ct.ps/dr/5mp2.2
CONFIDENTIAL
HONG KONG HMOCS ARRANGEMENTS
ANNEX
The points set out below address the misconceptions contained in
the Governor's letter:
Useful
The Governor says that SPOS does not provide any real
exchange rate protection. This is not the case. SPOS
guarantees that basic HMOCS pensions will attract at
least the same increases as UK public service pensions.
The increases are calculated on the sterling value of
the basic pension using the exchange rate prevailing on
the date of retirement. Consequently, while the sterling
value of the basic pension may fall because of exchange rate movements, the sterling value of the pension increases which SPOS guarantees is safeguarded. The longer the pension is in payment, the greater becomes
the pensions increase element and afforded by SPOS;
of
-
the protection
Brunei where the
has agreed to
HMOCS pensions in sterling
case of HK, a DT also
we should do all we can to
the Governor mentions the case
successor government and not HMG
underwrite a safeguard on
terms; it follows in the
relatively well off, that
secure a HK-underwritten safeguard before incurring potential costs to the UK taxpayer;
I am not wholly convinced that a HK-funded safeguard should be ruled out at this stage. However, if one is not achievable I have accepted that HMG must be prepared
to step in if necessary.
I believe the detailed
proposal in my letter of 15 January for a safeguard
based on HK$26:£1 to be fair and reasonable. This is
not a safeguard level plucked from the air. It is guided by legal advice that the Government can justifiably take into account the relative salary levels and pension entitlements of HK HMOCS vis a vis their UK counterparts when deciding how a safeguard scheme should operate.
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