UK - Marks and Spencer has announced plans to plug its £704m DB pension deficit using an extensive property portfolio and redeeming secured bonds.
M&S’ pension scheme will hold the property, with a current market value of £1.1bn, and lease it back at a fixed annual rate. This will contribute an instant £500m to the fund.
M&S finance director Ian Dyson said the company knew how highly its staff valued the pension scheme, and thus had kept it open.
He added: “By using our valuable property portfolio we have been able to put the scheme on a safer footing and we have also put together a range of options which we’re now discussing with employees to give them choices about how they want to grow their pensions in the future.”
A fixed annual allocation of aound £50m to the pension scheme will be made out of partnership profits over a 15-year period.
The partnership between the company and its pension scheme will be consolidated in the M&S accounts will have no impact on the group’s net assets. Instead the £500m deficit will be replaced by an amortising liability.
M&S have also announced plans to redeem £317m of secured bonds issued by Amethyst Finance plc. This will release properties with an estimated value of £550m and give rise to a one-off make-whole premium. After transaction costs, £30-35m will be recorded as an exceptional item in the group’s 2006/7 profit and loss account.
Chairman of the trustees Tony Watson said he was pleased with the announcement. “Under the plan with the company, the pension scheme will receive a substantial contribution which will significantly reduce the deficit and provide greater security for our 123,000 members.”
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
HM Treasury has agreed in principle to give NEST a £329m contingent liability guarantee in the event of the master trust's wind up or closure.
AMP Capital has set up a dedicated team to help institutional investors, including pension funds, invest in infrastructure through direct equity allocations.