High street chain Marks and Spencer has agreed a pension funding package worth £800 million in a bid to close the scheme’s deficit, it was announced today.

The group’s defined benefit scheme, which has 123,000 members, faced a £1.3 billion shortfall when its last valuation was carried out at the end of March last year.

In order to close this, M&S has agreed to pay in an additional £376 million between now and 2018.

It will contribute £35 million a year for the next three years, rising to £60 million for the remainder of the period, on top of the regular contributions it already makes.

The fund will also benefit from a further £300 million through an additional interest in property owned by M&S.

Under the partnership, an interest in property, including stores, is transferred to the pension scheme and then leased back by M&S, providing the pension with an annual income.

The partnership is already generating around £72 million a year for the scheme until 2022, while the latest transfer will contribute a further £36 million annually for 15 years from 2017.

The group will also transfer assets worth £124 million to the pension scheme from existing US dollar hedge contracts.

The £500 million difference between the current deficit and the additional contributions M&S plans to make should be made up by investment returns on the scheme’s existing assets.

M&S said the funding plan should not have a "material impact" on the group’s net assets or its income statement.

Finance director Ian Dyson said it was a comprehensive funding plan which made efficient use of existing assets and provided the scheme with a substantial income to reduce the deficit.

The group first began tackling its pension fund deficit in 2006 when it set up the property-backed partnership.

During the past year it has capped the level of pay rises for members included in pension calculations at 1%, while it has also changed its early retirement rules.

The scheme was closed to new members in 2002, although its 20,000 active members, who still work for M&S, can continue to contribute to it.

A further 46,000 of the scheme’s members are already drawing their pensions and 57,000 are deferred members, meaning they no longer work for the company.