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Property Props Up Pensions

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http://business.timesonline.co.uk/tol/business/columnists/article7127664.ece

WHEN Marks & Spencer put £1 billion of property into its pension fund in 2007, few in the City batted an eyelid. But the deal helped spawn a new wave of “partnership deals” between companies and their pension trustees.

Last week M&S announced an extension to that property partnership as part of an £800m bailout of its pensions black hole. J Sainsbury also forged an innovative property partnership of its own — putting £750m of assets into its pension scheme. Those companies that don’t have the luxury of owning hundreds of millions of pounds of freehold property assets are trying to find other “asset-backed” solutions.

In March ITV announced that it would use its Freeview multiplex operation, SDN, to provide support for its pension scheme. This cut £124m from its £550m pension deficit.

The likes of M&S and Sainsbury could be accused of selling off their crown jewels in order to kick their pension problems into the long grass. But these are good deals that make sense for everybody. The alternative — raising cash — could harm the day-to-day operations of these companies and dent their corporate credit ratings, which in turn would further damage the pension fund.

Deciding how much cash to put in would also be tricky. Actuarial assumptions about the size of pension deficits vary from year to year, creating huge volatility. Today the deficits are huge — so there is a danger that companies could over-react and put far more in the pension funds than is actually required. Injecting property or other assets avoids these problems and gives them a get out of jail free solution.

Price Waterhouse Coopers reckons 30 large employers are considering following the lead of M&S and Sainsbury. Expect many more to emerge in the months ahead.

Thank god property only ever goes up in value.

How lucky are they to have found a get out of jail card....

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You can't fill a blackhole.

An astute technical observation. In fact, as I understand it, putting stuff into a black hole increases it's density and thus is gravitational pull.... you make it bigger.

Pension funds; the ultimate private bag holder

I keep telling people... when the tide goes out, and we see who's swimming nude, it's all the pension funds that will carry the can, with the government then crapping it's pants over claims that it failed to regulate and then agreeing to backstop all private pensions of everyone over 50 at 100p in the pound.

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WHEN Marks & Spencer put £1 billion of property into its pension fund in 2007

The mark of another six-figure renumerated fund manager, no doubt.

These guys are criminals. Plain and Simple.

it doesnt sound as if it was new money, but more of a transfer of M&S already owned property portfolio, not sure exactly how that works with regards shareholders but clearly someone is getting rinsed, ultimately it is likely to be both shareholders and pensioners, i doubt if the actuaries have stress tested a credit cycle ending decline in equities and corp bonds of 90% and property of 60%

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The mark of another six-figure renumerated fund manager, no doubt.

These guys are criminals. Plain and Simple.

7 figure at least, possibly 8. At just 1% commission they'de be getting £10m.

it doesnt sound as if it was new money, but more of a transfer of M&S already owned property portfolio, not sure exactly how that works with regards shareholders but clearly someone is getting rinsed, ultimately it is likely to be both shareholders and pensioners, i doubt if the actuaries have stress tested a credit cycle ending decline in equities and corp bonds of 90% and property of 60%

Looking at the figure, the owed the pension fund £800m but gave them property "worth" £1bn... what's betting they got cash-back?

And what's the betting the property was worth waaaaaay less than they valued it at. Commercial R/E has fallen what.... 50%?

Say it's worth £500m, and they got £200m cash-back... the difference between "value" and the black hole. As long as they don't write the value down to real figures, they've paid off an £800m black hole with £300m.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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