Diageo boosts pension with liquid gold
DRINKS group Diageo has agreed a plan with its pension fund which will use up to 2.5m barrels of maturing Scotch whisky to help tackle a deficit of £862m.
The defined benefit plan was agreed after a triennial valuation of the Diageo Pension Scheme last April highlighted the deficit and triggered a requirement to agree a 10-year funding solution.
The whisky forms part of a deal designed to put just over £1bn into the scheme, while conditional cash contributions into escrow will amount to £338m.
The agreement will be submitted to the Pensions Regulator.
Diageo said it has formed a 15-year partnership under which the pension scheme will own a range of maturing whisky, aged up to three years, as assets. The partnership will involve 2-2.5m barrels from distilleries in Scotland.
“This structure will generate an income to the UK Scheme which is expected to total £25m each year over the term of the partnership,” the company said.
At the end of the 15 years, the scheme must sell its interests to Diageo for an amount expected to be “no greater than the deficit at that time,” which the company said would be up to a maximum of £430m.
“This is not different from any other offering of property (as collateral),” said a Diageo spokesman. Diageo, the maker of Guinness stout and Bell’s whisky, said it would also pay £197m to the scheme.
It expects annual payments to the UK scheme of £25m.