Case study: Diageo offers liquid assets

In its efforts to reduced its DB scheme’s deficit, Diageo, which owns a number of Scotch whisky distilleries, contributed £430 million in maturing whisky to a joint venture. This will cut the scheme deficit of almost £900 million and reduce the levy charged by the Pension Protection Fund (PPF). This investment is also an asset available to the scheme.

The maturing whisky will also create a series of annual payments of £25 million to the scheme for up to 15 years. If, at the end of this period, the scheme is still in deficit, trustees can sell their stake in the joint venture back to Diageo for a maximum of £430 million. If there is no deficit, Diageo will recover the whisky without a payment Finally, scheme members can see robust funding in place.

A spokesman for Diageo says: “Although Diageo is a strong company with an excellent cash flow and market-leading position, it is preferable for the trustees to have assets by way of security in the, albeit unlikely, event of our being unable to meet obligations to the pension fund.”

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