CONFIDENTIAL
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MDLIAN 9628
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HAVING REGARD TO PRIVATE SECTOR PRACTICE AND IN CONSULTATION WITH STAFF, PROPOSALS FOR CHANGE HAVE BEEN FORMULATED. THESE ARE SET OUT IN A PAPER WHICH WE SHALL GIVE THE CHINESE SIDE FOR INFORMATION.
4. AMONG THE VARIOUS PROPOSED CHANGES, THE MOST IMPORTANT ITEM WILL BE THE CONVERSION OF THE EXISTING COMPULSORY DEPENDANT PENSION SCHEMES INTO VOLUNTARY ONES IN KEEPING WITH STAFF'S WISHES. THE PROPOSAL IS ASSESSED TO BE FINANCIALLY ACCEPTABLE FROM THE HONG KONG GOVERNMENT'S POINT OF VIEW. ALTHOUGH THERE WOULD BE AN INITIAL EXPENDITURE FOR REFUND OF PAST CONTRIBUTIONS TO UNMARRIED MEMBERS OPTING OUT OF THE SCHEMES (MARRIED OFFICERS WOULD HAVE THEIR DEPENDANT PENSION BENEFITS PRESERVED AND FROZEN AT THE LEVEL WHEN THEY CEASE TO CONTRIBUTE), GOVERNMENT'S ULTIMATE PENSION LIABILITY WOULD BE REDUCED AND THERE WOULD BE CONSIDERABLE SAVINGS IN THE EXPENDITURE ON DEPENDANT PENSIONS IN THE LONG TERM. THE UK GOVERNMENT ACTUARY'S DEPARTMENT HAVE ESTIMATED THAT, ON THE ASSUMPTION THAT ONLY ABOUT 10 PER CENT NEW RECRUITS WOULD JOIN THE VOLUNTARY SCHEME, THE SAVINGS TO GOVERNMENT COULD BE UP TO 4 PER CENT OF THE EXPENSES ON THE SALARIES OF ALL MALE PENSIONABLE OFFICERS.
5. AS FOR THE OTHER PROPOSED IMPROVEMENTS TO DEPENDANT BENEFITS, THE ADDITIONAL COST INVOLVED, IF ANY, WOULD BE MINIMAL. THE BRITISH SIDE ARE THEREFORE CONFIDENT THAT NONE OF THE PROPOSED CHANGES WOULD HAVE MAJOR FINANCIAL IMPLICATION'S OR AFFECT THE PUBLIC SERVICE'S CONFIDENCE IN THE FUTURE.
THESE PROPOSALS WILL BE IMPLEMENTED AFTER ADVICE IS OBTAINED FROM THE ADVISORY BODIES ON CIVIL SERVICE SALARIES AND CONDITIONS OF SERVICE, AND AMENDMENTS TO THE PENSIONS LEGISLATION.
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THE BRITISH SIDE ALSO WISH TO INFORM THE CHINESE SIDE OF A TECHNICAL AMENDMENT TO THE PENSIONS ORDINANCES CONCERNING THE PENSIONABILITY OF SERVICE BELOW THE AGE OF 18.
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UNDER THE PENSIONS ORDINANCE (CAP 89) WHICH GOVERNS THE OLD PENSION SCHEME, SERVICE UNDER AGE 18 IS NOT COUNTED AS PENSIONABLE SERVICE FOR PENSIONABLE OFFICERS, BUT IS SO COUNTED FOR NON- PENSIONABLE OFFICERS IN CALCULATING THEIR RETIREMENT BENEFITS. THERE IS THEREFORE INCONSISTENCY IN TREATMENT OF PENSIONABLE AND NON-PENSIONABLE STAFF IN THIS ASPECT.
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