The scheme will remain open to existing members, but they will have to make contributions from their salaries or receive reduced benefits upon retirement.
M&S will contribute£1.1 billion of properties into its partnership with the pension fund, which will take£50 million each year for the next 15 years. After that, the ownership of the properties will revert to M&S. This plan enables the retailer to make a substantial contribution to the pension scheme, immediately reducing the deficit, while ensuring its cashflow obligations to the scheme are spread over a manageable period.
Marks & Spencer finance director Ian Dyson said: 'We know staff in our final salary scheme value this benefit very highly, which is why we want to keep the scheme open. By using our valuable property portfolio, we have been able to put the scheme on a safer footing and have put together a range of options that we're now discussing with employees to give them choices about how they want to build their pension in the future.'
Seymour Pierce analyst Richard Ratner said: 'In addition, M&S is to repurchase£317 million of bonds, which will release£550 million property [at present values] for the partnership. The premium to be paid on redemption of these bonds, together with the transaction costs, will amount to an exceptional charge of£30 million to£35 million.'
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