By Sarah Mortimer
LONDON Nov 28 UK retailer Marks and Spencer
has cut its pension scheme deficit by more than 1
billion pounds ($1.6 billion) and agreed a cheaper funding plan
that will keep reducing the shortfall.
The news from M&S contrasts with a trend of increasing
deficits in workplace schemes, exacerbated by the weak economic
growth that has lowered returns on UK government bonds, a staple
investment for pension funds.
Rising life expectancy has made it more onerous for
companies to continue funding defined benefit schemes, which
promise staff a pension based on their salaries.
M&S shares rose 2.2 pct to 387 pence, against a 0.15 percent
fall in the FTSE 100 index by 1608 GMT, after it said
earlier in the day the deficit on its UK defined benefit scheme
shrank to 290 million pounds in March 2012.
That compared with 1.3 billion pounds in March 2009.
The pension scheme is being funded by income from a portion
of the company's property portfolio. In 2007, M&S contributed a
number of properties to its pension pot, leasing them back to
provide an annual income to the pension scheme.
British companies offering defined benefit schemes have been
struggling to plug deficits, with some having to dip into their
own coffers or consider more risky investments than bonds to
fund them, PricewaterhouseCoopers said on Monday.
Recent figures from the Pension Protection Fund showed the
total deficit of British final-salary pension schemes had more
than doubled to 231 billion pounds ($369.8 billion) in the space
of a year.
M&S said it would release 28 million pounds a year to its
pension pot until 2017. This has been brought down from the 60
million pounds the retailer agreed in 2009.
M&S closed its defined benefit scheme to new members in
2002. The scheme has 56,000 deferred members, 51,000 pensioners
and 14,000 active members.