Reader's Digest UK faces administration after the UK Pensions Regulator said it would not approve plans for a rescue deal from Reader's Digest Association Inc to inject £10.9m and a third of the UK business into the pension scheme.
The plan was to then transfer the money to the Pension Protection Fund, the insurance scheme that enables insolvent employers to fulfil pensions for employees.
The need to fill the pension shortfall of £125m came about when American parent company RDA decided to apply for Chapter 11 bankruptcy protection last summer to reduce its debt. Plans to emerge from Chapter 11 have now been delayed.
RDA said in the US court that unless the pension hole issue was resolved it would "no longer be able to support the UK business indefinitely and, therefore, the UK business may need to file for administration".
The UK arm maintains a total of 1,600 full pensions for past and current employees. Its 135 employees in offices in London and Swindon have not lost their jobs, and the business is still operational.
The parent company has suffered due to a decline in advertising revenues in the recession. The rise of
internet news has also had an impact on traditional publishing.
The UK version of the US publication has been in print since 1938, and at its height had a circulation of 2 million. It was once popular with young markets but has since been eclipsed by gossip magazines such as OK! Circulation is now thought to be closer to 500,000.
