M&S closes gap in its pension scheme with £400m injection
Tuesday 02 March 2004
Marks & Spencer yesterday said it would plug a hole in its pension scheme by selling £400m of bonds.
The retailer has had to take the action after a £585m shortfall was discovered between the pension fund's assets and its liabilities. At present, the scheme is only 82 per cent funded, but after the £400m injection the scheme's assets will only be 6 per cent short of liabilities.
"By taking this action, we are providing reassurance to the scheme members," Alison Reed, the finance director, said. "This is an opportune time to raise the funds, taking into account current interest rates and demand in the corporate bond markets."
M&S closed its defined benefit scheme to new members of staff in April last year and an actuarial valuation of the scheme has been going on for the past few months. A number of companies with similar deficit problems, including Sainsbury and BAE Systems, have asked their staff to increase their own contributions to help share the burden of increased costs. Jardine Lloyd Thomson, the insurance broker, recently pledged £500m to its pension fund, but staff contribution levels look likely to be affected. M&S, however, said the £400m injection should be enough to safeguard its pension promises without having to ask employees to chip in.
Shares in Marks & Spencer rose 6p to 299p as the City welcomed M&S's decisive action to tackle its pension problem in a cost-effective manner. Many pension schemes have been struggling to combat the effects of longer life expectancy and increased costs on the funding of their schemes, which outweigh stock market improvements.
Under new accounting rules, known as FRS 17, which require the company to value its assets and liabilities of its pension fund every year, M&S still has a deficit in its pension scheme of about £1bn. "This is a non-cash item - it is just an accounting item and is not a deficit that needs to be plugged. The real deficit that needs action is the £585m, which we are now addressing with the bond issue," a spokesman for Marks & Spencer said.
Adopting the new accounting standard will actually benefit the company, cutting pension costs by £30m a year after taxation.
HSBC and Morgan Stanley have been appointed to manage the bond sale. M&S is likely to incur an interest charge of about £14m on the bonds.
In a separate move, the company declined to comment on news that it had tried to poach a key executive from Next to run its clothing division. Next confirmed that its product director Christos Angelides had been approached by M&S, but had turned down the prospect of such a move. Analysts are keen to see a heavyweight figure take on the position at M&S, whose clothing division has been struggling.
New UK station Russia Today gives a very bizarre view of Britain
By performing as African Americans or Indians, white people get to play act a kind of 'imaginary liberation', writes Michael Mark Cohen
New essay by JK Rowling went live on Pottermore site this morning
Top Gear presenter is no stranger to foot-in-mouth controversy
- 1 'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
- 3 Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
- 4 If you think Russell Brand’s new book is confused, you should read what his critics have to say about it
- 5 Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
Halloween 2014: From the Screaming Man of Pluckley to the 'White Lady' of the Tower of London - Britain's 20 most haunted places
Russian politician says Apple CEO Tim Cook should be 'banned' from country after coming out as gay
Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
Pope Francis declares evolution and Big Bang theory are real and God is not 'a magician with a magic wand'
Huge surge in Ukip support after EU funding row, according to new poll
Ukip ‘exploiting grooming scandal’ to secure party’s first police chief
Nigel Farage: 'There’s nothing wrong with white people blacking up'
Maureen Lipman says 'she can't vote Labour while Ed Miliband is leader'
Muslims, immigration and teenage pregnancy: British people are ignorant about almost everything
iJobs Money & Business
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...
£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...