HSBC 2011 Annual Report Download - page 326

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
7 – Employee compensation and benefits / 8 – Auditors’ remuneration
324
Expected rates of return
2011 2010
Expected
rates of return1 Value
Expected
rates of return1 Value
% US$m
% US$m
HSBC Bank (UK) Pension Scheme
Fair value of plan assets ............................................................... 26,604 22,236
Equities ..................................................................................... 7.2 3,190 8.4 3,415
Bonds ........................................................................................ 4.1 20,737 5.3 15,638
Property .................................................................................... 6.7 1,524 7.6 1,438
Other ......................................................................................... 2.8 1,153 4.0 1,745
Other plans
Fair value of plan assets ............................................................... 8,232 7,559
Equities ..................................................................................... 7.7 2,184 8.2 2,617
Bonds ........................................................................................ 4.7 4,659 5.0 4,073
Property .................................................................................... 4.6 106 6.1 98
Other ......................................................................................... 4.0 1,283 6.2 771
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.
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
2011 2010
US$m US$m
Discount rate
Change in pension obligation at year end from a 25bps increase ....................................................... (980) (941)
Change in pension obligation at year end from a 25bps decrease ....................................................... 1,045 1,003
Change in 2012 pension cost from a 25bps increase ........................................................................... 2 (9)
Change in 2012 pension cost from a 25bps decrease .......................................................................... (2) 9
Rate of inflation
Change in pension obligation at year end from a 25bps increase ....................................................... 1,026 1,029
Change in pension obligation at year end from a 25bps decrease ....................................................... (978) (978)
Change in 2012 pension cost from a 25bps increase ........................................................................... 57 67
Change in 2012 pension cost from a 25bps decrease .......................................................................... (54) (64)
Rate of increase for pensions in payment and deferred pensions
Change in pension obligation at year end from a 25bps increase ....................................................... 876 813
Change in pension obligation at year end from a 25bps decrease ....................................................... (841) (775)
Change in 2012 pension cost from a 25bps increase ........................................................................... 43 48
Change in 2012 pension cost from a 25bps decrease .......................................................................... (42) (45)
Rate of pay increase
Change in pension obligation at year end from a 25bps increase ....................................................... 248 216
Change in pension obligation at year end from a 25bps decrease ....................................................... (240) (203)
Change in 2012 pension cost from a 25bps increase ........................................................................... 19 20
Change in 2012 pension cost from a 25bps decrease .......................................................................... (15) (17)
Investment return
Change in 2012 pension cost from a 25bps increase ........................................................................... (65) (54)
Change in 2012 pension cost from a 25bps decrease .......................................................................... 67 54
Mortality
Change in pension obligation from each additional year of longevity assumed ................................. 619 497