Plugging the Pension Gap … With Cheese?

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In American slang, the word “cheddar” has long been a stand-in for money. Now, it would appear some folks in the U.K. are taking this association far more literally.

According to the Financial Times, the British food company Dairy Crest has a roughly $128 million deficit in its pension fund as of the end of September, and to help plug that gap, the firm has transferred roughly 44 million lb. of cheese to the pension. Writes the Financial Times:

Dairy Crest, maker of Cathedral City, holds stocks of about £150 million worth of maturing cheese at any one time. Cheese, like whisky, can be matured for different amounts of time: in Cathedral City’s case, most is sold after one year but can go up to 3½ years.

Apparently this isn’t the first case of a large food manufacturer handing over large inventories of goods to a pension fund to help plug a gap. In 2010 the firm Diageo — which manufactures popular spirits like Johnnie Walker and Smirnoff vodka — gave more than $760 million in “maturing whiskey” to its retirement fund in an effort to fill a more than $1 billion pension shortfall.

(MORE: How Bad Is America’s Pension-Funding Problem?)

It’s no secret that pension funds around the globe, in both the public and private sectors, are dangerously underfunded. Corporations and governments have always found ways to skimp on contributions, often by using rosy projections regarding pension funds’ investment returns. An already shaky system took a huge hit during the financial crisis and the weak economic growth that has followed. On top of all this, many retirees are living longer, putting even more strain on retirement accounts.

And while it might seem silly that a pension fund would end up owning so much cheese, in some ways it makes perfect sense. After all, for a company like Dairy Crest, its most liquid assets are going to be foodstuffs. As Charles Cowling, managing director at JLT Pension Capital Strategies, told the Guardian: 

If a company has valuable assets that are not pledged to a bank, why not pledge them to their pension scheme if that means they don’t have to put their hands in their pockets to put large amounts of cash into their retirement scheme?

It’s not actually as if Dairy Crest plans to ship thousands of pounds of cheese to retirees in lieu of pension payments. As the cheese matures, Dairy Crest will presumably sell it in the marketplace, giving the proceeds over to the pension fund. But if something were to happen to the company between now and then, the pension would have ownership of the cheese, and could sell it to maintain payments to retirees — or, if it so decided, slice it up and pass it out with crackers.

MORE: Are We Lying to Ourselves About Our Pension Problems?

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