It stinks. It’s full of holes. But it will give you a tasty lump sum. The company that’s put cheese in its pension plan

Cheddar cheese gains complexity when carefully stored (Alamy)

Twenty million kilograms of cheddar is a lot of cheese – enough to make roughly 200 million slices of cheese on toast, for one.

Yet for former milkmen and other retired workers at one of the UK’s biggest food companies, it will form a crucial part of their livelihood for the rest of their days.

Dairy Crest, the maker of Cathedral City, announced it was backing its pension fund with £60m-worth of maturing cheese.

The dairy goods maker – whose brands also include Utterly Butterly and Clover – is using the cheddar as one of a number of measures to tackle its pension deficit, which as of September stood at £84m.

The cheese is being pledged to the trustees of the fund who will, in the highly unlikely event of the fund going bust, be able to turn the cheddar into, well, cheddar by selling it.

Dairy Crest has £150m-worth of cheese maturing at any one time in its massive temperature controlled warehouse in Nuneaton, Warwickshire. The cheddar is moved there after being produced in Davidstow, Cornwall, and matures for an average of 12 months before being cut, packaged and sent out for sale.

Pension deficits in the dairy industry have been exacerbated by the fact companies are responsible for now-retired milkmen.

In 2011 milk group Uniq – formerly known as Unigate – handed 90 per cent of its shares to its pension scheme.

Dairy Crest is not the first company to turn to their own wares to back up their deficit.

“What we are seeing now is companies and trustees getting more and more creative with the assets they are using,” said pensions expert Ros Altman, who warned it is getting “harder and harder” for money to be found to shore up pension schemes.

Diageo, the drinks giant and maker of Guinness, announced in 2010 it would use millions of barrels of maturing whisky in an attempt to plug its pension deficit.

The whisky – made up of barrels from its distilleries in Scotland – is part of a 15-year deal that gives the company the option to buy it back from the fund after it has aged for three years. At the end of the 15-year period, the whisky can then be sold back to Diageo.

Other companies have used property to the same effect, such as Premier Inn-owner Whitbread, which has created a portfolio of properties occupied by the hotels chain.

“Pension schemes need money but if an employer is short of cash then it makes sense to give the scheme a claim over a physical asset instead,” said Tom McPhail, head of pensions research at financial services company Hargreaves Lansdown.

However, anyone hoping their block of cheese at the back of the fridge will, if left alone, turn into a tasty nest-egg will be disappointed to hear that the cheddar being pledged will not continue to gain in value as it gets older. Instead, the cheese allocated will be constantly revolving as it reaches its peak and is replaced by new stock.

Mature investment: Top cheeses

Cheddar

If you pick a good one, Britain’s favourite cheese, pictured above, gains complexity when carefully stored. Regarded by many as our top cheddar, Montgomery’s from North Cadbury, Somerset, is aged for a minimum of 12 months.

Parmigiano Reggiano

As everyone knows, Samuel Pepys buried his prized Parmesan before fleeing the Great Fire of London. Maturing is vital – usually two to three years – though producers of the world’s most famous hard cheese prefer more controlled conditions.

Mimolette

The Keith Richards of the cheese world, this speciality of Flanders appears amazingly gnarled and cracked in French supermarkets, But like the veteran Rolling Stone, it outshines younger rivals. Aged Mimolette is the perfect accompaniment for fine wine.

Emmentaler

This mighty Swiss giant becomes strong and nutty as it ages for 18 months or more. There’s one drawback if you choose to invest in a whole Emmentaler. Weighing 100 kilos per round, it is the largest cheese in the world.

Compté

Make in Eastern France, the large flat discs made from unpasteurised milk command high prices but are worth it for deep, spicy flavours. Most are aged from 12-18 months.

Christopher Hirst