Marks & Spencer Final Salary Pension Scheme - PRAG

Pensions Update
Issue 7, November 2008
For active and deferred members of the M&S Final Salary pension scheme
Welcome from Tony Watson, Chairman of your Trustee Board
Welcome to Issue 7 of Pensions Update, the newsletter for members of the M&S Final Salary pension scheme.
It’s that time of year again when we provide details of the scheme’s financial position. This issue features a
summary of the Report and Accounts for the year ended 31 March 2008, which gives an overview of the
scheme’s financial development during the year (pages 4–5).
We have also included the 2008 Summary Funding Statement, which provides an update on the scheme’s
funding position (pages 6–7). You may find this particularly interesting given the current financial climate.
As you know, these are turbulent times for savings markets and this may be causing you some concern. Whilst
the scheme is inevitably affected by the general downturn in markets, hopefully it’s reassuring for you to know
that we maintain a broad spread of investments to limit risk.
Through Pensions Update, we want to keep you informed about how the scheme is managed. So, in this
issue, we’ve got an article about the scheme’s advisers, which includes an interview with Colin Singer, the
scheme’s actuary (see pages 8–9). You’ll also find an article on page 10 which tells you about the
responsibilities of the different committees that support the Trustee in running the scheme.
So, what else is in this issue? On page 11, you can read about Responsible Investment, why we think this is
an important issue and how we encourage our investment managers to take account of Responsible
Investment when investing for the scheme.
We hope you enjoy Pensions Update, which we try to make both useful and informative. We value your
comments and suggestions, so feel free to get in touch with the M&S Pensions Administration team with
your feedback (see back page for contact details).
Tony Watson
Chairman of the Trustee Board

In this issue
Pension-speak 2
Pensions news 3
Summary Report and Accounts 2008 4–5
Summary Funding Statement 2008 6–7
About the scheme’s advisers 8–9
The committees 10
Responsible Investment and the scheme 11
Your Nomination Form 12
!
Important note
The full terms and conditions of The Marks and
Spencer Pension Scheme (the scheme) are contained
in the Rules. This is a formal document which is the
legal basis of the scheme and which will prevail in
any dispute.
Nothing in this Pensions Update confers any
entitlement to benefits. For a copy of the Rules,
please call 0845 304 7474. Current employees with
PC access can also find a copy of the Rules on the
internal M&S People Guide site.
Pension-speak
Pension-speak is your quick guide to some
of the technical terms used in this issue of
Pensions Update.
Active member
A member of the scheme who is currently employed by
M&S and is building up benefits within the Final Salary
pension scheme.
Actuary
An adviser who has professional responsibilities for
assessing the financial health of a pension scheme and
calculates probabilities relating to pension schemes –
for example life expectancy, investment returns, inflation
and other factors.
Actuarial valuation
A financial assessment of a scheme carried out at least
every three years by an actuary appointed by the
Trustee. The main purpose of the valuation is to assess
the scheme’s funding level and provide advice on the
level of company contributions to be paid in the future.
Additional Voluntary Contributions (AVCs)
Contributions that active members can choose to make
in order to earn additional benefits.
Deferred member
A member who is no longer employed by M&S (or has
opted out of the Final Salary pension scheme) and has
not transferred their pension benefits out of the scheme
or is not yet receiving their pension.
*
Good
to know
Pensions Update is printed on
paper made from 50% recovered
waste and 50% virgin fibre from
well-managed forests, as certified
by the Forest Stewardship
Council (FSC).
The paper is produced at a
mill whose environmental
management system is
ISO14001 certified.
Normal Retirement Date
The last day of the month in which your 65th
birthday falls.
2

