government will disregard the interests of overseas pensioners. I have to say, therefore, that I find many of the underlying assumptions in your memoranda unduly pessimistic. I certainly do not believe that under such circumstances a convincing case can be made that HMG should take over from the Hong Kong Government responsibility for the payment of pensions to Hong Kong
HMOCS.
Your memoranda deal with the specific problem of fluctuating exchange rates and advocate the early introduction of a system to safeguard the sterling value of the basic pension. I am well aware that in recent months the Hong Kong dollar has fallen substantially against sterling, by virtue of its link with the US dollar. But this development is only the latest of many exchange rate fluctuations, by no means all of which have worked against the interests of the Hong Kong pensioner. Moreover, over the long term the link with the US dollar will provide stability and certainty. I am therefore not persuaded that, taking an overall view, the present arrangements work to the disadvantage of Hong Kong pensioners. In any case I do not believe that it would be sensible or feasible to determine our policy on such a fundamental matter on the basis of short term trends.
I also doubt that a strong case exists for the early introduction of changes to the method of calculation of the UK pension supplement (SPOS). The purpose of this supplement is of course not to protect the value of the basic pension, but to "top up" local increases to the level of increases awarded on equivalent UK public sector pensions. In recent years the annual pension increases awarded by the Hong Kong Government have tended to exceed comparable awards in the UK. As a result, UK pension supplements are a very small - or in some cases non- existent - portion of the total benefits received by HMOCS pensioners who have retired in recent years. note your reservations about the present system of calculating the UK pension supplement. But I frankly doubt whether there is a completely satisfactory answer to the problem of determining the basic sterling value of pensions for this purpose. We are keeping the matter under careful review; but at present there are no plans to move from the existing system.
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