HBUK section Summary Funding Statement - 2018 HSBC Pensions future focus The HSBC Bank (UK) Pension Scheme A financial health check for the HBUK section (formerly the HSBC Bank section) - update 2017/18 The last formal valuation of the Scheme was as at 31 December 2014. Normally pension scheme Actuarial Valuations are undertaken every three years. In fact, the next one is expected to be at 31 December 2019. However, the 2016 Actuarial Valuation was undertaken only two years after the 2014 one, so that the Trustee could take into account the effect of the changes to the scheme structure that HSBC had to make to comply with the Banking Reform Act. As explained in a letter from the Trustee in July 2018, HSBC UK Bank plc is now the principal employer and Sponsor of the HBUK section, which is also supported by HSBC Holdings plc. HSBC Bank plc, the previous principal employer of the Scheme, was separated into two banks; HSBC UK Bank plc (often referred to as the ring-fenced bank) and the remaining HSBC Bank plc (which contains what is often referred to as the non-ring- fenced bank). You can find the Trustee letter, Scheme Actuarial Valuation reports as at 31 December 2016, as well as other key section documents, under ‘other information’ in the information centre on the website https://futurefocus. staff.hsbc.co.uk You’ve got defined benefits in the Scheme and you’ll want to know they can be paid as and when they’re due. The Trustee of the Scheme has completed the December 2016 Actuarial Valuation for the HBUK section and is pleased to report that the level of funding of the benefits has risen to 105%, which compares to the 102% funding level in the 2014 Actuarial Valuation.
The HSBC Bank (UK) Pension Scheme A financial health check for the HBUK section (formerly the HSBC Bank section) - update 2017/18
The last formal valuation of the Scheme was as at 31 December 2014. Normally pension scheme Actuarial Valuations are undertaken every three years. In fact, the next one is expected to be at 31 December 2019. However, the 2016 Actuarial Valuation was undertaken only two years after the 2014 one, so that the Trustee could take into account the effect of the changes to the scheme structure that HSBC had to make to comply with the Banking Reform Act.
As explained in a letter from the Trustee in July 2018, HSBC UK Bank plc is now the principal employer and Sponsor of the HBUK section, which is also supported by HSBC Holdings plc.
HSBC Bank plc, the previous principal employer of the Scheme, was separated into two banks; HSBC UK Bank plc (often referred to as the ring-fenced bank) and the remaining HSBC Bank plc (which contains what is often referred to as the non-ring-fenced bank).
You can find the Trustee letter, Scheme Actuarial Valuation reports as at 31 December 2016, as well as other key section documents, under ‘other information’ in the information centre on the website https://futurefocus.staff.hsbc.co.uk
You’ve got defined benefits in the Scheme and you’ll want to know they can be paid as and when they’re due. The Trustee of the Scheme has completed the December 2016 Actuarial Valuation for the HBUK section and is pleased to report that the level of funding of the benefits has risen to 105%, which compares to the 102% funding level in the 2014 Actuarial Valuation.
Achieving the Trustee’s objective to pay members’ pensions in full now, and in the future, relies heavily on the support of the Sponsor and its ability to remain in business, because:
• the value of the Scheme’s investments can go down as well as up and if there is a shortfall, the Sponsor may have to put more money into the HBUK section;
• the cost of providing benefits can increase, for example because members may live longer than expected, and this could result in the Sponsor having to pay more money into the HBUK section.
Investing our assets
The assets of the HBUK section are divided into two main parts:
Matching Portfolio – this is a low risk investment portfolio consisting primarily, but not exclusively, of UK Government and UK Government guaranteed bonds. It also consists of high quality long-dated corporate bonds and a portfolio of secure income illiquid assets.
Return Seeking Portfolio – this is made up of assets that are expected to generate returns in excess of the ‘Matching Portfolio’.
Over time as assets in the ‘Return Seeking Portfolio’ deliver a higher return they’ll be sold and the proceeds invested in the ‘Matching Portfolio’. When all of the ‘Return Seeking Portfolio’ is sold and the proceeds reinvested, the ‘Matching Portfolio’ will become the ‘Target Matching Portfolio’.
