STERLING SAFEGUARDS FOR HONG KONG HMOCS PENSIONS
Annex A:
Data and assumptions underlying the costs estimated by GAD
Data
1. ODA provided individual data for 975 active members of HMOCS as at 31 October 1991, and 1,740 pensions and dependants' pensions in HK$ as at 15 November 1991. Table Al shows the numbers and salaries for the active members, split between the groups used for valuation purposes: judicial, police, and administrative and other grades.
2. The 600 members in police grades include 358 serving members and 242 "potential" members who are contract officers with an option to become HMOCS members. This option expired on 30 June 1992. On advice from HKD, we have assumed that 35% (85) of the 242 will succeed in transferring to HMOCS. Not knowing which individuals will transfer, we have applied this percentage to the estimated costs for all 242. The data included only 10 contract officers in non-police grades, all of whom we have assumed will transfer to HMOCS.
3.
Table Al also shows the numbers and amounts of pensions in payment to pensioners and dependants. Although there are 1,740 pensions in payment, there are fewer pensioners, because some pensioners receive two pensions, only one of which attracts annual increases.
4.
The numbers of members used in this exercise are slightly different from numbers quoted in other papers, perhaps because of different inclusion criteria or different effective dates. In particular, recent correspondence from HK suggests that there are more contract officers in non-police grades who are eligible to transfer to HMOCs.
Benefits
The pensions paid to members (and their dependants) are calculated according to members' reckonable service and the rules of the scheme that determines their benefits. There are two schemes in operation: the "old" scheme (600ths with a 25% commutation option) and the "new" scheme (675ths with a 50% commutation option). The normal retirement age in the "new" scheme is 60, compared with 55 in the "old" scheme. Most of the options are costed on the assumption that all currently- active members remain in the "old" scheme, and that all members take the option on retirement to commute the maximum amount of pension into lump sum, at a rate of 14 for each 1 pa of pension.
Assumptions
6. The projection of future payments to HMOCS members depends upon assumptions about the long-term rates of general earnings increases and price increases. Estimates of the present capitalised values of future cash flows require an assumed long-term rate of investment yield. The following values have been assumed: