CONFIDENTIAL
ANNEX D(3)
STERLING SAFEGUARDS
Capitalisation
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1. The concept is that HMG would be prepared to assume responsibility for HKG pensions together with UK pension increases for serving HMOCS officers and HMOCS pensioners, provided that HKG would transfer to HMG the capitalised current value of liabilities for basic pensions and for pensions increases. HMG would then guarantee to pay those pensions at a sterling rate as and when they fell due.
2.
There are a number of factors that would be open to negotiation with HKG and the officers involved. For example:-
with HKG:
with the officers:
3.
exactly how to calculate the capitalised current value of pensions;
the phasing of the transfer payments (one payment or phased?);
the treatment of future service (pensionable met by HKG or non-pensionable but gratuity earning?)
timing of transfer to new arrangements (1992 or later?);
coverage of the new scheme (accrued benefits at time of transfer or including future service?);
a mandatory scheme or one for individual choice?;
age from which pensions payable (actual retirement or fixed age?).
The costs of the cheapest option (counting only service before, say, 1.1.92 with payments starting after 30.6.97) would be only about HK$2.3 billion. The cost of the most expensive (including future pensionable service up to normal retirement age with payments starting on 1.1.92) would be about HK$5 billion.
NC3AAB
CONFIDENTIAL