Last checked at 12 May 2010 12:10
Marks and Spencer Group plc announces £800m Funding Plan for its UK Defined Benefit Pension Scheme.
Marks and Spencer Group plc (M&S) and the Trustees of its UK Defined Benefit Pension Scheme (the Pension Scheme) have agreed a funding plan with a present day value of £800m.
The funding plan includes the following contributions from M&S:
·; Cash contributions of £35m per annum for the first three years of the funding plan increasing to £60m per annum until 2018. This has a present day cash value of £376m.
·; £300m of value through the granting of a further interest in the property-backed partnership established between M&S and the Pension Scheme in 20071. This new interest entitles the Pension Scheme to a fixed annual distribution of c£36m for 15 years commencing in 2017 and a capital sum in 2031 equal to the lower of £350m or any funding deficit in the Pension Scheme at that point in time.
·; £124m of value through the transfer of assets from existing US$ debt hedge contracts held by M&S.
Today's announcement follows the completion of the triennial actuarial valuation, which showed a deficit of £1.3bn at 31 March 2009. This reflects both the prudent assumptions used in the calculation of the deficit and the depressed market conditions at the time. The £500m difference between the valuation deficit and the funding plan is expected to be met by investment returns on the Pension Scheme's existing assets.
The funding plan will not have a material impact on the Group's net assets or income statement.
Ian Dyson, Group Finance & Operations Director at M&S commented:
"We've agreed a comprehensive funding plan with the Pension Scheme Trustees, which makes efficient use of our existing assets, providing the scheme with a substantial income to reduce the deficit, while ensuring our cash flow obligations are spread over a manageable timeframe."
For more information:
Investor Relations:
Majda Rainer 0208 718 1563
Corporate Press Office: 020 8718 1919
Clair Foster 0208 718 8323/ 07748 147851
Amanda Glover 0208 718 1563/077 7551 4185
Out of hours: 020 8718 2000
1. Property Backed Partnership
Following the triennial actuarial valuation of the Marks & Spencer UK Defined Benefit Pension Scheme at 31 March 2006, M&S agreed to contribute £500m of value into the Pension Scheme via an interest in a property-backed partnership. The partnership was established and acquired from M&S properties having a then-current market value of approximately £1.1bn. In 2008, M&S agreed to pre-fund £200m of its annual contributions to the Pension Scheme by increasing the value of the Pension Scheme's interest in the partnership. At this time, M&S placed additional properties into the Partnership with a then-current market value of approximately £400m. All properties held by the Partnership are leased back to M&S and provide a fixed annual distribution to the Pension Scheme of c£72m made out of partnership profits for a 15 year period to 2022. M&S retain control over the properties held as part of this arrangement, including flexibility to substitute alternative properties.
Details of the Defined Benefit Pension Scheme
At the time of valuation, the M&S UK Defined Benefit Scheme had approximately 123,000 members - including 57,000 deferred members, 46,000 pensioners andjust over 20,000 active members, i.e. current M&S employees.