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Company Plugs Pension Hole With Cheese

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Dairy Crest, one of Britain's top producers of dairy products, has chosen a novel solution for its pension deficit: give it a cheddar cheese filling.

The company said Friday that it would add £60 million, or $92 million, worth of cheddar cheese to its pension fund. That is about 20,000 tons of cheese or 40 percent of Dairy Crest's current maturing cheese inventory, the company said.

Dairy Crest is not the first company to transfer some of its products to its pension fund. Diageo, the maker of Johnnie Walker whiskey, moved two million barrels of maturing whiskey at its distilleries in Scotland to its pension fund in 2010. The companies would not pay pensions in cheese or Scotch instead of cash, but the move does provide a guarantee to employees in case the companies should face insolvency.

"Over recent years Dairy Crest has been proactive in seeking ways to reduce exposure to the pension fund," the company said in a statement. The step "strengthened the long-term funding position of the pension fund."

Companies are seeking new ways to finance their pension systems as costs rise because people live longer, but the economic crisis slowed sales growth. Shares in BT Group, the British telecommunications company, slumped earlier this month after a report by Morgan Stanley warned that the company's pension deficit would rise to £6 billion next year from £2.4 billion in 2011.

Moving assets that are not already used as a security for outstanding bank loans to pension plans allows companies to avoid having to come up with the cash needed to plug any deficit. The British supermarket chain J Sainsbury previously transferred property into its retirement plan, and the hedge fund Man Group moved some of its holdings into a trust as a security for its plan.

Dairy Crest produces its cheddar cheese in Cornwall, in southwest England, and it is left to mature for one to three years. Cathedral City, the company's biggest cheddar brand, had sales of more than £250 million last year. Dairy Crest also produces various types of butter, including Country Life, and supplies milk to restaurants, hotels, supermarkets and local distributors.

The company's pension deficit was £84 million Sept. 30, the last time the company reported the figure. Dairy Crest also said Friday that it had made a one-time immediate payment to the pension fund of £40 million, in addition to an annual payment of £20 million.

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