CONFIDENTIAL
036615 MDLT 3085
IN PRINCIPLE. THERE WOULD BE NO OBVIOUS ADVANTAGE TO THE SARG. THE IDEA OF HKG PAYING A LUMP SUM OVER TO HMG BEFORE 1997 WILL LOOK BAD ENOUGH, ANOTHER CASE OF RESERVE STRIPPING, BUT THE ENTRY INTO AN OBLIGATION TO PAY HMG AFTER 1997 WOULD ALMOST CERTAINLY BE REJECTED OUT OF HAND. GIVEN THE TROUBLE WE HAD WITH THE CHINESE OVER INCREASING THE PENSION COMMUTATION LEVEL FROM 25 PERCENT TO 50 PERCENT WE ARE ALSO LIKELY TO EXPERIENCE CONSIDERABLE DIFFICULTY IN OBTAINING THEIR AGREEMENT TO A FURTHER INCREASE IN THE LEVEL FOR LOCAL OFFICERS. AS REGARDS ANY SPECIAL OBLIGATIONS TO MEMBERS OF HMOCS THE CHINESE WOULD CERTAINLY SAY THAT THAT WAS A MATTER FOR HMG AND-HMG ALONE.
4. WE ARE THEREFORE OF THE VIEW THAT ANY SCHEME TO PAY PENSIONS IN A LUMP SUM, WHETHER TO HMG FOR HMOCS PENSIONERS OR TO LOCAL OFFICERS BY WAY OF 100 PERCENT COMMUTATION, WE WILL NOT RUN WITH THE CHINESE. WE THEREFORE BELIEVE THAT THE BEST IF NOT THE ONLY SOLUTIONS TO THIS PROBLEM ARE EITHER:
(A) OUR PROPOSAL FOR HMG TO TAKE OVER THE PAYMENT OF HMOCS PENSIONS AT A FIXED STERLING EXCHANGE RATE TO BE AGREED AND FOR HKG TO PAY TO HMG THE VALUE OF THE PENSIONS IT WOULD OTHERWISE HAVE PAID TO THESE OFFICERS DIRECT: OR
(B) TO-ADJUST-SPOS TO TAKE ACCOUNT OF FLUCTUATING EXCHANGE RATES.
5 WE APPRECIATE THAT EACH OF THE ABOVE PRESENTS YOU WITH DIFFICULTIES AND THAT ANY MOVEMENT ON THE STERLING SAFEGUARDS. ISSUE IS LIKELY TO BE SLOW. WE WOULD THEREFORE SUGGEST THAT IN ORDER THAT SOMETHING CAN BE SEEN TO BE BEING DONE FOR HMOCS MEMBERS WE SHOULD TRY AND PUSH AHEAD WITH THE GENERAL COMPENSATION SCHEME. IF WE CAN GET ON WITH THIS IT WILL AT LEAST PROVIDE SOME SOLACE FOR SERVING HMOCS OFFICERS.
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6. I AM PREPARED TO COME TO LONDON TO CLARIFY OUR POSITION AND TO DISCUSS FURTHER IF THIS WILL. HELP..
WILSON
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