HSBC 2004 Annual Report Download - page 338

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
336
Pension assumptions
The measurement date for the major pension plans is 31 December. The assumptions used to determine the
projected benefit obligation of the defined benefit plans are as follows:
HSBC Bank (UK)
Pension Scheme Other schemes
2004 2003 2004 2003
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Discount rate ....................................... 5.3 5.5 5.5 6.0
Rate of compensation increase ............ 3.2 3.0 3.5 4.0
Inflation ............................................... 2.7 2.5 2.0 2.0
HSBC determines discount rates in consultation with its actuary based upon the current average yield of
high quality (AA rated) debt instruments, with maturities consistent with that of the pension obligation.
The accumulated benefit obligation in respect of the above schemes was:
2004 2003
US$m US$m
HSBC Bank (UK) Pension Scheme ........................................................................ 19,063 16,165
Other schemes ......................................................................................................... 4,829 4,464
The weighted average assumptions used in determining the net periodic costs are as follows:
HSBC Bank (UK)
Pension Scheme Other schemes
2004 2003 2004 2003
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Discount rate ....................................... 5.5 5.6 6.0 5.6
Rate of compensation increase ............ 3.0 2.75 4.0 3.7
Expected return on assets .................... 7.1 7.3 7.0 6.5
For the year 2005, HSBC expects to contribute US$251 million for the HSBC Bank (UK) Pension Scheme
and US$142 million for the other schemes.
Benefits expected to be paid over each of the next five years and in aggregate for the five years thereafter
are:
2005 2006 2007 2008 2009 2010 - 2015
US$m US$m US$m US$m US$m US$m
HSBC Bank (UK) Pension
Scheme ............................. 644 658 677 696 716 3,868
Other schemes ....................... 260 267 282 296 316 1,866
(ii) Post-retirement benefits
The components of post-retirement expense for HSBC’ s principal schemes, which make up approximately
80 per cent of all HSBC’ s schemes by benefit obligation, are as follows:
2004 2003
US$m US$m
Components of net periodic post-retirement benefit cost
Service cost .................................................................................................................... 10 5
Interest cost .................................................................................................................... 45 27
Amortisation of transition obligation .............................................................................. 12 12
Net periodic post-retirement benefit cost ........................................................................ 67 44
For measurement purposes, the calculation assumes a 9.3 per cent annual rate of increase in the weighted
average per capita cost of covered medical benefits. The measurement date for the plans is 31 December.