Prudential said the 15-year contract, worth £722m, would save it £60m a year from 2010, extending to an annual saving of £195m by the end of 2010.
The restructuring process will cost the firm a one-off charge of £176m and will also see 1,250 posts moved to Mumbai, India, in April.
About 1,000 staff, predominantly in administration, at the firm’s Craigforth site in Scotland, and 750 in Reading will be affected. Prudential currently employs around 4,300 staff in the UK.
A spokesman for Prudential told Personnel Today that the deal would have no impact on the HR function.
“We have said we are undertaking a review of all shared-services operations as part of the ongoing consultation programme.”
Prudential’s staff working in the UK in customer-focused roles, IT and other related support functions will transfer to Capita.
The contract is Capita’s largest ever, and will take the number of life and pensions policies it handles to 23 million.
Nick Prettejohn, chief executive, Prudential, said: “We have set out very clear priorities for the business and this agreement helps us to deliver our strategy by removing fixed costs from our operations and achieving significant operating efficiencies.”
Paul Pindar, chief executive at Capita, said: “The Stirling operation will be developed into a Centre of Excellence for life and pensions administration. The Reading operation will initially continue to be delivered from its current site while we investigate the feasibility of combining it with our operations in Cheltenham or Swindon, or from an alternative site in Reading.”
The operation in Mumbai will also be developed into a Centre of Excellence.