CONFIDENTIAL
HKA 233/1
472
044725
MDLIAN 0802
CONFIDENTIAL
FM HONG KONG
TO PRIORITY FCO
TELNO 1935
OF 230514Z JULY 92
-454)
TOP COPY Q DIST?
YR TELNO 1083: HMOCS: PRIVATE SECTOR PENSION INITIATIVES
1. ALTHOUGH WE ARE ABLE TO COMMENT ON THE ARRANGEMENTS MARGOLIS PROPOSED IN HIS REPORT, IT WOULD BE HELPFUL TO KNOW WHETHER BARINGS, IN THEIR ADVICE TO THE TREASURY HAVE INTRODUCED ANY NEW ELEMENTS THAT SHOULD ALSO BE TAKEN INTO ACCOUNT. WE ARE UNCLEAR AS TO WHETHER BARINGS ADVICE RELATED TOT HE RELATIVELY SMALL NUMBER OF HONG KONG HMOCS OFFICERS OR WAS A GENERAL ENDORSEMENT OF THE CONCEPT PROPOSED BY MARGOLIS AND ITS APPLICABILITY TO THE HONG KONG CIVIL SERVICE AS A WHOLE. IT SHOULD BE BORNE IN MIND THAT THERE ARE ONLY 700 HMOCS OFFICERS BUT A TOTAL OF 180,000 PENSIONABLE STAFF IN THE CIVIL SERVICE. THE DIFFERENCES IN SCALE MIGHT AFFECT JUDGEMENTS ON FEASIBILITY.
2. CLEARLY TO ENSURE THAT WE ARE COMMENTING ON PRECISELY THE SAME PROPOSALS, IT WOULD BE HELPFUL IF THE TREASURY COULD SHARE WITH US THE ADVICE WHICH THEY HAVE RECEIVED FROM BARINGS. IF BARINGS HAVE BEEN ABLE TO COME UP WITH SPECIFIC ARRANGEMENTS WHICH ARE ATTRACTIVE, RISK FREE AND COULD, WITHOUT CREATING POLITICAL DIFFICULTIES, BE APPLIED TO THE HONG KONG CIVIL SERVICE AS A WHOLE, THEN WE WOULD NATURALLY WELCOME THE OPPORTUNITY TO CONSIDER THEM.
3. ON THE QUESTION OF THE POOL OF POSSIBLE BENEFICIARIES (PARA 4 OF TUR), IT SHOULD BE NOTED THAT THE MARGOLIS PROPOSALS RELATE ONLY TO THE COMMUTED PORTION OF THE PENSION. THUS THEY COULD NEVER PROVIDE A COMPLETE SAFEGUARD ON THE VALUE OF PENSIONS. THE FOCUS ON THE COMMUTED ELEMENT MEANS THAT, EVEN IF PRACTICABLE, THE SCHEME WOULD ONLY BE ATTRACTIVE TO, AT MOST, THOSE ON THE NEW PENSION SCHEME. THIS IS BECAUSE 50 PERCENT OF THE PENSION CAN BE COMMUTED UNDER THE NEW PENSION SCHEME, BUT ONLY 25 PERCENT UNDER THE OLD. FURTHERMORE, THOSE ON THE OLD PENSION SCHEME HAVE NO STATUTORY RIGHT TO A PENSION IF THEY RESIGN FROM THE SERVICE BEFORE REACHING NORMAL RETIREMENT AGE: THIS COULD COMPLICATE ANY
ASSIGNATION TO A FINANCIAL INTERMEDIARY.
4. ON PARA 5 OF TUR, WE CONCUR WITH MARGOLIS' CONCLUSION THAT,
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