Financial health check.

The Scheme is a defined benefit (DB) pension arrangement where all members' pensions are paid from a single pot, known as the fund.

We keep a close eye on the Scheme’s financial health to make sure there’s enough money set aside in the fund today to make all future pension payments.

We complete an in-depth financial health check known as an actuarial valuation every three years. We ask the independent Scheme Actuary to check the difference between how much the Scheme needs to be able to pay the pensions built up (liabilities) and the total amount set aside in the fund to pay those pensions (assets).

The results show whether the Scheme is in surplus and the assets are worth more than the liabilities, or in deficit and the assets are worth less than the liabilities. We also look at the funding level, which is the difference between assets and liabilities shown as a percentage. It's important because it tells us whether the Scheme’s investments are on track or if we need to take action.

The latest results.

The results of the actuarial valuation as at 31 March 2024 are provided below, alongside the results of the previous actuarial valuation. The Scheme is in a secure position with a surplus of £288m and a funding level of 105%.

Finanicial Healthcheck at 31 March 2024 Finanicial Healthcheck at 31 March 2024

What do these results tell us?

As at 31 March 2024 the Scheme’s liabilities had decreased. At the same time, the asset values had decreased, but are still more than the liabilities meaning that the Scheme remains in surplus.

This drop in assets and liabilities was largely due to the increase in interest rates the UK has experienced over the last few years. When interest rates increase, the amount the Scheme needs to pay future pension payments reduces. At the same time, the value of certain investments in the Scheme’s assets, such as government bonds and insurance policies, held to match the value of future pension payments, also decrease in value.

Despite the drop in values of the assets and liabilities, the Scheme’s funding level was stable and remains above 100%. This reflects the Scheme’s investment strategy, which is designed so that movements in the assets and liabilities are broadly matched.

It’s important to be aware that a surplus doesn’t mean the Scheme has more money than it needs. The value of the Scheme’s assets can go up or down over time and the assumptions used to work out the liabilities might change in the future too. A surplus provides the Scheme with some protection against these changes. And it tells us that it is currently in a healthy financial position, holding enough money to pay all pensions now as well as those that will fall due in the future.

What happens next?

The Trustee will continue to target the aims of its long-term plan, gradually taking less risk with how it invests the Scheme’s assets across a careful mix of investments.

The next in-depth financial health check is due to be calculated as at 31 March 2027. You can keep up to date on what happens in between with the annual Summary Funding Statement which we post in the news section each year.

What would happen if M&S could no longer support the Scheme?

As part of every actuarial valuation, all pension schemes must give members an idea of what would happen in the unlikely event that the sponsoring employer is no longer able to support future funding.

The Scheme Actuary must assume that the Trustee uses the amount it has set aside (the assets) to buy members’ pensions from an insurance company. The insurance company would then take on the responsibility for paying pensions going forward.

As at 31 March 2024, the estimated cover for the benefits built up would have been around 93%. This is a lower percentage than the funding level because it costs more to buy pensions from an insurance company.

If M&S could no longer support the Scheme, it would be legally required to pay enough funds into the Scheme to secure the total amount of benefits earned with an insurance company. In the extreme situation that M&S could not pay this amount in full, the Pension Protection Fund (PPF) may be able to take over the Scheme and pay compensation to members. The compensation paid by the PPF would not be the same as the level of benefits from the Scheme. More information about the PPF is available at www.ppf.co.uk.

The Trustee gets regular financial updates from M&S so that it can, with independent expert advice, keep a close eye on the financial health of the business. Whilst the retail industry is a challenging market, the size and cash flow of M&S give the Trustee confidence in the Company’s ability to support the pension scheme.

Other information

We must also confirm that:

  • There have not been any payments to M&S out of Scheme funds since the last Summary Funding Statement provided in 2023.
  • The Pensions Regulator has not had to intervene in the running of the Scheme.

For detailed information about the latest actuarial valuation from the Scheme Actuary, members can request a copy of the full Actuarial Valuation Report by contacting the Pensions Administration Team.

Members can also request information on how the Scheme manages climate change risks and our sustainable investment choices. More detail can be found in our Climate Change Report. A copy of the latest report can be downloaded from the Our approach to sustainability page.  

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