CONFIDENTIAL
HONG KONG: HM OVERSEAS CIVIL SERVICE:
I. OPTIONS FOR HMG-FUNDED ARRANGEMENTS
A.
STERLING SAFEGUARDS FOR PENSIONS
Option A:
HMG to under-write pensions at 1991 average exchange-rate (HK $13.76 £1), ie HMG would pay supplements if the Hong Kong dollar fell below this level.
POTENTIAL ANNUAL COST:
If HK dollar at or above this rate: Nil
If HK dollar fell to HK $20 : £1 :
in 1998: £ 3.8 m
in 2011: £ 5.7 m
If HK dollar fell to HK $24 : £1 :
in 1998: £ 5.2 m
in 2011: £ 7.8 m
If HK dollar became worthless (or if SARG defaulted):
in 1998: £ 12.1 m
in 2011: £ 18.2 m
Option B:
HMG to under-write pensions at "historic" rate of HK $16: £1 (about 50% below average rate 1972-1992) :
POTENTIAL ANNUAL COST:
If HK dollar at or above this rate: Nil
If HK dollar fell to HK $20 : £1 :
in 1998: £ 2.1 m
in 2011: £ 3.1 m
If HK dollar fell to HK $24 :
in 1998: £ 3.5 m
in 2011: £ 5.2 m
If HK dollar became worthless (or if SARG defaulted):
in 1998: £ 10.4 m
in 2011: £ 15.6 m
CONFIDENTIAL