A financial health check Your summary statement– for the HBUK section

The last formal valuation of the HBUK section was as at 31 December 2016 and the results were communicated to you in September 2018.

In between valuations, so that the Trustee can keep track of the Scheme’s financial situation, the Scheme Actuary provides an annual update. This takes the last formal valuation (i.e. as at 31 December 2016) and provides an approximate update of how the position has changed taking into account changes in economic conditions.

The Scheme Actuary has completed their update of the funding position at 31 December 2017 and 31 December 2018 for the HBUK section. At 31 December 2018 the funding level was estimated to be 108%. This compares to 105% at the 31 December 2016 formal actuarial valuation.

Previous financial health check documents, setting out the results of the formal valuation at 31 December 2016 and the update at 31 December 2017 can be found on the information centre on the futurefocus website www.futurefocus.staff.hsbc.co.uk

This Statement gives you an update on the financial position of the HBUK section of HSBC Bank (UK) Pension Scheme (the Scheme) as at 31 December 2018. As you know, HSBC UK Bank plc is now the principal employer (referred to here as the ‘Sponsor’) of the HBUK section, which is also supported by HSBC Holdings plc.

You’ve got defined benefits in the HBUK section of the Scheme and you’ll want to know they can be paid as and when they’re due.

For members of the HSBC Bank (UK) Pension Scheme

Support from the Sponsor

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; and

• 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 of UK Government guaranteed bonds, 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 the assets in the ‘Return Seeking Portfolio’ deliver a higher return, they’ll be sold and the proceeds invested in the ‘Matching Portfolio‘. This is a more conservative asset portfolio that is expected to increase the certainty that members benefits will be paid when they fall due.

The latest funding update – 31 December 2018The results of the Scheme Actuary’s funding update for the HBUK section as at 31 December 2018 were:

Assets (current investments available) £26.64 billion

Liabilities (amount needed to provide benefits) £24.68 billion

2 HSBC Bank (UK) Pension Scheme (the Scheme) – HBUK section

Change in the funding levelThe results of the annual update as at 31 December 2017 showed an estimated funding level for the HBUK section of 110%. The latest update for the HBUK section as at 31 December 2018 shows an estimated funding level of 108%. The slight worsening of the estimated funding position over the year is due to the decrease in the value of the HBUK section's assets being greater than the decrease in its liabilities. The next actuarial valuation is expected to be carried out as at 31 December 2019.

As you will see in the ‘Investing our assets’ section above, 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 HSBC since the date of the last funding update sent to you in March 2019.

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 table shows the position of the Section’s DB assets and liabilities (i.e. excluding assets and liabilities relating to DC benefits) as at 31 December 2018.

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 a funding assessment, 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 2018, the estimated solvency level was 80%, a slight reduction compared to 81% as at 31 December 2017 and 78% as at 31 December 2016.

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 in 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 2018.

3HSBC Bank (UK) Pension Scheme (the Scheme) – HBUK section

Issued by HSBC Bank Pension Trust (UK) Limited December 2019

© Copyright HSBC Bank Pension Trust (UK) Limited 2019. 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. HSBC Bank Pension Trust (UK) Limited, 8 Canada Square, London, E14 5HQ Registration number: 489775

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

Telephone: 01737 227575 Email: HSBCpension@willistowerswatson.com

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’.