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ie for those officers who have been retired for a long period during which UK inflation and therefore UK pension increases have been running at a high level. Looking to
1997, however, if UK inflation and pension increases are
running at a level of say 4%, and the HK dollar were to
collapse within one or two years of an officer's retirement,
SPOS would protect only 4% or 8% of his pension. Thus to
rely on SPOS as a way of addressing the sterling safeguard issue would neither fulfil our obligations nor would it
permit the achievement of our objectives regarding &
continuity in the Hong Kong public service through 1997: indeed it would be an incentive to some to retire early in order to start accumulating the UK pension supplements.
4.
int
In any case we remain committed by the assurances originally given by Robert Carr and Reginald Prentice that X HMG would step in there were to be default or if for any
other reason in relation to the payment of their pensions HMOCS officers were to find themselves in financial
difficulties. There is thus already a contingent liability: if we define and limit it now in the way we have proposed we can also meet our wider obligations and contribute to other vital national objectives.
5.
The question of the likely Chinese attitude to a
proposal to capitalise HMOCS pensions before 1997 was considered at paragraph 14 of the paper enclosed with my minute of 11 February (extract enclosed for ease of
reference). This paper was the fruit of many weeks of discussion between departments. The paragraph explains why this capitalisation proposal for certain expatriates is
fundamentally different from the Chinese notion of a set- aside fund for all Hong Kong civil service pensions.
Governor of Hong Kong, the Ambassador in Peking and the Senior Representative to the Joint Liaison Group have unanimously advised that the Chinese would react very
negatively to a proposal that HKG should capitalise HMOCS
pensions and transfer the funds to us before 1997; and that
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The