Marks & Spencer’s (M&S) defined benefit (DB) pension surplus fell by £400.2m to £77.2m on an IAS 19 basis in 2023/24, its full year results report has revealed.

The company stated that the reduction was largely driven by a narrowing in the credit spreads of corporate bonds relative to government bonds.

Despite the decrease, M&S said there had been no material worsening of the scheme’s overall funding position and the M&S UK Pension Scheme remained fully funded on a technical provisions basis.

The most recent triennial valuation of the scheme was carried out as at 31 March 2021 and showed a funding surplus of £687m, up from £652m as at 31 March 2018.

M&S and the scheme trustees confirmed that, in line with the current funding arrangement, no further contributions will be required to fund past service due to this valuation result, other than those already contractually committed to under the existing M&S Scottish Limited Partnership arrangements.

M&S is a general partner of the M&S Scottish Limited Partnership, with the UK DB scheme being a limited partner.

The partnership holds £1.3bn of properties at book value that have been leased to M&S.

The first limited partnership interest held by the scheme entitled it to receive £73m in 2023 and £54.4m in 2024.

The second partnership interest held by the scheme entitled it to a further £36.3m annually from June 2017 to June 2031.

The second partnership interest is not a transferrable financial instrument and is therefore not included as a scheme asset in accordance with IAS 19.

M&S and the pension scheme are also in “ongoing discussions” about the distributions to ensure they are appropriate, and have agreed to amend the distribution dates in relation to the first limited partnership interest.

The scheme therefore received £40m in October 2023 and will receive £89.7m in June 2024.

Furthermore, the company and the scheme have agreed to amend the distribution dates for the second interest so the scheme will receive £38.3m in June 2024 and an annual distribution of £36.4m from June 2024 to June 2031.

“If the ongoing discussions are successfully concluded, the profile of contributions to the scheme would be revised so that distributions in the year would substantially reduce and the group would commit to extending the distribution profile, if required, to ensure that the scheme was fully funded,” the report stated.

Following buy-in transactions in September 2020, April 2019 and March 2018, the scheme has now insured around 73 per cent of the pensioner cashflow liabilities for pensions in payment.

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