HSBC 2001 Annual Report Download - page 175

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scheme comprises a funded defined benefit scheme and a defined contribution scheme. The latter was
established on 1 January 1999 for new employees. The latest valuation of the defined benefit scheme was
made at 31 December 2001 and was performed by E Chiu, Fellow of the Society of Actuaries of the
United States of America, of HSBC Life (International) Limited, a subsidiary of HSBC Holdings. At that
date, the market value of the defined benefit scheme’ s assets was US$815 million. On an ongoing basis,
the actuarial value of the scheme’ s assets represented 112% of the benefits accrued to members, after
allowing for expected future increases in salaries, and the resulting surplus amounted to US$90 million.
On a wind-up basis, the actuarial value of the scheme’ s assets represents 120% of the members’ vested
benefits, based on current salaries, and the resulting surplus amounted to US$135 million. The actuarial
method used was the projected unit credit method and the main assumptions used in this valuation were a
long-term investment return of 7% per annum and salary increases of 6% per annum.
In the United States, the HSBC Bank USA Pension Plan (the ‘principal scheme’ ) covers employees of
HSBC Bank USA and certain other employees of HSBC. The latest valuation of the principal scheme was
made at 1 January 2001 by R G Gendron and K G Leister, Fellows of the Society of Actuaries, of Hewitt
Associates LLC. At that date, the market value of the principal scheme’ s assets was US$850 million. The
actuarial value of the assets represented 117% of the benefits accrued to members, after allowing for
expected future increases in earnings, and the resulting surplus amounted to US$122 million. The method
employed for this valuation was the projected unit credit method and the main assumptions used were a
discount rate of 7.75% per annum and average salary increases of 5.15% per annum.
The HSBC Bank (UK) Pension Scheme, The HSBC Group Hong Kong Local Staff Retirement Benefits
Scheme and the HSBC Bank USA Pension Plan cover 42% (2000: 45%, 1999: 46%) of HSBC’ s
employees.
The pension cost for defined contribution schemes, which cover 41% (2000: 24%; 1999: 26%) of
HSBC’ s employees, was US$144 million (2000: US$81 million; 1999: US$87 million).
(ii) FRS 17 Retirement Benefits
At 31 December 2001 the assumptions used to calculate scheme liabilities for HSBC’ s main defined
benefit pension schemes under FRS 17 are:
D
iscoun
t
rate Inflation assumption
Rate of increase
for pensions
in paymen
t
and deferre
d
pension Rate of pay increase
%% % %
United Kingdom......................................... 5.9 2.5 2.5 3.75
Hong Kong ................................................. 6.5 4.0 N/A 6.0
United States .............................................. 7.25 2.75 N/A 4.0
Jersey.......................................................... 5.9 2.5 2.5 4.25
Brazil.......................................................... 10.25 5.0 5.0 6.05
France......................................................... 5.5 2.0 2.0 3.5
Other........................................................... 4.5-6.25 1.5-2.0 1.5-2.0 2.5-3.5