CONFIDENTIAL
THE OPERATION OF UK PENSION SUPPLEMENT REGULATIONS
FOR HONG KONG PENSIONERS
ANNEX C
1.
overseas
The UK pension supplement (SPOS) payable on pensions is calculated by deducting the sterling value of any local (Hong Kong) increases from the UK increases that would have
been paid on an equivalent UK pension. In addition, we treat as
a local increase, any sterling bonus resulting from the basic
pension being paid in any month at a more favourable rate than
that used at an officer's retirement to calculate the basic
sterling pension. However, the converse does not take place.
If the basic pension is paid at less than the retirement rate,
the shortfall is not topped-up directly, nor is the value of
local increases adjusted to take account of the shortfall. As
a result, the pensioner does not receive overall, the full
sterling value of an equivalent UK pension. In short, we gain
on the swings and the pensioners lose on the roundabouts, which
makes the SPOS system very difficult to defend for those not on fixed-rate basic pensions.
2. We propose that we should be able to take into account the depreciation in the value of the basic pension when quantifying
local increases.
3. By way of illustration, if a
if a basic Hong Kong pension of HK$ 120,000 a year was awarded at retirement, and the prevailing rate of exchange was then HK$10 to £1, the pension would attract the same increases under the 1971 Pensions (Increase) Act as a UK public service pension of £12,000 a year awarded on the same date. Let us assume, for the sake of mathematical simplicity
that:
a) both the Hong Kong pensioner and his UK counterpart
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