(C) UK PENSION SUPPLEMENT (SPOS)
19. The final element of the package proposed by FCO/ODA is a change to the way in which we operate the Supplementary Pension for Overseas Service (SPOS) regulations. Under the UK Pensions (Increase) Act (which provides for pensions to rise in line with UK inflation), such UK supplements are payable to certain overseas service pensioners,
ie supplementing their local pension supplements in order to provide parity of treatment with their UK counterparts. Almost all such overseas pensions are guaranteed in sterling terms. But for Hong Kong pensioners, who are paid in a currency not tied to sterling, the present arrangements can lead to abated payments of UK supplements and a fall in overall income, inconsistent with the Act's purpose. The UK supplements are reduced if the Hong Kong dollar exchange rate rises above the level prevailing at the pensioner's date of retirment, but no account is taken of exchange rate falls. This is unfair and can result in hardship, particularly for those whose basic pension is low and who retired when the Hong Kong dollar was much stronger against sterling than it is today (it is the basic pension's
sterling value at date of retirement which determines the UK equivalent pension throughout).
20. We propose that such pensioners should in future receive the same level of UK supplement as those paid to equivalent UK pensioners, subject to the total of their Hong Kong pension (including Hong Kong supplements) plus this UK supplement not exceeding in any one month the total pension
plus supplement of their UK equivalent. This would not guarantee the purchasing power of the overall pension but it would remove the inequity of the present arrangements and satisfy many Hong Kong pensioners. The cost would be about
£1 m per annum at current exchange rates or £2 m if the dollar fell to HK$16: £1 sterling.
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