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(a) The
amounts
involved.
The total
potential
liability
as
at 1 July 1992 for 50% of accrued
pensions of officers
with 10 years or more
service and below 50 years of age by 1.7.97,
that is commutable into lump sums is over HK$20
billion. In order to offer enough officers the
to participate with a worthwhile
chance
proportion
the
of their future lump sum payments,
scheme would need to be able to raise at
least $5 billion as a start, rising to $10
billion over a 5 year period.
(b)
The need to fix interest rates. The object
of the scheme is to secure a portion of the
value of future lump sums against the risk of a
reduction in the value of the Hong Kong
serious
dollar.
It
The period of maximum risk is likely
to be the five years either side of 1997.
will be necessary to raise funds at fixed rates
for up to ten years.
which а serious
Any circumstances in
fall in the value of the Hong
Kong dollar took place would certainly involve
dramatic rise in Hong Kong dollar interest
rates,
· still
assuming that the link rate system were
functioning.
Even if the link rate
system
had given way under the strain, it is