CONFIDENTIAL
4.
b)
have received cumulative increases totalling 25% of
their basic pension entitlement since retirement, and
the rate of exchange between the HK$ and sterling has
deteriorated from HK$10 to £1 (at retirement) to a
current rate of HK$15 to £1.
Under this scenario, the Home Civil Service pensioner would
receive increases of £3,000 a year (or 25%), bringing his total
pensionable income up to £15,000 a year. The Hong Kong pensioner would be paid locally awarded increases of HK$ 30,000 a year,
which at the current rate of exchange would equate to £2,000 a
year, plus SPOS of £1,000 a year to make good the difference
between the sterling value of the overseas increases actually
received and the UK "target figure". However, because his basic
pension entitlement would have been reduced to £8,000 a year, through the effects of exchange rate losses, his total pension would be worth only £11,000 a year a shortfall of some £4,000 a year compared to his Home Civil Service counterpart.
5. Presenting the figures in tabular form provides a clearer illustration of the problem. In Appendix 1, examples (i) and (ii) show the situation described above; examples (iii) (iv) and (v) show the position if the Hong Kong increases had been awarded ät 30%, 40% and 50% respectively, whilst the UK increases
remained at 25% over the same period. Appendix II gives precisely the same examples, but assumes a current exchange rate of HK$12.5 to £1.
6.
Our proposal is that the pensioner should be paid the same level of increases from UK funds as those paid to his UK equivalent, providing his total pension entitlement (including his Hong Kong basic pension increases) does not in any one month exceed the total pension
pension paid
paid to his Home Civil Service counterpart. Appendices III and IV respectively demonstrate the
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