Pensions news
Here, we provide regular updates on the scheme and pensions in general.
The ‘credit crunch’ and its impact on the scheme
The ‘credit crunch’ is in our newspapers daily and many of you have asked what it means for the scheme.
Scheme funds are invested in a wide variety of shares, bonds, property, cash and other investments. Although these
investments have been affected by the fall in world markets, it is important to remember that a scheme of our size
has thousands of different holdings, so the impact of any individual investments, such as shares in a particular bank,
will be limited.
Pension funds invest to pay out pensions many years into the future. The instability of current markets is a challenge,
but the scheme invests in a balanced way for the long-term needs of its members.
Watch this space
The Trustee has been looking at ways of improving the Money Purchase Additional Voluntary Contributions (AVC) Plan.
In response to your feedback, we will be introducing simpler communications and a new range of investment choices
which are easier to understand.
If you pay or have paid Money Purchase AVCs, you don’t need to take any action now – we’ll send you more details
this month.
Your benefit statement
If you’re an active member, you should have received your annual benefit statement.
Your benefit statement provides a projection of how much pension you are likely to
receive in retirement.
If you have any queries about your statement, you should contact the M&S Pensions
Administration team (see back page for contact details).
Who is the Trustee?
The Trustee of the scheme is a company called Marks and Spencer Pension Trust Limited, which has a board of
12 Trustee Directors. Seven of the Trustee Directors are appointed by the Company (including the two Independent
Trustees) and five are nominated by the scheme membership. The Trustee Directors are responsible for running
the scheme.
A recent meeting of the Trustee Directors at Salford Quays
3

i
Read this if...
you would like to know
more about the scheme’s
financial position for
the year ended
31 March 2008.
Summary Report
and Accounts 2008
?
Did you know?
The full financial statements of
the scheme are audited by
KPMG LLP. The auditor’s report
on the financial statements is
unqualified, which means in
KPMG’s view, the accounts
represent a true and fair value of
the transactions of the scheme.
*
Good to know
Any figures within brackets are
negative amounts.
!
Important note
If you would like a copy of the
full Annual Report and Accounts,
you can request this from the
M&S Pensions Administration
team in Salford Quays (see back
page for contact details).
Each year, the Trustee of the scheme produces a formal Report and
Accounts, which provides information on the financial performance
and management of the scheme over the year.
The following two pages provide a shorter and less technical version
of the Report and Accounts for the year ended 31 March 2008.
Income and expenditure
The table below shows the income and expenditure for the year ended 31 March 2008.
Income
Final Salary Retirement
pension scheme
Plan
£’000 £’000
Company contributions 94,838 10,789
Normal member contributions 990 5,374
Members’ Additional Voluntary Contributions 3,140 1,192
Ex-gratia contributions ** 1,661 –
Transfers in – 461
Investment income 162,483 36
Change in market value of investments (207,852) (2,172)
Total income 55,260 15,680
Expenditure
Benefits payable 198,845 366
Leavers 5,223 581
Administration expenses 14,616 443
(includes investment expenses)
Total expenditure 218,684 1,390
4
** Ex-gratia contributions are paid into the scheme by the Company to cover any exceptional benefits
(for example, redundancy).

Fund value
The table below shows the fund value of both sections of the scheme at the beginning and end of the year.
Final Salary pension scheme Retirement Plan
£’000 £’000
Value of the fund at the beginning of the year 5,181,474 34,546
Income (see opposite) 55,260 15,680
Expenditure (see opposite) (218,684) (1,390)
Value of the fund at the end of the year 5,018,050 48,836
Investments
The assets of the Final Salary pension scheme and Retirement Plan are invested separately. The pie charts below show
where the assets were invested as at 31 March 2008:
Final Salary pension scheme
Retirement Plan
%
UK Equities 10.2
Overseas Equities 23.8
Bonds 61.0
Property 5.0
%
UK Equity Fund 46.3
Global Equity Fund 35.1
Corporate Bond Fund 0.2
Index Linked Gilt Fund 11.4
Property 0.4
Money Market Fund
(Cash) 6.6
Membership numbers
The bar charts below show the number of members in both sections of the scheme at 31 March for the past two years:
Final Salary pension scheme
2008
Retirement Plan
2008
2007
2007
23,016
26,480
7,913
6,311
1,080
736
131
15
43,219
40,648
57,253
57,271
Active
Deferred
Pensioner
Active
Deferred
Pensioner
5

