1 March 1993
Mr Woodfield
HMT
Confidential
Dłut"
Foreign & Commonwealth
Office
File 48
HKA 233/1
BOTRY
G 3 MAR 1993
DESK.
X
Action Tox.
London SW1A 2AH
Telephone: 071-
Dear Kevin,
HONG KONG PENSION SAFEGUARD
1.
(612)
HKA 233/
(1992)
614)
You wrote to John Morris and to myself on 12 and 13 November 1992, setting out your understanding of how the sterling pension safeguard would operate. You attached to your letter of 12 November Dave Fish's explanation of the safeguard mechanism, which you said accorded with the Treasury's understanding. We agreed that your understanding accorded with our's.
2.
It was therefore something of a surprise to see that the Chief Secretary, in his letter to the Foreign Secretary of 15 January, proposed that the sterling safeguard would only operate when the amount the pensioner actually receives - from both the Hong Kong Government and the ODA under the SPOS Regulations - falls below the safeguarded level. This is clearly different from our earlier understanding which was that the safeguard would protect the basic pension (see Dave Fish's explanation attached to your letter of 12 November) and not a pension which would include the basic pension and any SPOS addition. The introduction of this new feature is a very significant departure from our earlier understanding and, in all probability, would have the effect of providing far less protection than if the safeguard related only to the basic pension.
3. As you said in your letter of 13 November, it is important that there is no misunderstanding between us on technical matters should Ministers reach agreement. It would therefore be very helpful if you could clarify your proposal on how the pension safeguard scheme should operate.
4. Although the Foreign Secretary and the Chief Secretary have agreed to put to one side for the moment the proposed amendment to the SPOS Regulations, our view is that this amendment is essential if there is to be any chance of the HMOCS Association agreeing to the proposed sterling safeguard, at whatever rate, particularly on the basis of the mechanism proposed in the Chief Secretary's letter. We are also under
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SLM
Confidential