HSBC 2012 Annual Report Download - page 420

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
7 – Employee compensation and benefits / 8 – Auditors’ remuneration
418
Expected rates of return
2012 2011
Expected
rates of return1 Value
Expected
rates of return1 Value
% US$m
% US$m
HSBC Bank (UK) Pension Scheme
Fair value of plan assets ............................................................... 29,092 26,604
Equities ..................................................................................... 7.1 3,899 7.2 3,190
Bonds ........................................................................................ 4.0 22,258 4.1 20,737
Property .................................................................................... 6.7 1,583 6.7 1,524
Other ......................................................................................... 3.1 1,352 2.8 1,153
Other plans
Fair value of plan assets ............................................................... 9,015 8,232
Equities ..................................................................................... 7.9 2,688 7.7 2,184
Bonds ........................................................................................ 4.1 4,963 4.7 4,659
Property .................................................................................... 5.0 107 4.6 106
Other ......................................................................................... 3.6 1,257 4.0 1,283
1 The expected rates of return are used to measure the net defined benefit pension costs in each subsequent year, and weighted on the
basis of the fair value of the plan assets. In 2013 the basis will change as described on page 386.
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.
Actuarial assumption sensitivities
The discount rate is sensitive to changes in market conditions arising during the reporting period. The mortality rates
used are sensitive to experience from the plan member profile. The following table shows the effect of changes in
these and the other key assumptions on the principal defined benefit pension plan:
The effect of changes in key assumptions on the principal plan
HSBC Bank (UK) Pension Scheme
2012 2011
US$m US$m
Discount rate
Change in pension obligation at year end from a 25bps increase ....................................................... (1,191) (980)
Change in pension obligation at year end from a 25bps decrease ....................................................... 1,275 1,045
Change in 2013 pension cost from a 25bps increase1 .......................................................................... (78) 2
Change in 2013 pension cost from a 25bps decrease1 ......................................................................... 76 (2)
Rate of inflation
Change in pension obligation at year end from a 25bps increase ....................................................... 881 1,026
Change in pension obligation at year end from a 25bps decrease ....................................................... (842) (978)
Change in 2013 pension cost from a 25bps increase1 .......................................................................... 48 57
Change in 2013 pension cost from a 25bps decrease1 ......................................................................... (47) (54)
Rate of increase for pensions in payment and deferred pensions
Change in pension obligation at year end from a 25bps increase ....................................................... 719 876
Change in pension obligation at year end from a 25bps decrease ....................................................... (692) (841)
Change in 2013 pension cost from a 25bps increase1 .......................................................................... 36 43
Change in 2013 pension cost from a 25bps decrease1 ......................................................................... (34) (42)
Rate of pay increase
Change in pension obligation at year end from a 25bps increase ....................................................... 175 248
Change in pension obligation at year end from a 25bps decrease ....................................................... (173) (240)
Change in 2013 pension cost from a 25bps increase1 .......................................................................... 15 19
Change in 2013 pension cost from a 25bps decrease1 ......................................................................... (13) (15)
Investment return
Change in 2013 pension cost from a 25bps increase1 .......................................................................... – (65)
Change in 2013 pension cost from a 25bps decrease1 ......................................................................... – 67
Mortality
Change in pension obligation from each additional year of longevity assumed ................................. 663 619
1 The change in 2013 pension cost from a 25bps increase/decrease was calculated based on the requirements of IAS 19 revised, which
will be adopted from 1 January 2013. The comparative numbers, which show the change in 2012 pension cost from a 25bps
increase/decrease, were calculated in accordance with the accounting policy set out in Note 2(t).