i
Read this if...
you would like an
overview of the scheme’s
funding position.
Summary Funding
Statement 2008
By law, every company in the UK that provides a final
salary pension scheme must produce an annual
Summary Funding Statement. The purpose of the
statement is to summarise the scheme’s funding
position at the most recent actuarial valuation and
explain changes to the position since the last
valuation. The statement also has to explain how
members’ benefits would be covered if the scheme
were ever to wind up (ie come to an end immediately).
This statement applies to the whole of The Marks and
Spencer Pension Scheme, but all of the information
relates to the Final Salary pension scheme, for which
assets are held in a common fund. The Trustee also
maintains accounts for each member of the
Retirement Plan and for members who have Money
Purchase AVCs. However, because these funds are
invested separately, they are not included when
calculating the scheme’s overall funding position.
What do we mean by the scheme’s
funding position?
The scheme’s funding position is the difference between
the scheme’s total assets (ie what the scheme is worth)
and the scheme’s total liabilities (ie the benefits due to be
paid). If the assets are greater than the liabilities, the
scheme is said to be in surplus. If the liabilities are greater
than the assets, the scheme is said to be in deficit.
This calculation is performed by the actuary at least every
three years at the scheme’s actuarial valuation. The results
of the valuation form the basis for decisions about the level
of future contributions the scheme’s sponsoring employer
should make.
How well funded is the M&S scheme?
The last actuarial valuation of The Marks and Spencer
Pension Scheme was as at 31 March 2006. This showed
that the scheme’s funding position on an ongoing basis
(ie if the scheme continues as it is now into the future)
was as follows:
Scheme’s assets:
£4,574 million
Scheme’s liabilities:
£5,278 million
Scheme’s funding deficit:
£704 million
Scheme’s funding level: 87%
As the scheme’s assets at 31 March 2006 were less than
the scheme’s liabilities, the Company and Trustee agreed a
new schedule of contributions and put in place a plan to
eliminate the scheme’s deficit.
The Company agreed to provide £500m of additional
funding into the scheme through an interest in a
property-backed partnership. The remainder of the deficit
was expected to be met by investment returns over
10 years to 31 March 2016 (although this will be reviewed
at the 2009 valuation).
In addition, following the actuarial valuation, the Company
increased its regular contributions to the Final Salary
pension scheme. The Company’s contributions increased
from 15.8% of active members’ pensionable salaries to
27% from 1 April 2006. The Company’s contributions
reduced slightly to 24.3% from 1 October 2007 and to
23.7% from 1 October 2008. This pattern reflects the effect
of the benefit changes to the scheme implemented last
year, including the gradual introduction of contributions
paid by some members.
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The Company also contributes to the Retirement Plan
members’ individual pension funds. For every £1 a
member puts into their fund, M&S puts in another £2, up
to a maximum of 12% of the member’s pensionable salary
(and depending on circumstances, up to 24% in the first
year of eligibility for membership). These contributions
have not been taken into account in the figures in
this statement.
What is the latest position of the scheme?
Although the funding position has improved since the last
valuation as at 31 March 2006, it has deteriorated slightly
since 31 March 2007, mainly because investment markets
have not performed well.
At 31 March 2008, the scheme was approximately 92%
funded, compared to 97% funded at 31 March 2007 and
87% funded at 31 March 2006. This assessment is not a
formal valuation, but an estimate of the position of the
scheme measured consistently with the method used for
the 2006 valuation, taking into account the effect of
changes in investment conditions and scheme
membership since 31 March 2006.
Have there been any orders made by the
Pensions Regulator or any payments to
the Company from the scheme?
The Pensions Regulator can in certain circumstances
make orders regarding the benefit provisions or funding
of a pension scheme. The Trustee can confirm that the
Pensions Regulator has not made any orders in relation
to The Marks and Spencer Pension Scheme.
As part of this statement, the Trustee also needs to let
you know of any payments made to the Company from
the scheme during the year. The Trustee can confirm that
there have not been any payments to the Company out of
scheme funds in the last 12 months.
How well funded is the scheme on a
buy-out basis?
As part of the Summary Funding Statement, all schemes
need to let their members know about what may happen if
the supporting employer’s circumstances were to change
and the scheme had to be wound up. This section is for
information only and does not imply that M&S or the
Trustee are thinking about winding up the scheme. In fact,
the circumstances that would lead to winding up a scheme
are considered very unlikely in the near future, given the
size and relative financial stability of the M&S business and
the Company’s ongoing commitment to the scheme.
If a pension scheme had to be wound up, it might be
necessary to ‘buy out’ its members’ benefits from an
insurance company. A ‘buy-out’ valuation for a scheme
tells you how much of the scheme’s benefits it could afford
to buy out from an insurance company if these
circumstances occurred (assuming no extra money was
available from the supporting employer).
If the M&S scheme had wound up on 31 March 2006,
ie the date of the last actuarial valuation, the estimated
buy-out cover for the Final Salary pension scheme’s
benefits would have been in the region of 61%. As at
31 March 2008, this had dropped to 58%, again because
investment markets have not performed well.
This level of cover may seem low, but it’s not unusual
amongst UK schemes. This is because buying out a
scheme’s benefits is much more expensive than providing
pensions directly from the scheme.
What would happen if a pension scheme
started to wind up?
As explained above, if a scheme had to be wound up, the
supporting employer would be required to secure the
members’ benefits by paying enough into the scheme to
enable the Trustee to buy out the benefits with an
insurance company. If the employer could not pay this full
amount because it was insolvent, the Pension Protection
Fund (PPF) might be able to take over the scheme and pay
compensation to members of final salary pension
schemes. The compensation paid by the PPF would not
be the same as the M&S scheme benefits (as explained in
previous issues of Pensions Update).
You can get further information about the PPF at:
www.pensionprotectionfund.org.uk or by calling their
helpline on 0845 600 2541.
Where can I get further information?
If you have any questions about this statement or you
require more information or documentation about the
scheme, please contact the M&S Pensions
Administration team in Salford Quays (see back page
for contact details).
7

