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Last Updated: Monday, 27 March 2006, 15:32 GMT 16:32 UK
Diageo to cover pension arrears
Smirnoff whisky
Diageo could pay more than 700m into its pension fund
Drinks firm Diageo is to pay hundreds of millions of pounds into its pension scheme to eliminate its deficit.

The maker of Guinness, Smirnoff and Johnnie Walker will pay in 100m next year and expects to pay similar amounts in the following six years.

Diageo closed its final salary scheme to new joiners last September, leaving it with 5,400 active members.

The exact level of deficit payments will be decided after the fund is valued by its actuary later this year.

At the end of last year, Diageo calculated that under the accounting standard known as IAS 19 the scheme's deficit stood at 653m.

When the actuary finalises the regular three-yearly valuation for the pension fund's trustees later this year, the deficit may well be of a similar size.

Recovery plan

The Pensions Regulator now demands that companies put a recovery plan in place if a scheme is in deficit.

Diageo chief executive Paul Walsh said: "This funding framework, together with changes we have made to the pension scheme, demonstrate Diageo's commitment to provide a high standard of employment benefits."

In addition to the deficit payments, the company will also continue to put in 50m a year in ordinary pension contributions.

It resumed these payments last year after many years in which it had taken a complete contribution holiday.

During that time, staff had been paying in either 4% or 6% of their annual salaries each year.

Those rates were raised to 6% and 8% in September.



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