M&S in Property Deal to Cut Pension Deficit

Marks & Spencer said on Tuesday it would inject 500 million pounds ($987 million) into its final salary pension fund through a property partnership scheme and it would keep the scheme open to existing members.

The British retailer said the triennial actuarial valuation of its defined benefit pension scheme showed a deficit of 704 million pounds as at March 31, 2006.

Under pressure from new regulations, British companies are taking steps to reduce their pension deficits and many of them are closing costly final salary pension schemes to existing members, as well as new members.

Marks & Spencer closed its final salary scheme to new members in 2002, a spokeswoman said.

"We know staff in our final salary scheme value this benefit very highly which is why we want to keep the scheme open," Finance Director Ian Dyson said in a statement.

M&S said its final salary scheme has 123,000 members, including 26,000 current employees.

The firm said it would establish a partnership with the pension scheme which will hold M&S properties with a current market value of approximately 1.1 billion pounds.

These properties will be leased back to M&S and the partnersip will make a fixed annual distribution to the pension scheme of about 50 million pounds for a 15-year period.

The pension scheme will hold the 500 million pound partnership interest - representing the net present value of these future distributions - as part of its total investment portfolio, thereby reducing the pension deficit by this amount.

M&S shares closed at 670 pence on Monday, valuing the business at about 11.4 billion pounds.