Dairy Crest to reduce cash pension contributions by £12m

Dairy Crest said it will trim its cash pension contributions by around £12m over the next two years and its future pensions bill will reduce as it moves retirees' benefit increase to the consumer price index rather than the retail price index.

CPI is generally lower than RPI so changing to CPI reduces the estimate of future benefit costs. The value of this future reduction in costs is estimated to be £75m on an actuarial basis. On an accounting basis, the estimated benefit is around £125m and this will be reported as an exceptional gain in the year ended 31 March 2018.

"CPI is already used by the Fund for increases in deferred pensions and is becoming more widely used across the UK including for the calculation of increases in public sector pensions. This change was agreed as part of a broader package to put the Fund on a stronger foundation for the future. This package includes continuing to move to lower-risk investments over time."

The company has also agreed a revised schedule of cash contributions. The new schedule provides for contributions of £10m in 2017/18 and £15m in 2018/19; a reduction of £12m over two years compared to contributions payable under the previous schedule of contributions.