TREMORS passed through the corporate landscape as Reader’s Digest collapsed under the weight of its pension deficit yesterday, leading experts to warn of a fresh phase of crisis for retirement schemes.
The UK arm of the 87-year-old publisher filed for administration two weeks after the Pensions Regulator rejected a plan to plug the £125m hole in its savings fund.
As a result of the decision the famous magazine’s US parent said it was unable to meet the “significant financial obligations” attached to the pension scheme. More than 100 jobs are now at risk, with the British edition of the publication in danger of folding unless a buyer can be found.
Last night analysts said the watchdog’s precedent meant more big-name firms would be crushed by their retirement scheme liabilities.
Former government adviser Ros Altmann said: “What the regulator’s started to say is there are certain companies which are never going to fill their deficits. We have reached a new stage in the demise of our pension schemes. It will accelerate from here.”
Altmann predicted British Airways would need a taxpayer bailout to close the yawning £3.7bn deficit in its pension schemes. British Telecom and Royal Mail are also struggling under mammoth liabilities.
In a sign of growing concern among other companies, the National Association of Pension Funds called for more clarity from the regulator on its decision to refuse the Reader’s Digest funding plan.
FAST FACTS | READER’S DIGEST
The magazine launched in the US in 1922. It made its name in the ‘50s by taking on tobacco firms with a hard-hitting series on lung cancer.
Its circulation in the UK has gradually fallen from 2m in the 1990s to around 500,000.