PS/Mrs Chalker
RESTRICTED
FROM: D S FISH
(Ext 3444)
DATE: 12 October 1990
cc PS/Mr Lankester
Mr Kerby
CONSTITUENCY CORRESPONDENCE FROM THE RT HON JOHN PATTEN MP
MR S W RAINBIRD: STERLING VALUE OF HONG KONG PENSION
Mr Patten has written on behalf of his constituent, Mr S W Rainbird, who is concerned about the decline in the sterling value of his pension.
2.
Mr Rainbird was employed in Hong Kong from 1956 to 1979 and his retirement benefits are calculated under the laws of that territory, and paid from local revenues in Hong Kong dollars. As a former member of Her Majesty's Overseas Civil Service (HMOCS), Mr Rainbird is also eligible to receive an index-linked pension supplement (SPOS), designed to top-up the value of any Hong Kong increases to the same level as the increases paid on an equivalent UK public service pension. SPOS is not intended to supplement any shortfall in the sterling value of the basic pension, and we have always argued that it is for the Hong Kong Government to provide any such protection.
3.
In Mr Rainbird's case much of the lost value of his basic pension has been made up by the generous pension increases awarded by the Hong Kong Government in recent years. In the period since his retirement, UK pensions have increased by 105%, whereas his Hong Kong pension has increased by 154%. We can deal with Mr Rainbird's letter by pointing to the level of overseas increases, and by emphasising the resilience of the link between the Hong Kong and US dollars and the measure of stability which this provides for externally paid pensioners.
4. Mr Rainbird's underlying fear is that, as 1997 approaches, the Hong Kong dollar will become worthless. This is a hypothetical situation which will be raised by more and more past and present HMOCS officers in coming months, especially if the Hong Kong dollar continues to fall against sterling.
5.
As all other colonies moved to Independence we insisted on the inclusion of a Public Officers' Agreement (POA), under the terms of which, the basic pensions of HMOCS officers was paid at a fixed rate of exchange. Eventually these protected pensions were taken over by HMG, as an aid initiative, thus providing the pensioners with the assurance of both continuity of payment and a guaranteed rate of income.
6. The pensions of Dependent Territories, of which Hong Kong is the only one of significance, are different in that they are paid by the local government at current rates of exchange. Hong Kong has been wealthy enough to carry the burden of these payments and, indeed, has often awarded pension increases greater than that awarded in the UK. This, and the traditionally high level of Hong Kong salaries, has generally resulted in Hong Kong pensioners doing very well indeed, certainly in comparison with their HMOCS counterparts from other territories. And it is also true to say that exchange rate movements have often gone in favour of expatriate pensioners.
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