HSBC 2009 Annual Report Download - page 391

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Post-employment benefit plans
Income statement charge
2009 2008 2007
US$m US$m US$m
Defined benefit pension plans ................................................................................. 161 477 694
– HSBC Bank (UK) Pension Scheme ................................................................. (179) 255 490
– Other plans ........................................................................................................ 340 222 204
Defined contribution pension plans ......................................................................... 492 498 484
653 975 1,178
Defined benefit healthcare plans ............................................................................. 31 13 33
Defined contribution healthcare plans ..................................................................... 4 10 1
688 998 1,212
Net liabilities recognised on balance sheet in respect of defined benefit plans
2009 2008
US$m US$m
Defined benefit pension plans ................................................................................................................. 6,147 3,154
– HSBC Bank (UK) Pension Scheme ................................................................................................. 3,822 392
– Other plans ........................................................................................................................................ 2,325 2,762
Defined benefit healthcare plans ............................................................................................................. 820 734
6,967 3,888
HSBC pension plans
HSBC operates 211 pension plans throughout the world, covering 88 per cent of HSBC’s employees, with a total
pension cost of US$653 million (2008: US$975 million; 2007: US$1,178 million). The income statement charge for
plans outside the UK was US$760 million (2008: US$678 million; 2007: US$626 million). This was partly offset by
a gain of US$107 million on the UK plans, which included a one-off accounting gain of US$499 million due to a
change in the basis of delivering death-in-service, ill health and early retirement benefits for some UK employees.
HSBC has been progressively offering all new employees membership of defined contribution plans. At
31 December 2009, 59 per cent of HSBC’s staff were members of defined contribution plans. The related
pension cost for the year was US$492 million (2008: US$498 million; 2007: US$484 million).
Defined benefit plans cover 29 per cent of HSBC’s employees. For these plans, the long-term investment objectives
of both HSBC and, where relevant and appropriate, the trustees 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, where relevant,
desired levels of out-performance. The benchmarks are reviewed at least triennially within 18 months of the date at
which an actuarial valuation is made, or more frequently if required by local legislation or circumstances. The
process generally involves an extensive asset and liability review.
The majority of the Group’s defined benefit plans are funded plans. The assets of most of the larger ones are held in
trusts 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 the
plans 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 comprises a funded defined benefit plan (‘the principal plan’), which is