CODE 18-77
CONFIDENTIAL
250
Reference
File, cany сору
Mr Cox
HMOCS STERLING SAFEGUARDS
1.
HKA 233/1
(AND SPOS)
245
Thank you for your minute of 13 April which asks for my views on a number of questions and also asks for some further information.
2. On your para 2, I am not sure that a decision not of offer any sterling safeguard would lead people to opt for the old pension scheme - the one which gives them earlier access to the commutable sum. The drawback to the old pension scheme is that you can not obtain a deferred pension (unless you are of retirement age). So if you thought you might have to leave early for what ever reason, you would not remain on the scheme. Secondly, the amount that may be commuted is only 25%, compared to 50% under the new pension scheme.
Margolis Report
2.
I agree that the Margolis Report does appear to be dead in the water, and, as you have pointed out, the significant problem with any scheme on the lines he is touting is that it could only possibly cater for a small segment of officers who are due to retire within, roughly, a ten year time frame.
Alternatives
3. I am not sure I understand the first alternative in your paragraph 5. As to the second alternative, my understanding is that this type of advance is already available - certainly to expatriates. I know that expatriates are able to take out a loan against the commutable part of their pension in order to purchase accommodation abroad in preparation for retirement. I think the same applies to locals. This is slightly different to the thought you describe and, as you say, is only a very partial solution.
4.
As to partial funding of pensions, this is basically what civil servants have been asking the government to do for many years. There are many ways they could do it. One would be to start putting aside now the annual pension liability that is calculated to arise each year. This would be a substantial figure and I, think, far higher than the HK$ 3.7 billion set out in your para 6. My understanding is that actuarily, HKG should be setting aside at least 25% of the annual pensionable payrole emoluments. I would hazzard a guess that this would mean they would have to put aside HK$ 10 billion each year (perhaps we should ask Hong Kong how much they should be putting aside). This would clearly be impossible for them. The HK 3.7 billion in your para 6 is therefore a drop in the ocean. It is very difficult for me to guess how much HKG could afford to put aside. An additional HK$ 4 billion each year would add up to HK$ 20 billion by 1997. I cannot see them agreeing to that:
SISACL JRB
CONFIDENTIAL