CONFIDENTIAL
For decision
on 31 January 1989
가
KCC(89) 22 Copy No.
2
MEMORANDUM FOR EXECUTIVE COUNCIL
81
PA
13,
HK3 431/6
VALUE OF PENSIONS FOR OVERSEAS PENSIONERS
CURRENCY PROTECTION
THE PROBLEM
Recent fluctuation in the sterling/Hong Kong dollar exchange rate has affected the value of Hong Kong pensions drawn in sterling. Many overseas pensioners in the United Kingdom have called for special measures to alleviate this problem. This memorandum outlines possible options to assist them and addresses the resultant policy and political
considerations.
ADVICE SOUGHT
2
Members will be asked to consider whether measures should be introduced So that the pensions of overseas pensioners paid in foreign currencies overseas can be adjusted to protect them against currency fluctuations.
A
BACKGROUND AND ARGUMENT
Difficulties Faced by Overseas Pensioners
3
This
Annex A shows sterling exchange rates since 1946. Prior to November 1967 the rate was fixed at £1: HK$16. was changed to £1: HK$14.55 upon a 10% revaluation of the Hong Kong dollar in 1967. The rate began to fluctuate following the floating of sterling in 1972. In the past five years, the value of the HK dollar has fluctuated widely. For example, it fell by about 60% from £1: HK$9 in early 1985 to £1: HK$ 14.60 HK$14.60 in April 1988.
4
retired Overseas
In the UK,
officers entirely dependent on their pensions have suffered a reduction in the value of their pensions as a result of currency fluctuations in recent years. In some cases, this is said
said to
to have caused a significant decline in their standard of living. Some pensioners feel very strongly that their difficulty arises directly from the Government's policy to link the HK dollar with the United States dollar, a decision which they believe was determined by political considerations. They claim that the HK dollar is seriously undervalued in terms of sterling. They consider that
CONFIDENTIAL