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Dairy Crest uses cheese stocks to help plug pension gap

Workers at Cathedral City cheese maker Dairy Crest are to see their pensions backed with £60 million worth of maturing cheddar cheese under innovative plans to bolster the scheme.

The group has agreed to offer nearly half of its valuable cheese stock as security for the pension fund.

It will also pump in an extra £40 million to the scheme to help plug an £84 million pension deficit, using proceeds from last August's £341 million sale of its French spreads business St Hubert.

Dairy Crest has been battling to fill the hole in its final salary pension fund, which covers around 3,500 workers. It closed to new members in 2006 and shut to existing members in 2010.

The firm already pays £20 million a year into the scheme, but said the new deal will further boost its funding and help ensure it is protected in case Dairy Crest ever went bust.

Dubbed the "Bank of Dairy Crest", the group's cheese stock is worth around £150 million.

The cheese being used to back the pension fund is equivalent to 20,000 pallets or 20 million kilos.

Drinks giant Diageo struck a similar deal with its pension scheme in 2010 when it agreed to transfer millions of barrels of maturing whisky to the fund in an effort to close its funding gap.

Dairy Crest said it will also use cash from the St Hubert sale to cut debts and strengthen its balance sheet, while it will also invest in the business.

It had been considering using the proceeds to make acquisitions, but said in February that any large deals were unlikely.

The group said it was still eyeing potential small deals.

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