In yet another reflection of the ever-growing pension funding problem in the UK, the British arm of Reader's Digest is seething on the verge of collapse with a £125 million pension fund deficit seemingly to blame. The American parent company Reader's Digest Association recently filed for bankruptcy protection in America and has been in discussions with the British Pensions Regulator for some time. However, after seemingly brokering a deal which would save the British arm of Reader's Digest it looks as though the deal is unravelling this evening.

The company had proposed to inject £10.9 million into the company pension scheme and transfer 33.33% of the equity of the UK business to the pension scheme. The idea was that the scheme would then be transferred to the Pension Protection Fund which would protect the pension payments of all members. However, the Pensions Regulator has different ideas and has rejected the deal with little hope of further movement from the American parent company in the short-term.

Unless a last-minute deal can be reached it seems that the British arm of Reader's Digest could be placed into administration purely and simply because of the pension fund deficit. An operation which has been around for over 70 years could well be coming to a premature close over the next few days.

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