CONFIDENTIAL
Treasury
HONG KONG: COMPENSATION AND PENSION ARRANGEMENTS FOR
HER MAJESTY'S OVERSEAS CIVIL SERVICE (HMOCS)
1.
In March 1985, OD(K) first discussed what arrangements should be made for Hong Kong HMOCS members in the light of the
end of British administration in 1997. It concluded that the
main body of doctrine on compensation and pension safeguards which had been applied to HMOCS members in previous dependent territories should also apply in Hong Kong. On finance, OD(K) decided that, certainly initially, we should aim for costs to be
met by the Hong Kong Government or by the post-1997 Special
Administrative Region Government.
In November 1988,
Geoffrey Howe wrote to Nigel Lawson about compensation
arrangements. In his letter of 19 December 1988, John Major,
then Chief Secretary, agreed that HMG should fund a compensation
scheme, spread over a number of years from 1997, but no action was taken at the time to promulgate the scheme. More recently,
discussions between officials have also addressed the need to
deal with the issue of sterling safeguards to protect HMOCS pensions against falling exchange rates. Adjustments to the
regulations governing Supplementary Pensions for Overseas Service
(SPOS) have also been discussed, on an exploratory basis between the Head of ODA's Overseas Pensions Department and the Head of
the Treasury Superannuation Division.
2.
Ministers have concluded that HMG must now address these matters decisively, in the interests of maintaining the stable administration of Hong Kong. I am therefore writing to bring you up to date with our plans for the compensation scheme and to seek your agreement for HMG to provide a sterling safeguard for HMOCS pensions and to amend the application of the SPOS regulations.
3.
I summarise the key issues below; more details are set out
1