One for the Road…

One of the most amusing stories that has arisen in the past week (although it has a serious purpose) is the proposal that Diageo, the drinks conglomerate has come up with to try and solve its Final Salary Scheme funding deficit. As readers may know, when an actuarial valuation reveals a deficit, the law requires that the Trustees and the Employer get together to try to agree a cunning scheme to repair that deficit over a period of time. This is called a Recovery Plan.

Now the usual way of doing this is by (for example) the employer putting in additional cash sums or contributions. Or it may put up some property as collateral or put in place a Guarantee. But Diageo has come up with a somewhat unique offer. It is handing over 2.5 million barrels of booze to the scheme Trustees. At the end of 15 years, the scheme must sell this back to Diageo for an amount expected to be “no greater than the deficit at that time”, which is estimated to be up to a maximum of £430m. The deal will generate an income to the UK Scheme of about £25m each year over the 15 years. While it’s true that this is no different from any other offering of property (as collateral) it should certainly help make the Trustees meetings go with a swing!!

All of which led me to wonder just what other assets companies might consider using in these circumstances. If you’ve got any ideas, just let me know!! No prizes for the funniest I’m afraid but it might cheer us all up over the Summer!!