Diageo announces 10 year funding arrangements for UK Diageo Pension Scheme

Diageo has today announced that agreement has been reached with the Trustee of the UK Diageo Pension Scheme (the UK Scheme) on a 10 year funding plan.  At the time of the triennial actuarial valuation at 1 April 2009 the deficit of the UK Scheme was £862 million. This triggered a requirement to put in place the 10 year funding plan which has been announced today.

Key points of the agreement include:

·     £197 million which was agreed under the 2006 funding plan has been transferred to the UK Scheme.

·     A pension funding partnership will be formed (the PFP), which will hold maturing whisky spirit as assets. This structure will generate an income to the UK Scheme which is expected to total £25 million each year over the term of the PFP. The PFP is expected to be in place for 15 years after which time the Trustee will be able to sell its PFP interests to the company for an amount expected to be no greater than the deficit at that time, up to a maximum of £430 million.

·     The company will further underwrite the reduction of the UK Scheme deficit through an agreement to make conditional cash contributions into escrow totalling £338 million if an equivalent reduction in the deficit is not achieved over the 10 year term.

·     It is expected that the annual payments to the UK Scheme of £25 million together with payments which are anticipated 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 UK Scheme since 2007. These arrangements will have no impact on the value of Diageo's net assets.

Further details: