HSBC 2004 Annual Report Download - page 254

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
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scheme at the rate of 20 per cent of pensionable salaries until completion of the next actuarial valuation, due
as at 31 December 2005.
The deficit as at 31 December 2002 is being amortised over a thirteen year period, the average remaining
service life of the existing employed members. The amortisation is net of the interest benefit from the
payments of US$817 million in February and US$137 million in August 2003.
In Hong Kong, the HSBC Group Hong Kong Local Staff Retirement Benefit Scheme covers employees of
The Hongkong and Shanghai Banking Corporation and certain other employees of HSBC. The scheme
comprises a funded defined benefit scheme (which is a lump sum 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 2004 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$942 million. On an
ongoing basis, the actuarial value of the scheme’ s assets represented 115 per cent of the benefits accrued to
members, after allowing for expected future increases in salaries, and the resulting surplus amounted to
US$121 million. On a wind-up basis, the actuarial value of the scheme’ s assets represents 128 per cent of
the members’ vested benefits, based on current salaries, and the resulting surplus amounted to
US$206 million. The actuarial method used was the projected unit credit method and the main assumptions
used in this valuation were a discount rate of 4.0 per cent per annum and long-term salary increases of 3.0
per cent per annum (with short-term deviation from 2005 to 2008). HSBC has decided to continue ongoing
contributions to the scheme at the rate of 14.4 per cent of pensionable salaries until completion of the next
valuation, due as at 31 December 2005.
In the United States, the HSBC Bank USA Pension Plan (the ‘US principal scheme’ ) covers employees of
HSBC Bank USA and certain other employees of HSBC. The latest valuation of the US principal scheme
was made at 1 January 2004 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 scheme’ s assets was US$1,222 million. The
actuarial value of the assets represented 122 per cent of the benefits accrued to members, after allowing for
expected future increases in earnings, and the resulting surplus amounted to US$191 million. The method
employed for this valuation was the projected unit credit method and the main assumptions used were a
discount rate of 8.0 per cent per annum and average salary increases of 5.0 per cent per annum. HSBC has
decided not to pay contributions to the scheme until completion of the next valuation, due as at
31 December 2005.
Also in the United States, the HSBC Finance Corporation Retirement Income Plan, which covers employees
of the HSBC Finance Corporation and certain other employees of HSBC, comprises a funded defined
benefit scheme (the ‘HSBC Finance Corporation principal scheme’ ) which is closed and a cash balance plan
which was established on 1 January 2000. HSBC has decided not to pay contributions to the scheme until
completion of the next valuation, due as at 31 December 2005.
The last reported actuarial valuation was made as at 1 July 2004. At that date, the market value of the HSBC
Finance Corporation principal scheme’ s assets was US$956 million, representing 129 per cent of the
benefits accrued to members, after allowing for future increases in earnings. The resulting surplus amounted
to US$213 million. The method employed for this valuation was the projected unit credit method and the
main assumptions used were a discount rate of 8.0 per cent per annum and average salary increases of 3.75
per cent per annum.
Effective close of business on 31 December 2004, the HSBC Bank USA Pension Plan and the HSBC
Finance Corporation Retirement Income Plan merged, to form the HSBC North America (U.S.) Retirement
Income Plan, with all new employees participating in the cash balance plan.
The HSBC Bank (UK) Pension Scheme, The HSBC Group Hong Kong Local Staff Retirement Benefits
Scheme, the HSBC Bank USA Pension Plan and the HSBC Finance Corporation Retirement Income Plan
cover 40 per cent (2003: 41 per cent, 2002: 37 per cent) of HSBC’ s employees.
The pension cost for defined contribution schemes, which cover 34 per cent (2003: 34 per cent, 2002: 38
per cent) of HSBC’ s employees, was US$190 million (2003: US$165 million, 2002: US$152 million).