}
CONFIDENTIAL
maximum of 25% of his pension. It is proposed that this be increased to 50% under the revised arrangements. There will
be taxation implications as a result of the increase in the
level of commutation. This is because pensions are taxable
while the 1 ump sums deriving from the commutation are not.
However, when viewed against the substantial future savings
from the new scheme, the HKG believe the tax loss arising from
the higher rate of commutation can be regarded as
insignificant.
4.
The scheme also proposes the introduction of deferred
pension benefits for civil servants who leave the service
after completing 10 ог more years qualifying service.
Pensions will be payable to these civil servants when, but
only when, they reach normal retirement age. (At present,
civil servants may retire early on
on reaching the age of 45 in
certain circumstances,
or on reaching the age of 50 on request, in either case they receive their pension benefits immediately upon retirement.) On the other hand, civil
servants who resign at present before the age of 45, regardless of their length of service, forfeit their pension benefits. The proposed new arrangements are more in line with
international practice. The provision whereby pensions are
granted at the pleasure of
of the crown will be deleted from the
pensions legislation.
5.
It is proposed to apply the new scheme to all civil
servants appointed on pensionable terms after the date of its
introduction. Existing civil servants will be permitted to
transfer to the new scheme, and to encourage
they will be allowed to retain their existing retirement age
of 55.
them to do SO
6.
Assuming that all existing civil servants convert to
the n ew scheme, and assuming costs at 1983-84 rates, it is
estimated that, under the new scheme, the total pension
liability in 1997 will be about 18 per cent less than under
the existing arrangements. Some minor modifications to the
proposed n ew scheme may be necessary in the light of
CONFIDENTIAL