HSBC 2008 Annual Report Download - page 366

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Note 8
364
Post-employment benefit plans
Income statement charge
2008 2007 2006
US$m US$m US$m
Defined benefit pension plans ......................................................................... 477 694 602
– HSBC Bank (UK) Pension Scheme ......................................................... 255 490 342
– Other plans ............................................................................................... 222 204 260
Defined contribution plans .............................................................................. 508 485 456
985 1,179 1,058
Defined benefit healthcare plans ..................................................................... 13 33 62
998 1,212 1,120
Net liabilities recognised on balance sheet in respect of defined benefit plans
2008 2007
US$m US$m
Defined benefit pension plans ........................................................................................................... 3,154 1,968
– HSBC Bank (UK) Pension Scheme ........................................................................................... 392 808
– Other plans ................................................................................................................................. 2,762 1,160
Defined benefit healthcare plan ......................................................................................................... 734 925
3,888 2,893
HSBC pension plans
HSBC operates some 205 pension plans throughout the world, covering 86 per cent of HSBC’s employees,
with a total pension cost of US$985 million (2007: US$1,179 million; 2006: US$1,058 million), of which
US$678 million (2007: US$626 million; 2006: US$668 million) relates to plans outside the UK.
Progressively, HSBC has been moving to defined contribution plans for all new employees. The pension cost for
defined contribution plans, which cover 50 per cent of HSBC’s employees, was US$508 million (2007:
US$485 million; 2006: US$456 million).
Both HSBC’s and, where relevant and appropriate, the trustees’ long-term investment objectives for defined benefit
plans are:
• to limit the risk of the assets failing to meet the liabilities of the plans over the long-term; and
• to maximise returns consistent with an acceptable level of risk so as to control the long-term costs of the defined
benefit plans.
Both HSBC and, where relevant and appropriate, the trustees, consider that the investment policy should be
consistent with meeting their mutual overall long-term investment objectives. In pursuit of these long-term
objectives, a benchmark is established for the allocation of the defined benefit plan assets between asset classes. In
addition, each permitted asset class has its own benchmarks, such as stock market or property valuation indices and
desired levels of out-performance where relevant. This is intended to be reviewed at least triennially within 18
months of the date at which the actuarial valuation is made, or more frequently if circumstances or local legislation so
require. The process generally involves an extensive asset and liability review.
Most of the Group’s defined benefit plans, which cover 36 per cent of HSBC’s employees, are funded plans with
assets which, in the case of most of the larger plans, are held in trust or similar funds separate from HSBC. The plans
are reviewed at least annually or in accordance with local practice and regulations by qualified actuaries. The
actuarial assumptions used to calculate the defined benefit obligations and related current service costs vary
according to the economic conditions of the countries in which they are situated.
The largest plan exists in the UK, where the HSBC Bank (UK) Pension Scheme covers employees of HSBC Bank plc
and certain other employees of HSBC. This plan comprises a funded defined benefit plan (‘the principal plan’) which
is closed to new entrants, and a defined contribution plan which was established on 1 July 1996 for new employees.
The principal plan holds a diversified portfolio of investments to meet future cash flow liabilities arising from
accrued benefits as they fall due to be paid. The Trustee of the principal plan is required to produce a written