Drinks giant Diageo has announced that it has reached a ten year funding plan for the UK Diageo Pension Scheme.

At 1 April 2009, the deficit of the UK scheme stood at £862 million, triggering a requirement to put in place a funding plan.

The agreement with the scheme trustees will see £197million transferred to the scheme, which was agreed under the 2006 funding plan; a pension funding partnership (PFP), which will hold maturing whisky spirit as assets, expected to generate an income of £25million each year over the term of the PFP; and an underwriting of the reduction of the UK Scheme deficit through an agreement to make conditional cash contributions as collateralisation totalling £338miolion if an equivalent reduction in the deficit is not realised over the ten year term.

It is anticipated that the annual payments to the scheme of £25 million, together with payments under the agreement currently being negotiated in respect of the Guinness Ireland Group Pension Scheme, will be broadly cash flow neutral against the £50 million per annum which has been paid in respect of the scheme since 2007.

Diageo said the arrangements will have no impact on the value of its net assets.

Following separate negotiations with the Irish Scheme Trustee, Diageo has made provisional deficit funding arrangements in respect of the Guinness Ireland Pension Scheme. This agreement, subject to regulatory approval, is project to result in additional initial contributions to the Scheme of approximately €21million annually over a period of 18 years.

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