The pension plan deficit of HSBC ballooned over the first half of the year thanks to collapsing corporate bond yields, in the latest examples of corporate pension plans coming under severe pressure in the wake of the financial crisis.
The deficit in HSBC’s main U.K. pension plan expanded by almost 10 times from $392 million at the turn of the year to $3.9 billion at June 30. This was because of lower corporate bond yields, which are used as a measure to calculate how liabilities for the plan will grow in the future.
In its results statement, the bank said: “There has been an increase in the liabilities of the scheme as well as a reduction in the fair values of the plan assets of the scheme.”
The bank did not provide an estimate for the current value of the pension plan this morning, but it was worth $14.8 billion on Dec. 31. The pension plan has been closed to new entrants since 1996, but its existing members have been able to maintain their membership.
The bottom line is that a huge deficit exists that must be addressed.
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