The results of the Actuarial Valuation for the HBUK section as at 31 December 2016 were:
2016 2014
Assets £26,870 million £22,540 million
Liabilities (amount needed to provide benefits)
£25,490 million £22,020 million
Surplus £1,380 million £520 million
Funding level 105% 102%
Change in the funding levelThe results of the formal Actuarial Valuation as at 31 December 2016 showed that the funding level for the HBUK section had improved to 105% compared to 102% as at 31 December 2014 and an estimated level of 101% as at 31 December 2015 as shown in our financial health check last year. The improvement in funding position is mainly due to better than expected returns on the Section’s investments and the additional contribution paid by the Sponsor.
As you will see in the section opposite, over time the Trustee aims to change the HBUK section’s investments to move towards a lower risk investment strategy.
There have not been any payments made from the HBUK section to the Sponsor in the previous twelve months.
The Pensions Regulator has not had to use its power to modify, issue any directions or impose a schedule of contributions on the HBUK section.
The latest funding update – 31 December 2016
The table shows the position of the section’s DB assets and liabilities (ie excluding assets and liabilities relating to DC benefits), as at 31 December 2016 compared to the last Actuarial Valuation of that section. A fuller explanation is given in the following sections.
What would happen if the Sponsor couldn’t support the HBUK section?
The Scheme Actuary looks at how much might be needed to provide benefits if the Trustee had to continue to run the HBUK section without the support of the Sponsor, for example, if it went out of business – known as the Scheme’s solvency position.
If this happened, the Trustee would take a prudent approach in calculating how much is needed to pay for members’ benefits. It would also adopt a more cautious investment strategy which would generate lower returns.
Remember for the Actuarial Valuation the Trustee assumes the Sponsor will continue to financially support the HBUK section and the assumptions about the future are less cautious than those normally used in a solvency valuation.
For information – if the Sponsor had withdrawn its support of the HBUK section as at 31 December 2016, the estimated solvency level was 78%.
What would happen to members’ benefits if the HBUK section had to wind up?
If the Sponsor continued in business but the HBUK section had to wind up, enough money would have to be paid by the Sponsor into the HBUK section so that members’ full benefits could be transferred for payment by an insurance company.
In the unlikely event the Sponsor went out of business and the HBUK section had to wind up but did not have enough money to pay members’ benefits, the Pension Protection Fund (PPF) could take over the assets and liabilities of the HBUK section. The income you might get from the PPF may be less than the benefits you’ve built up in the HBUK section. This is because different rules apply to the way benefits are calculated when a pension scheme goes into the PPF.
If you’d like to know more about this, go to the PPF’s website at:www.pensionprotectionfund.org.uk
Where can I get more information?
If you want to read more, you can find the following HBUK section documents on the information centre on the website at: www.futurefocus.staff.hsbc.co.uk
Actuarial Valuation Report – shows the results of the Scheme Actuary’s formal valuation of the HBUK section as at 31 December 2016. The Scheme Actuary is Colin Singer of Willis Towers Watson.
Member guide – explains how the Scheme works – please refer to the defined benefit guide appropriate to your membership.
Schedule of Contributions – shows how much money is to be paid into the HBUK section by members and the Sponsor.
Statement of Funding Principles – sets out how the Sponsor and the Trustee have agreed that the HBUK section should be funded.
Statement of Investment Principles – sets out how the Trustee invests money paid into the HBUK section.
Trustee’s Annual Report and Accounts – shows the money coming into and out of the Scheme in the year to 31 December 2016.
Getting in touch
If you need to get in touch please contact the:
HSBC Administration Team Willis Towers Watson PO Box 652 Redhill Surrey RH1 9AL
Help us stay in touch with you... and use less paper!Because you have HSBC pension benefits we want to let you know as soon as we can if there is any news about your benefits or the Scheme.
An easy way to keep in touch is by email, so, if you haven’t already, please take a minute and go into the My Pension website to give us your personal email address (and, if you want to, your mobile number).
Go to: www.futurefocus.staff.hsbc.co.uk
• click on My Pension
• put in your user ID and password,
Your user ID is HSBC + your 8 digit HSBC employee ID + the year you were born.
If you can’t remember your password choose ‘forgotten password’ to get a new temporary one to change later.
• once logged in, click on the ‘Update your’ dropdown menu, ‘Contact details’.
Issued by HSBC Bank Pension Trust (UK) Limited September 2018
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank Pension Trust (UK) Limited.
Members of the pension scheme may, however, copy appropriate extracts in connection with their own benefits under the Scheme.
