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CONFIDENTIAL
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We have led on this matter throughout (ie since 1984), because it is fundamental to the good government of Hong Kong.
the issues had been left to the ODAL the Treasury wd have trounced them, and Hong Kong wd have gone down the plug-hole Long ago • uld you like me to draft
if
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(in more elaborate terms) to the estimable),
JE Mortimer Esq
HM Treasury
Parliament Street
LONDON SW1P 3AG
M Muir
TOR
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145/20
TheGutt Admaple
محمد
Mr Foxt
14/xi
Dear Jamie, please ♡
Галий,
Foreign & Commonwealth
Office
London SW1 2AH
8 November 1991
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It would be highly advantageous I get this correspondance de t
ODA / Treamy basis a to
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HONG KONG COMPENSATION/INCENTIVE SCHEME AND PENSIONS ARRANGEMENTS FOR HER MAJESTY'S OVERSEAS CIVIL SERVICE
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1. As requested in your letter of 31 October, and as promised in my letter of 6 November, I can now give you some copy
further details on our calculations.
Sterling Safeguards
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2. Our calculations of the potential annual costs of providing a sterling safeguard are fairly straightforward. The essential principle, as I explained in paragraph 4 (ii) of my letter of 15 October, is that we take the Hong Kong HMOCS pensions bill for any given year and convert it to sterling at whatever exchange rate the pensions are to be guaranteed. with the The cost of the safeguard to HMG will then be the difference between the sterling value of the pensions bill converted at bill. the safeguarded rate, and the sterling value of the pensions at the prevailing rate of exchange.
3. If, for illustration, we take the safeguarded rate to be HK$16 to £1, and the Hong Kong dollar were to become worthless, it would cost HMG about £10m a year to cover the current estimated HMOCS pensions bill which stands at some HK$160m a year. Using Hong Kong's projections of the number of HMOCS pensions which will be payable in future years, the pensions bill will peak in the year 2011 at around HK$244m a year. Using the same exchange rate assumptions, the cost of providing a safeguard in that year would be about £15m. We have asked Hong Kong to provide updated forecasts of anticipated retirement dates of all HMOCS and potential HMOCS members (including those likely to be affected by the Limited Compensation and Special Branch Schemes), so that we can further refine our figures.
BOYABA/1
CONFIDENTIAL
+2/