Drinks firm Diageo, which produces Guinness, has agreed to put £100m into its underfunded final salary UK pension scheme by March next year. It has made the contribution through transferring four million shares that it owns in US food firm General Mills. Diageo’s 2004 annual report showed that its UK pension plan has a deficit of £817m under FRS17 accounting rules.
Many organisations are looking at ways to fund their pension deficits without having to put in cash. Michael Glasgow, pensions director at Diageo, said that although a trustees valuation showed there was no immediate need to contribute to the scheme, it decided that using General Mills shares was a good idea. The General Mills’ shares cannot be sold until October next year.
Glasgow said: “Diageo has always been and remains committed to providing good quality pensions benefits for its employees. The trustees did not require the company to contribute at that time but recognised that if markets didn’t improve it would be inevitable. So, given the fact that the company had these shares, it seemed an innovative way of getting some recognition for them but also reducing the deficit of the pension plan.”
He added that keeping its final salary pension scheme open to all staff, including new entrants, boosted employee pride in the company.