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M&S to 'pre-fund' scheme with more property

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UK - British retailer Marks & Spencer (M&S) today announced it will top up its property-backed partnership with its £5.2bn (€6.76bn) UK pension fund with another £400m.

The London-based company said in a statement the transaction is set to "pre-fund" £200m of annual contributions to its UK defined benefit (DB) pension scheme over the next three years.

"These properties will be leased back to M&S, and the fixed annual distribution made out of partnership profits to the pension scheme will be increased from £50m to approximately £72m," read the statement.

The company said the partnership will continue to be consolidated in the group's accounts with no impact on its net assets.

"The amortising liability in respect of the obligations of the partnership to the pension scheme shown on the group's balance sheet will increase by £200m matched by a prepayment which will be released over time as the annual contributions would otherwise have fallen due," concluded M&S.

In May last year, M&S announced it would sell and  lease back a £1.1bn property portfolio in order to fund £500m of payments to help cut the deficit in its DB pension plan and keep it open to existing employees. (See earlier IPE story : M&S property plug cuts deficit to £283m)

The partnership, set up in March 2007, was said to have brought Marks & Spencer's pension deficit down to £283m at the time.

In November, M&S reported a £95m exceptional pension credit in its interim results, as pension scheme members consent to slow down benefit increases.

From the beginning of last October, pensionable salaries of members in the defined benefit plan would only increase in line with inflation.

This move created a £95m in past service credit for the company, reflecting the impact of adjusting their projected final pensionable salaries. (See earlier IPE story: M&S makes £95m from pension cuts)

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on             +44 (0)20 7261 4622        or email carolyn.bandel@ipe.com

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