Marks and Spencer has agreed a pension funding package worth £800m in an attempt to close the scheme's deficit. The group's defined benefit scheme, which has 123,000 members, faced a £1.3bn shortfall when its last valuation was carried out at the end of March last year. In order to close this, M&S has agreed to pay in an additional £376m between now and 2018.
It will contribute £35m a year for the next three years, rising to £60m for the remainder of the period, on top of the regular contributions it already makes.
The fund will also benefit from a further £300m through an additional interest in property owned by M&S. Under the partnership, an interest in property, including stores, is transferred to the pension scheme and then leased back by M&S, providing the pension with an annual income. The partnership is already generating about £72m a year for the scheme until 2022, while the latest transfer will contribute a further £36m annually for 15 years from 2017.
The group will also transfer assets worth £124m to the pension scheme from existing US dollar hedge contracts.
The £500m difference between the current deficit and the additional contributions planned by M&S should be made up by investment returns on the scheme's assets.
M&S said the funding plan should not have a "material impact" on the group's net assets or its income statement. Ian Dyson, M&S's finance director, said it was a comprehensive funding plan which made efficient use of existing assets and provided the scheme with a substantial income to reduce the deficit.
The group first began tackling its pension fund deficit in 2006 when it set up the property-backed partnership. During the past year it has capped the level of pay rises for members included in pension calculations at 1 per cent, while it has also changed its early retirement rules.
The scheme was closed to new members in 2002, although its 20,000 active members can continue to contribute to it.Reuse content