[HK3AEM]
BACKGROUND
CONFIDENTIAL
1.
Section IV of Annex
of
IV of Annex I of the Joint Declaration on the
Future of Hong
Hong Kong provides for the continued payment pensions following establishment of Special Administrative
Region on terms no less favourable than before. After 1997 members of the public service in Hong Kong will be employed by the Government of the Hong Kong Special Administrative Region (SAR), and the systems and policies current elsewhere in China
will not be practised in the SAR. The agreement provides that
the SAR Government will administer the public service on the
same general lines as at present. It will be the Government
of the Hong Kong SAR which will have the responsibility for paying pensions. These provisions concerning the payment of
pensions of serving and retired civil servants and their
dependents are contained in a formal and binding international
agreement.
2.
For s ome time the Hong Kong Government has been
considering amendments to its existing pension scheme. The se
amendments are required because the present system needs
modernising to bring it more into line with those used in the
UK and other Western countries, and because the Hong Kong
Government are concerned to reduce to s ome extent the long
term cost of the present scheme. Initially the new package
will lead to higher expenditure but it will in the long term
produce appreciable savings. The Hong Kong Government's
proposed new scheme has several differences to that at present
in force. The normal
retirement will be raised to 60
age of
As a
as opposed to the present 55 which, in these days of longer
life expectancy, i s considered to be too low.
consequence of this change, the pension factor, a fraction which when multiplied by a civil servant's annual salary and
the number of months of his service, produces the amount of
his pension, will be reduced so that a civil servant will tak e longer to earn his maximum pension which will remain at two
thirds of his final salary.
3.
The present scheme allows a civil servant to commute a
CONFIDENTIAL