About the scheme’s advisers
Running a pension scheme can be complicated. A number of specialist advisers help the
Trustee in this task, each performing a different expert role.
The Trustee currently works with the following
scheme advisers:
• an actuary (Colin G Singer, Watson Wyatt LLP)
who provides advice on all aspects of the
scheme’s funding
• an investment and pension adviser (Watson Wyatt
LLP) that gives advice to the Trustee on how the
scheme’s assets should be invested
• numerous different investment managers that
look after the day-to-day investment of the
scheme’s assets
• an auditor (KPMG) that audits the
scheme’s accounts
• a solicitor (Linklaters LLP) that provides advice on
legal matters
• a custodian (State Street Bank and Trust Company)
that holds and safeguards the scheme’s assets
• a consultant (Mercer Ltd) that advises the Trustee
on defined contribution (DC) issues
• a property adviser (DTZ) that advises the Trustee on
the M&S property holding.
*
Good to know
All advisers must have the knowledge and experience
to do their job properly. Some advisers are also
required to have professional qualifications.
An interview with Colin Singer
Colin Singer is the actuary of the M&S pension
scheme. He works for actuarial firm Watson
Wyatt LLP. Below Colin answers some
questions about himself and his role.
Can you tell us a bit about yourself?
I live in Berkshire and I am married with three fairly grown
up daughters. I have worked in the pensions industry for
nearly 30 years, and have been a qualified actuary for the
last 25 years. My main non-work interests are music, travel
and various sports such as jogging, golf, tennis and skiing.
What does an actuary do?
The Institute of Actuaries describes an actuary as someone
who "makes financial sense of the future". Typically, an
actuary provides advice to financial institutions – in my
case, I work mainly with the trustees of occupational
pension schemes such as the M&S pension scheme.
8

