The HSBC Bank (UK) Pension Scheme (the Scheme) Defined Benefit (DB) assets have continued to perform as expected through recent market events because of the low-risk investment and hedging strategy which protect the Scheme’s funding level from volatility in interest and inflation rates.

The funding level (assets divided by estimated pension liabilities) has been stable through events of recent weeks and continues to show a surplus of assets relative to those estimated liabilities. 

The Scheme has also benefitted from its strategy of using fewer derivatives to hedge liabilities than a typical UK pension scheme and instead hedges with a higher proportion of UK Government gilts.

This means that the Scheme is less exposed to the need to sell assets to cover losses on hedging assets because of market movements which have been reported in the media as impacting UK defined benefit pension schemes. The Scheme also has material amounts of eligible investments in reserve to support the hedging derivatives that are in place and can withstand material further increases in market interest rates.

The Pension Scheme Executive continues to be in contact with the Scheme’s asset managers and none of those managers has reported any stress in their portfolios to date.

The Trustee and the Pension Scheme Executive will continue to monitor the situation as markets evolve.