Marks & Spencer Final Salary Pension Scheme - PRAG

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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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