HSBC 2007 Annual Report Download - page 372

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Note 8
370
The principal actuarial financial assumptions used to calculate the Group’s obligations under its defined benefit
pension and post-employment healthcare plans at 31 December 2005, were as follows. These assumptions also
formed the basis for measuring periodic costs under the plans in 2006:
Healthcare cost trend
Discount
rate
Inflation
rate
Rate of
increase for
pensions1
Rate
of pay
increase
Initial
rate
Ultimate
rate
Year of
ultimate
rate
% % % % % %
UK .......................................... 4.75 2.7 2.7 3.72 6.7 6.7 n/a
Hong Kong ............................ 4.2 n/a n/a 5.0 n/a n/a n/a
US .......................................... 5.7 2.5 n/a 3.75 10.4 5.0 2013
Jersey ..................................... 4.75 2.7 2.7 4.45 n/a n/a n/a
Mexico ................................... 8.90 3.75 3.75 4.5 7.3 7.3 n/a
Brazil ...................................... 11.75 5.5 5.5 5.5 12.5 6.5 2016
France .................................... 4.1 2.0 2.0 3.0 6.0 6.0 n/a
Canada ................................... 5.25 2.5 n/a 3.0 7.3 4.5 2009
Switzerland ............................ 2.25 1.5 n/a 2.25 n/a n/a n/a
Germany ................................. 4.0 2.0 2.0 3.0 n/a n/a n/a
1 Rate of increase for pensions in payment and deferred pension.
2 The 2005 rate of pay increase assumptions disclosed have been increased from 3.2 per cent to 3.7 per cent to reflect an age-related
promotional salary scale that was included in the obligation calculation but not in the disclosed assumption.
HSBC determines the discount rates to be applied to its obligations in consultation with the plans’ local actuaries, on
the basis of current average yields of high quality (AA rated or equivalent) debt instruments, with maturities
consistent with those of the defined benefit obligations. The expected return on plan assets represents the best
estimate of long-term future asset returns, which takes into account historical market returns plus additional factors
such as the current rate of inflation and interest rates.
Mortality assumptions are increasingly significant in measuring the Group’s obligations under its defined benefit
pension and post-employment healthcare plans, particularly given the maturity of the plans. The mortality tables and
average life expectancy at 65 used at 31 December 2007 were as follows:
Mortality table
Life expectancy at
age 65 for a male
member currently:
Life expectancy at
age 65 for a female
member currently:
Aged 65 Aged 45 Aged 65 Aged 45
UK .......................................................................... PA921 20.4 21.7 23.4 24.6
Hong Kong ............................................................ n/a n/a n/a n/a n/a
US .......................................................................... RP 2000 fully
generational 19.1 20.6 21.1 22.0
Jersey ..................................................................... PA922 21.9 23.0 24.8 25.8
Mexico ................................................................... EMSSA-97 16.5 16.5 19.9 19.9
Brazil ...................................................................... RP 2000 fully
generational 19.1 20.6 21.1 22.0
France .................................................................... TG 05 22.9 25.7 26.4 29.3
Canada pension plans ............................................ Between UP94 C2015
and UP94 C2027
19.0
and 20.0
19.0
and 20.0
21.6
and 22.1
21.6
and 22.1
Canada healthcare plan .......................................... UP94 C2025 19.8 19.8 22.0 22.00
Switzerland ............................................................ BVG 2005 (3% load) 17.9 17.9 21.0 21.0
Germany ................................................................. Heubeck 2005 G 18.1 20.8 22.2 24.9
1 PA92 with standard improvements to 2005 and medium cohort improvements thereafter.
2 PA92 year of birth with medium cohort improvements.