15:05
ODA EASTKILBRIDE
NO. 013
002
6. That said, you will notice that the principles underlying the scheme set out in the Chief Secretary's letter (para 6(c) refers) differ fundamentally from the proposals outlined in para 4 above. Apart from advocating a safeguard of HK$26 : £1, as opposed to our preferred rate of HK$16: £1, the Treasury are insisting that any index linked supplement (SPOS) which is paid by HMG under the UK Pensions Increase legislation is taken into account before the safeguard is triggered. But, SPOS is not intended to make good any shortfall in the value of the basic pension as originally awarded; it is simply designed to provide the pensioner with some protection against inflation, by ensuring that any subsequent increases awarded by an overseas government are brought up to the same level as the increases paid to a hypothetical Home Civil Service counterpart who is deemed to receive a basic pension of equivalent value. Thus, if the SPOS entitlement is used to supplement any shortfall in the sterling value of the basic pension (and for the reasons already given this will not arise unless there is a significant fall in the value of HK$ even if the safeguard is set at HK$16: £1), then the Hong Kong pensioner will, in practice, receive less, by way of increases than his UK counterpart.