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in terms of pension protection, than their colleagues who served elsewhere. I do not doubt that Ivor Stanbrook, and the many other MPS interested in colonial pensions matters, would present an effective case for Hong Kong staff being more at risk than their counterparts from other territories, given the political events of the last couple of years. You will recall that the White Paper 306 made it clear that the pensions of HMOCS officers should be protected and stated that formal agreements (POAS) would be concluded with incoming governments. As I understand it, we have not embarked upon a POA for Hong Kong because we did not wish to open up another flank of negotiation, and we have consistently advised MPs, and others, that we expect to protect the interests of HMOCS staff in other ways.
5. All in all, I do not believe that 'no safeguard' is an option. But it could be argued, with some support from history, that the safeguard should be provided by the Hong Kong (or SAR) Government, which should be better able to afford it than could most of our other ex-colonies. I do not think that this argument is sustainable, for reasons which have been rehearsed many times, but it is for you to deal with the question of what we can expect or persuade the Hong Kong Government to do.
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6. There is, as we have recognised, some force in the suggestion that currency safeguard scheme might send out the wrong signals, and affect confidence in the Hong Hong economy. I can see a myriad of difficulties with the proposals set out in paragraphs 4 and 5 of Simon's letter, one of them being that they would give out similar danger signals about confidence in the future. I will not list all the problems which capitalisation and going 'private' would cause. But two of the most significant are the benchmark to
be used when awarding pension increases under UK legislation, and the fact that capitalised pensions would be denominated in HK dollars and thus still prey to exchange rate movements. It would make more sense for HMG to takeover HMOCS pensions in return for a capitalised sum, as happened elsewhere. This would, of course, be very expensive for Hong Kong and, in a unified service, with the prospect of several thousand 'local' civil servants becoming British, it would surely undermine everything we are trying to achieve.
7.
I hope that you will be able to persuade Simon Rew to take a more pragmatic view and to agree that we must begin to take some positive steps. I am ready to attend a further meeting if necessary although I doubt whether we are going to make much progress at official level. Eventually, Ministers will have to decide to what extent we wish to look after the interests of HMOCS staff.
D S FISH
Jün
Overseas Pensions Department
5 October 1990
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