There are many aspects to my role, but I see the most
important one being to help the Trustee make sure there is
enough money in the pension fund to pay the promised
benefits to members.
Do you work for M&S?
No, I’m not an employee of M&S. I have been appointed
by the Trustee of the M&S pension scheme as their
independent scheme actuary and I am an employee of
Watson Wyatt.
What role do you play in the M&S
pension scheme?
I provide financial advice to the Trustee to help it in its role
as guardian of the scheme's finances. This involves
providing regular, informal updates of the scheme’s funding
position to the Trustee and carrying out the scheme’s
actuarial valuation, which takes place at least every three
years. I attend most Trustee and relevant sub-committee
meetings (for example, the Actuarial Working Group) and
provide information, opinion and advice about the more
general world of pensions, as appropriate.
scheme’s assets immediately. As this effectively increased
the scheme’s assets by around £500m, in my view, it is
both an innovative, and desirable way of enhancing the
position of the scheme and improving member security.
“There are many aspects to my role, but
I see the most important one being to help
the Trustee make sure there is enough
money in the pension fund to pay the
promised benefits to members.”
What does next year bring for the scheme?
The next formal review of the scheme's financial position
(ie the actuarial valuation) will take place over the course of
next year. As part of this process, the Trustee and M&S will
consider how much money the scheme needs to have to
pay benefits to members, and how much M&S should pay
into the scheme to meet these benefits.
There was a lot of publicity last year
about how M&S used property to fund
the scheme’s shortfall. Can you tell us a
bit more about this and whether in your
view it was a good thing?
Last year, M&S set up a property partnership with the
scheme – under which the income generated by some
M&S properties would be paid into the scheme (instead of
the Company) over the next 15 years. The clever thing
about this arrangement is that the properties provide such
strong security that the whole value of the annual income
generated from the properties can be added to the
9

The committees
Ever wondered exactly who runs the M&S pension scheme and who ensures its prudent and
appropriate management?
Well, the Trustee is responsible for running the scheme and is supported in its role by three main committees. There are
also some sub-committees, which are set up to respond to specific issues.
The committee members gain specialist skills so that they can recommend the most appropriate course of action to the
Trustee Board. All of the Trustee Directors sit on one or more of the committees, depending upon their skills.
In addition to the committees, several other parties support the Trustee (eg the advisers and administrators). We think
that this provides an extremely robust structure, resulting in a well-run and well-governed scheme.
Defined Benefit
Committee
Responsibilities include
monitoring the overall
running of the scheme
(including the
administration of the DB,
or Final Salary, section of
the scheme), ensuring the
scheme remains
compliant with legislation,
assessing risk and
awarding discretionary
benefits (eg death
benefits). This committee
also considers Trustee
training requirements.
Administration
Advisory
Systems Group
DB
Established in April 2008,
this sub-committee is
responsible for reviewing
and improving the
administration systems for
the DB, or Final Salary,
pension arrangement.
Trustee
The Trustee of the scheme is a
company called Marks and Spencer Pension
Trust Limited. Its Board of Directors is made
up of seven Company-appointed Trustee
Directors (including the two Independent
Trustees) and five Member-nominated Trustee
Directors.
The Trustee is ultimately responsible for the
scheme’s affairs and has a duty to run the
scheme in accordance with the Trust Deed
and Rules and to act in the interests of the
scheme beneficiaries.
The Trustee is supported in its role by a
number of committees and three
sub-committees.
Investment Committee
Responsibilities include reviewing the
scheme’s overall investment strategy and
helping to select the investment managers,
then monitoring their performance.
Actuarial Working Group
Established in summer 2008, this
sub-committee is responsible for helping to
manage the 2009 actuarial valuation process.
Defined
Contribution
Committee
Responsibilities include
monitoring the
administration, investment
policy and
communications of the
DC arrangements (ie the
M&S Retirement Plan and
the Money Purchase
AVC Plan).
Communications
Committee
DC
This sub-committee is
currently reviewing the
communications that are
sent to new employees
eligible to join the M&S
Retirement Plan.
10

