CONFIDENTIAL
486
102003
MDHIAN 4461
CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 2056
OF 051108Z AUGUST 92
нка 2331,
INFO PRIORITY PEKING, UKREP JLG HONG KONG
(393 473
TOP COPY
O DIST?
YRTELNOS 947 AND 1135: PUBLIC SERVICE PENSION FUNDING
1. IN ORDER TO BE REASONABLY CONFIDENT ON THE SIZE OF THE FUND THAT WOULD NEED TO BE ESTABLISHED, BY EITHER 2002 OR 2007, FINANCE BRANCH/TREASURY ADVISE THAT AN ACTUARIAL VALUATION OF THE
PENSION LIABILITY FOR THOSE YEARS WOULD FIRST BE NECESSARY. UNFORTUNATELY, THEY DO NOT HAVE THE EXPERTISE TO UNDERTAKE SUCH A VALUATION.
2. ODA COMPLETED A STUDY ON THE FUNDING OF PENSION LIABILITIES IN EARLY 1984. THE RESULT OF THE EXERCISE SHOWED THAT HKD6.4 BILLION (1984 DOLLARS) WOULD HAVE TO BE SET ASIDE EACH YEAR FOR 13 YEARS
IN ORDER TO MEET THE PENSION LIABILITIES OUTSTANDING AT 30 JUNE 1997. OVER THE LAST 8 YEARS, HONG KONG CIVIL SERVICE SALARY LEVELS HAVE INCREASED BY 180 PERCENT. THEREFORE THE AMOUNT REQUIRED AT CURRENT DATE PRICE LEVEL TO BE SET ASIDE EACH YEAR WOULD BE AROUND HKD17.9 BILLION.
3. FROM THE FOREGOING, AND CONSIDERING THE FIFTEEN YEAR TIME HORIZON FROM NOW, WE CONTEMPLATE THAT AT LEAST HKD15 BILLION (1992 DOLLARS) WOULD NEED TO BE SET ASIDE EACH YEAR TO ESTABLISH THE FUND. HOWEVER, IF IT WAS DECIDED THAT THE FUND SHOULD BE USED ONLY TO COVER THE PAYMENT OF THE COMMUTABLE ELEMENT THEN WE ESTIMATE THAT THE ANNUAL CONTRIBUTION WOULD BE AT LEAST HKD7.5 BILLION.
4. HOPEFULLY, THE ABOVE WILL GIVE YOU SOME IDEA OF THE LIKELY MAGNITUDE OF THE AMOUNTS INVOLVED. IF, HOWEVER, YOU WOULD LIKE TO SEE A MORE THOROUGH EXERCISE UNDERTAKEN, THEN POSSIBLY ODA, WHO DO HAVE THE EXPERTISE AND WERE PREVIOUSLY INVOLVED, MIGHT BE WILLING TO OBLIGE. FOR OUR PART WE WOULD BE PLEASED TO PROVIDE ALL THE INFORMATION THAT ODA MIGHT REQUIRE FOR THE EXERCISE.
PATTEN