The Marks & Spencer (M&S) defined benefit (DB) pension scheme surplus has increased by almost £1bn over the past year, reaching £1,902.6m as at 30 March 2020 (£914.3m in 2019).

Over the past year, scheme liabilities fell from £9,301.3m, to £8,743.3m as at 30 March 2020.

This was in addition to an increase in scheme asset returns, from £10,224.7m as at 30 March 2019, to £10,653.8m for the same point in 2020, attributed to a fall in gilt yields.

The company saw a 50.2 per cent increase in total net assets, which reached £3,708.5m at the year end.

The surge was primarily due to a "significant increase in longer dated credit spreads", driven by market changes linked to Covid-19 and resulting in a reduction on scheme liabilities.

The group anticipates that the increase in surplus will also “give rise to an increased pension credit” over the next year.

This follows a £77m increase in the DB surplus in September last year, after the group completed two buy-ins, with Pension Insurance Corporation and Phoenix Life, insuring around £1.4bn of liabilities.

This, combined with two previous buy-ins completed in March 2018, saw the firm's longevity exposure hedged for around two thirds of the liabilities for pensions in payment.

The group emphasised that Covid-19 had led to “significant market falls for some asset classes”, adding that it would continue to monitor the impact of the pandemic on DB scheme funding levels closely.

The UK DB pension scheme closed to future accrual in April 2017, with the most recent actuarial valuation, carried out as at 31 March 2018, showing a funding surplus of £652m.

As a result of this valuation, the firm and trustees confirmed that no further contributions would be required to fund past service.

The group have also confirmed plans for the removal of pension cash supplements for any future directors, as well as the reduction of the CEO’s cash pension supplement to zero over the past three years.

It stated that both the CEO, Steve Row, and the remuneration committee were “mindful of the external sentiment of executive pension arrangements”.

As such, Rowe has agreed to forgo contractual agreements for this pension cash alternative, in order to "remove any policy differential" between incumbent and new executive directors.

He will however, remain eligible to participate in the pension scheme on the same terms as all other colleagues.

The group previously confirmed that it would be making changes to bring its exectuive pension offering in line with the broader workforce, with its newly appointed chief financial officer receiving benefits in line with Investment Association guidelines.

It also determined that the valuation of the UK DB pension obligation is no longer a key audit matter for the current year.

The report stated: "This is due to a history of assessing the judgements and assumptions made by management at or near the middle of our independently calculated ‘reasonable range’ and the reduction in risk as a result of recent annuity buy-in."

It did however, identify significant pension charges, arising as a result of “the historical changes to the UK defined benefit scheme practices”, as an adjusting item for the 52-week period ending 28 March 2020.

The total retirement benefit cost for the group over the past year was £49.2m, slightly lower than last year, when costs totalled £695m.

This was broken down into an income of £20.2m relating to the UK DB pension scheme, compared to a 2019 income of £4.5m, as well as costs of £65.6m for the UK defined contribution (DC) plan, and further costs of £3.8m for other retirement benefit schemes.

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