Pensions governance

The Group operates a defined benefit pension scheme (the ‘Scheme’) for employees with an appointment date prior to 1 April 2002.

The results of the triennial actuarial valuation of the Scheme as at 31 March 2012 revealed a deficit of £290m. This represents a substantial reduction in deficit from £1.3bn as at 31 March 2009.

The assets of the pension scheme, which are held under trust separately from those of the Group, are managed by the Board of the Pension Trust (‘Trustee Board’). The Trustee Board has three main committees: Management and Governance, Investment and Actuarial Valuation.

During the year the size of the Trustee Board reduced from 12 to nine members. The Trustee Board is chaired by Graham Oakley, who commenced a five-year term in April 2011, having been a member of the Board since 2000. The Trustee Board includes two independent directors plus three member representatives who are appointed through a selection process which embeds efficient succession rotation planning. During the year the Board has been recognised through various external awards including those for investment strategy and risk management.

The Trustee Board has a business plan against which progress is measured on an ongoing basis in a similar approach to the Group Board. The Trustee Board also maintains a risk register and an associated action plan, a conflicts of interest policy, plus a register and a code of ethics, all of which are reviewed regularly.

Each Trustee Board Director has an individual training plan, which is based on the Pension Regulator’s Trustee Knowledge and Understanding requirements and tailored to address any skill gaps and specific committee roles. The majority of the Trustee Board members hold the Pensions Management Institute Award in Trusteeship.

All advisers, investment managers and suppliers are appointed through a rigorous tender process. They are monitored via quarterly reports and periodic meetings and there is also a rolling programme of both informal and formal adviser reviews.

The Scheme is a signatory to the UN Principles for Responsible Investment and the Trustee has partnered with a specialist engagement service, Hermes Equity Ownership Services (EOS), to exercise its global equity voting rights in accordance with a detailed Trustee policy, which addresses a range of governance, social and environmental issues. EOS has also enhanced the Trustee’s stewardship and governance oversight of investee companies by engaging with companies, on a global basis, where management is considered not to be acting in the best long-term interests of investors. The results of these voting and engagement activities are published quarterly on the M&S website. The Scheme is also a signatory to the Financial Reporting Council’s UK Stewardship Code.

During 2012 all remaining DC assets in respect of employees joining on or after 1 April 2002 were transferred to the new Master Trust arrangement with Legal and General.