Marks and Spencer Group plc has asked the Trustees of the Marks & Spencer Pension Scheme about the possible impact on the pension fund of a deterioration in the creditworthiness of the employer group.
The Trustees have today responded by providing information in relation to the possible implications of such a deterioration on the investment policy of the fund. The Trustees have stated that they would be concerned as to any material weakening of the Company's covenant and have said that, in such circumstances, they would be bound to consider the adoption of a more conservative investment strategy, involving a significant shift into bonds.
The table below is an extract from information provided by the Trustees showing the potential impact of moving equities into bonds to lower the investment risk in the pension fund. The Trustees have stated that if they were to decide to change the investment strategy, they would seek to agree with the Company any consequent change in funding arrangements so that the actual funding patterns would not necessarily be the same as those shown below.
| Asset allocation |
40% bonds
60% equities
(2003 valuation) |
60% bonds
40% equities |
70% bonds
30% equities |
80% bonds
20% equities |
100% gilts |
| Past service deficit (after £400m lump sum) |
£185m |
£550m |
£850m |
£1,050m |
£1,800m |
| On going contribution rate |
15.8% |
18% |
20% |
22% |
28% |
| Annual ongoing contributions based on £500m payroll |
£80m |
£90m |
£100m |
£110m |
£140m |
| Deficit spread over |
12 years |
8 years |
5 years |
5 or 3 years |
3 years |
| Estimated total annual Company contributions |
£105m (see note 1) |
£180m |
£290m |
£350m or £490m |
£785m |
(1) To be consistent with the rest of the table, the figure of £105m has been calculated assuming that the deficit of £185m is spread over 12 years. The actual current funding plan agreed between the Company and the Trustees was for an initial payment of £400m, together with 9 payments of £33m a year from 2007 to 2015 to fund the remaining £185m deficit, in addition to the regular annual contribution of £80m.
PRESS ENQUIRIES
Marks & Spencer 020 7268 1919
Corporate Press Office
Tulchan 020 7353 4200
Andrew Grant
Kirstie Hamilton
Katie Macdonald-Smith
The directors of Marks and Spencer Group plc accept responsibility for the information contained in this announcement and confirm that to the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.
-Ends-
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