SECRET
FM FCO
TO IMMEDIATE HONG KONG
TELNO 947
OF 100858Z JUN 92
SECRET
MKA 233/1
Copied to "B'BENT.
EN 12/6
1102
INFO PRIORITY PEKING, UKREP JLG HONG KONG
la
HMOC$393 POLIC
106356
MDHOAN 5777
PERSONAL FOR DEPUTY TO GOVERNOR
PEKING PERSONAL FOR AMBASSADOR
UKREP JLG PERSONAL FOR MR GALSWORTHY
YOUR TELNO 1563:
1.
377
PUBLIC SERVICE PENSIONS FUNDING
THANK YOU FOR THE INFORMATION IN PARAS 4 AND 5 OF TUR. HOWEVER WE STILL REMAIN RATHER UNCLEAR ABOUT WHICH OPTIONS YOU HAVE CONSIDERED AND WHY YOU ARE DISPOSED TO CONCLUDE THAT IN ALL CASES THE POSSIBLE DISADVANTAGES OUT-WEIGH THE POSITIVE EFFECT THEY MIGHT HAVE ON CIVIL SERVICE AND POLICE CONFIDENCE AND MORALE. AS SEEN FROM HERE, THERE ARE MAJOR ATTRACTIONS IN THE IDEA OF HKG AND LATER THE SARG UNDERTAKING, SUBJECT TO THE FISCAL POSITION EACH YEAR, TO TRANSFER AN INCREASING ANNUAL SUM INTO A FUND CONTROLLED BY INDEPENDENT TRUSTEES, WHICH WOULD EVENTUALLY BE USED FOR THE PAYMENT OF PENSIONS AND/OR THEIR COMMUTABLE ELEMENT. THIS WOULD BE A CONSTRUCTIVE RESPONSE TO THE CHINESE PROPOSAL FOR HK DOLLARS 15 BILLION TO BE SET ASIDE BEFORE 1997. WE MIGHT EVEN PROPOSE, IN ORDER THAT THE FUND BUILDS UP MORE RAPIDLY, THAT AFTER 30 JUNE 1997 THE SARG COULD TRANSFER TO IT FROM THE SARG LAND FUND A SUM MATCHING THE ACCUMULATED HKG CONTRIBUTIONS.
2. IF THE CHINESE WERE TO CO-OPERATE, WE DO NOT THINK THAT SETTING UP SUCH A FUND NEED BE SEEN AS A VOTE OF NO CONFIDENCE: DUE REFERENCE COULD BE MADE IN PUBLIC PRESENTATION TO THE PRACTICE OF OTHER COUNTRIES. IT WOULD BE NATURAL FOR THE TRUSTEES TO HAVE DISCRETION TO INVEST A LARGE PART OF THE FUND OFFSHORE. (IF POSSIBLE THEY SHOULD ALSO HAVE DISCRETION TO AUTHORISE EVENTUAL PAYMENTS IN FOREIGN CURRENCY.)
3=
APART FROM THE INTRINSIC ADVANTAGES OF SUCH A SCHEME AND OF OUR BEING SEEN TO COOPERATE WITH CHINA IN A WAY HELPFUL TO CIVIL SERVICE CONTINUITY, THIS MIGHT OFFER A WAY OF CHANGING THE BASIS OF OUR DISCUSSIONS WITH THE CHINESE ABOUT THE LEVEL OF HONG KONG'S RESERVES AND POST-1997 LIABILITIES. LU PING MIGHT BE ABLE
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