Pension Funding Plan

Marks & Spencer Group PLC
23 January 2007


Issued: Tuesday, 23 January 2007


  MARKS & SPENCER ANNOUNCES FUNDING PLAN FOR UK DEFINED BENEFIT PENSION SCHEME


  • Triennial actuarial valuation deficit: £704m

  • M&S to contribute value of £500m via interest in property partnership;

  • It is not proposed to close the scheme for existing members and
    consultation begins with employees on a range of choices regarding the build
    up of their pension in the future.

The triennial actuarial valuation of the Marks & Spencer UK defined benefit
pension scheme ('Pension Scheme') at 31 March 2006 results in a deficit of
£704m. The IAS19 valuation as at 30 September 2006 was a deficit of £1,031.7m.

M&S has agreed the terms of a plan to fund the £704m deficit with the Pension
Scheme Trustee.  M&S will contribute £500m of value into the Pension Scheme via
an interest in a property-backed partnership, with the remainder of the deficit
expected to be met by investment returns on the Pension Scheme's assets.

To meet the £500m contribution of value, M&S will establish a partnership with
the Pension Scheme which will hold M&S properties with a current market value of
approximately £1.1bn. These properties will be leased back to M&S and a fixed
annual distribution to the Pension Scheme of c£50m will be made out of
partnership profits for a 15 year period (currently equating to an effective
financing rate for M&S of c5.4%.). The Pension Scheme will hold the £500m
partnership interest, representing the net present value of these future
distributions, as part of its total investment portfolio and accordingly the
deficit will be reduced by this amount. M&S will retain control over the
properties held as part of this arrangement, including flexibility to substitute
alternative properties.

The partnership will be consolidated in the M&S Group accounts with no impact on
the Group's net assets as the retirement benefit liability will be reduced by
£500m and replaced by an amortising liability in respect of the obligations of
the partnership to the Pension Scheme. The impact of the funding plan on the
Group's Income Statement is not expected to be material.

This funding plan enables M&S to make a substantial contribution to the Pension
Scheme which will immediately reduce the deficit, while ensuring that the
Company's cashflow obligations to the Scheme are spread over a manageable
period.  From its perspective, the Pension Scheme receives a significant income
yielding asset, backed by a strong portfolio of M&S property. This plan enables
the Company to make the future of the Pension Scheme more secure for its 123,000
members, including 26,000 current employees.

In conjunction with the finalisation of the funding plan, Marks & Spencer has
also begun consulting with employee members on a range of choices about how
their pension builds up in the future.  Under the proposal, there are three
options and each member can choose the one that suits them best. With one of the
options, members would make contributions to the scheme; with the other two,
members would not.

In addition, Marks & Spencer today announces its intention to redeem outstanding
secured bonds to the value of £317m issued by Amethyst Finance plc*. This will
release properties with a current estimated market value of £550m (book value at
30 September 2006: £343m) for use in the partnership. The redemption will give
rise to a one-off make-whole premium, which, together with the costs of this
transaction will result in an exceptional item of £30m - £35m being recorded in
the Group's 2006/7 profit and loss account.

Ian Dyson, Finance Director, Marks & Spencer, 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 we have also put
together a range of options which we're now discussing with employees to give
them choices about how they want to grow their pension in the future.'

* Amethyst Finance Plc comprises:

£60,000,000 Class A1 Secured Floating Rate Notes due 2015

£131,000,000 Class A2 Secured Floating Rate Notes due 2026

£140,000,000 Class B Secured 6.282 per cent. Bonds due 2026

Statements made in this announcement that look forward in time or that express
management's beliefs, expectations or estimates regarding future occurrences and
prospects are 'forward-looking statements' within the meaning of the United
States federal securities laws. These forward-looking statements reflect Marks &
Spencer's current expectations concerning future events and actual results may
differ materially from current expectations or historical results. Any such
forward-looking statements are subject to various risks and uncertainties,
including failure by Marks & Spencer to predict accurately customer preferences;
decline in the demand for products offered by Marks & Spencer; competitive
influences; changes in levels of store traffic or consumer spending habits;
effectiveness of Marks & Spencer's brand awareness and marketing programmes;
general economic conditions or a downturn in the retail or financial services
industries; acts of war or terrorism worldwide; work stoppages, slowdowns or
strikes; and changes in financial and equity markets.


Contacts:

Amanda Mellor, IR               [phone]

Majda Rainer , IR               [phone]

Corporate Press Office:         [phone]

Investor Conference Call:

This will be hosted by Ian Dyson at 08.30 (GMT) on Tuesday 23 January 2007:

Dial in number:                 [phone]

A recording of this call will be available until Tuesday 30 January 2007:

Dial in number:                 [phone]

Access Code:                     134895 #


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