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IPE special report May 2018

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M&S, BA pension deficits top one billion pounds

UK – Two of the UK’s biggest corporate names, Marks & Spencer and British Airways, have both disclosed pension deficits of more than one billion pounds (1.4 billion euros) each.

Retailer M&S said that as at March 29 that it had a pension deficit of 1.2 billion pounds (1.68 billion euros) under the FRS17 accounting standard.

M&S said the 4.8 billion euro scheme has a positive cash flow which it expected to continue for some time. It said its contributions to the scheme and investment income are greater than the annual payments to pensioners. “It is therefore expected to be many years before the defined benefit scheme needs to liquidate a material portion of scheme assets.”

The group would also bring forward its planned actuarial valuation of the scheme from March 2004 “to allow us to make an earlier informed decision as to the contribution level and asset mix going forward”.

Airline operator British Airways said that it had a post-tax deficit of 1.2 billion pounds as of the end of March, also under FRS17. It said its three-yearly actuarial review of its two main UK schemes, the APS and NAPS schemes, would be completed by the end of this year. The two schemes have a combined value of around 15 billion euros.

Meanwhile, aerospace group Rolls-Royce has seen its long-term debt rating cut to ‘BBB’ by ratings agency Standard & Poor’s from ‘A-’ – in part because of its pension obligations. “Although the group is likely to pay further sums into its pensions fund in the coming years, it should also benefit from mitigating actions in connection with the provision of pensions benefits,” S&P said.

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