HSBC 2014 Annual Report Download - page 130

HSBC BANK PLC
Notes on the Financial Statements (continued)
128
Triennial valuation
UK regulation requires pension schemes be valued formally every three years and a funding plan agreed between the
trustee and scheme sponsor. The most recent triennial actuarial valuation of the UK Scheme performed by the Scheme
Actuary on behalf of the Trustee has been carried out as at 31 December 2011. At that date, the market value of the
Scheme’s assets was £17.2 billion. The market value of the plan represented 100 per cent of the amount expected to be
required, on the basis of the assumptions adopted, to provide the benefits accrued to members after allowing for
expected future increases in earnings, and resulted in neither surplus nor deficit. The method adopted for this valuation
was the projected unit method.
Ongoing contributions
Following the completion of the 2011 triennial valuation, the bank pays contributions at the rate of 43 per cent of
pensionable salaries (less member contributions) which are expected to continue to 30 June 2015 at which point future
service accrual for active members of the Defined Benefit Scheme will cease.
Solvency position
As part of the 31 December 2011 valuation, calculations were also carried out as to the amount of assets that might be
needed to meet the liabilities if the Scheme was discontinued and the members’ benefits bought out with an insurance
company (although in practice this may not be possible for a plan of this size) or the Trustee continued to run the plan
without the support of the bank. The amount required under this approach was estimated to be £26.2 billion as at 31
December 2011. In estimating the solvency position for this purpose, a more prudent assumption about future mortality
was made than for the assessment of the ongoing.
Future accrual
In 2013, following consultation on various employee benefit proposals, the bank announced to employees in the UK that
the future service accrual for active members of the Defined Benefit Section (‘DBS’) would cease with effect from 30 June
2015. As a result, defined benefit pensions based on service to 30 June 2015 will continue to be linked to final salary on
retirement (underpinned by increases in CPI) but all active members of the DBS will become members of the Defined
Contribution Section from 1 July 2015.
Directors’ emoluments
The aggregate emoluments of the Directors of the bank, computed in accordance with the Companies Act 2006 as
amended by statutory instrument 2008 No.410, were:
2014
2013
£000
£000
Fees1
1,393
1,382
Salaries and other emoluments
3,966
1,438
Annual incentives2
2,925
3,334
Year ended 31 December
8,284
6,154
Vesting of long-term incentive awards
–
–
1 Fees included fees paid to non–executive directors.
2 Incentive awards made to executive directors are delivered in the form of cash and HSBC Holdings plc shares. The amount shown is comprised of
£526,420 (2013: £463,875) in cash, £789,629 (2013: £695,813) in deferred cash, £526,420 (2013 £463,875) in Restricted Shares and £789,629
(2013: £695,813) in deferred Restricted Shares, issued under the HSBC Share Plan 2011, and £292,455 (2013: £1,014,212) in shares awarded
under the Group Performance Share Plan (‘GPSP’) and other long term deferred awards under the HSBC Share Plan 2011. The total vesting
period of deferred awards is no less than three years, with 33% of the award vesting on each of the first and second anniversaries of the date of
the award and the balance vesting on the third anniversary of the date of the award. Where the total vesting period is three years, the share
awards will be subject to a six month retention period upon vesting. GPSP awards are subject to a five year vesting period. On the vesting date
GPSP awards are subject to a retention requirement until cessation of employment.
One Director exercised share options over HSBC Holdings plc ordinary shares during the year.
Awards were made to four Directors under long–term incentive plans in respect of qualifying services rendered in 2014
(2013: four Directors). During 2014, no Directors received shares in respect of awards under long–term incentive plans
that vested during the year (2013: no Directors).
Retirement benefits are accruing to one Director under a defined benefit scheme and are accruing to two Directors under
money purchase schemes in respect of Directors’ qualifying services. Contributions of £48,715 were made during the year
to money purchase arrangements in respect of Directors’ qualifying services (2013: £158,963).
In addition, there were payments under retirement benefit agreements with former Directors of £805,005 (2013:
£809,519), including payments in respect of unfunded pension obligations to former Directors of £686,104 (2013:
£693,632). The provision as at 31 December 2014 in respect of unfunded pension obligations to former Directors
amounted to £10,849,954 (2013: £11, 664,633).
The salary and other emoluments figure includes Fixed Pay Allowances. Discretionary annual incentives for Directors are
based on a combination of individual and corporate performance and are determined by the Remuneration Committee of
the bank’s parent company, HSBC Holdings plc. The cost of any conditional awards under the HSBC Share Plan 2011 are
recognised through an annual charge based on the fair value of the awards, apportioned over the period of service to