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CONFIDENTIAL
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Background and arqument
3.
The Secretary of State and Mr Portillo agreed, at their meeting on 2 July also attended by Mr Patten, that officials
should produce an agreed set of costed options. This is now complete. The options paper covers the full range of options which have been examined and which both we or the Treasury
think should be considered. It also includes a list of
advantages and disadvantages in respect of each pension
safeguard option. Because Ministers recognised that it would not be possible for officials to choose between the options, given the entrenched differences between the Departments, the paper does not make any recommendations on which options should be pursued. We have therefore prepared a commentary on the options which sets out FCO and ODA official thinking.
4.
The detailed examination of the various options over the
summer has not changed our view of what needs to be done:
(a) A sterling safeguard for pensions which would come into operation at a defensible trigger rate. Ideally this would be
HK $16: £1 but see paragraphs 6-8 below;
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(b) A compensation scheme on traditional lines for all
officers serving on 30 June 1997, with payments phased over
5 or 6 years; and
(c) Amendments to the regulators governing Supplementary
Pension for Overseas Service (SPOS) to make them more equitable.
5.
This would be a significant improvement on the proposal rejected by HMOCS officers earlier this year. It would not meet all their demands particularly for the right to early retirement with full payment of pension. But that is in HKG's gift, not ours.
hk.arr.ADM
SLM
CONFIDENTIAL
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