Readers Digest UK moved a step closer to possible administration last night when pension regulators refused to approve a deal to reduce its £125m pension deficit.
The future of the 72-year-old pocket-sized magazine, which employs 135 people in London and Swindon, was left in doubt after the UK pension regulator decided not to sign-off on a plan by US parent company to inject £10.9 million into the pension fund plus one third of the UK business as a guarantee against future liabilities.
The regulator refused to agree to the plan despite an earlier agreement with the trustees of the fund and the Pension Protection Fund, which helps troubled schemes.
The need to plug the pension gap emerged when the US business filed for “Chapter 11” bankruptcy protection in August 2009 to reduce its debt.
The parent company had been hoping to emerge with a restructured business over the coming weeks without affecting its overseas companies. But it failed to emerge from Chapter 11 after the UK pension regulator indicated that outstanding liabilities needed to be plugged.
A spokesman for the Reader’s Digest Association said: “If a deal cannot be agreed between Reader’s Digest Association 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.”
Reader’s Digest is one of the most read magazines in the world, with offices in 44 countries it publishes 50 editions in 21 languages.
In the 1990s, Reader’s Digest was the best-selling magazine in the UK with a circulation of around two million however an aging readership has not been fully replaced and the rise of rival titles and the internet has also contributed to falling sales.
Despite the recent financial difficulty of its parent company and an average year-on-year fall in circulation of 16 per cent, the UK edition of Reader’s Digest still sold more than 540,000 magazines each month in the first half of last year.
Former Radio Times editor, Gill Hudson, became editor-in-chief at the UK edition in June last year following the departure of Sarah Sands to become deputy editor of the London Evening Standard.