Pension shortfall may cause Readers Digest UK collapse

The jobs of 135 staff at the UK arm of Reader’s Digest are under threat. The magazine came close to financial collapse last night after a talks on a deal to prop up its pension fund broke down.

The jobs and the full pensions of 1,600 past and present employees are now in danger after negotiations between the magazine’s American parent Reader’s Digest Association (RDA) and the UK Pensions Regulator stalled.

The American company Ð which filed for bankruptcy protection last August Ð had proposed injecting £10.9m and one-third of the equity of the UK business into the pension fund, which has a shortfall of £125m. The scheme would then have been transferred to the Pension Protection Fund (PPF).

But according to the US company, the Pensions Regulator ruled against this plan, the Times reported.

RDA’s spokesman said: “If a deal cannot be agreed between RDA and the Pensions Regulator, RDA will not be able to continue its support for the UK company. If that is the case, the directors of the UK business will have no choice but to file for administration.”

The Pensions Regulator declined to comment on the case, but it is thought the organisation is either seeking a more generous contribution from RDA or it believes a better deal could be achieved for pension fund members if the UK business was allowed to go into administration.

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RDA said: “In light of this unexpected ruling [by the regulator], the UK entity is now reviewing its options in an attempt to find a solution.”