Responsible Investment
and the scheme
You will no doubt be aware that in January 2007 M&S launched Plan A – a five-year eco and
ethical plan with 100 stretching commitments to responsible retailing.
Like former US vice-president and climate-change
campaigner Al Gore, M&S believes that running a
responsible, sustainable business is an essential part of
being a successful, profitable business of the future.
Responsible Investment, also known as sustainable
investing, is based on the same principle: that investing
in socially responsible businesses is a good idea, for
both society and the environment and in terms of profit.
The two main approaches to Responsible Investment are screening and engagement. Screening is an approach where
companies are selected for investment because of their good social and environmental policies or because they are not
involved in certain negative activities (eg tobacco or arms). Engagement, on the other hand, involves monitoring the
behaviour of companies and encouraging change (where appropriate) through dialogue and persuasion.
So, where does Responsible Investment feature in the running of the M&S
pension scheme?
For the Trustee, which has a duty to act in the interests of the scheme’s beneficaires, financial performance
remains the main priority when investing the scheme’s assets. However, the Trustee does impress on the
scheme’s investment managers the importance of Responsible Investment by asking them to take a balanced
view, which considers social and environmental performance in addition to financial performance.
Important note
A note for those who stopped working for M&S after 1991
When you leave the scheme, and become a deferred member, your pension entitlement is increased between your date
of leaving and the date when you start receiving your pension. This increase is broadly in line with inflation, up to a
maximum of 5% a year.
At the point at which you leave, it is obviously not possible to accurately predict future inflation and particularly for those
of you who left the scheme between 1991 and 1996, your paperwork will probably show a ‘maximum pension’ figure
based on 5% inflation.
As you will be aware, actual inflation has been less than 5% a year for some time and therefore at your Normal
Retirement Date, the actual pension due to you may be less than the maximum pension illustrated when you left.
You will automatically be sent a quote six months before your Normal Retirement Date reflecting your pension
entitlement, based on actual inflation. If you are thinking of retiring sooner, you should request an up-to-date quote by
contacting the M&S Pensions Administration team.
11

*
Good to know
Whether you die before or after
retirement, a pension will be
paid to your spouse or civil
partner. If you are unmarried,
you can nominate a financial
dependant to receive a
pension by completing a
Nomination Form.
Your Nomination Form
Active members and members with Money Purchase AVCs –
have you completed a Nomination Form?
?
Did you know?
If you die, any lump sum benefit
is payable to the Trustee. The
Trustee then uses its discretion
as to who to pay the lump sum
to. This has the advantage of
avoiding inheritance tax as the
lump sum does not form part
of your estate.
If you are an active member of the M&S pension scheme (ie you currently work for
M&S), it’s important that you complete, and keep up to date, a Nomination Form.
A Nomination Form lets the Trustee know who you would like to receive the lump
sum benefit of 4 x your final salary in the event of your death. Your beneficiaries
do not have to be financially dependent on you.
The Trustee is not legally bound by the wishes you express on your Nomination
Form but it will take them into account when making a decision about who should
receive the payment.
If your circumstances change, if you marry, divorce or have children, for instance,
you should complete a new Nomination Form. In fact, it’s a good idea to complete
a new Nomination Form regularly, even if your circumstances have not changed,
so the Trustee knows that your wishes are up to date.
Where to get a Nomination Form
You can request a Nomination Form from the
M&S Pensions Administration team (see below
for contact details) or, if you’re a current M&S
employee with PC access, you can download
the form from the internal M&S People Guide site.
Contact details for the M&S Pensions Administration team
Write to: M&S Pensions Administration team, Alexandra Court,
200-220 The Quays, Salford Quays, Manchester M50 3SP
Email: pensions@marks-and-spencer.com Tel: 0845 304 7474 or 0161 266 6100
Please remember to write to the M&S Pensions Administration team at Salford Quays if you change your address.
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