CONFIDENTIAL
SECRETARY OF STATE'S MEETING WITH THE CHIEF SECRETARY ON HMOCS
(27 OCTOBER)
BACKGROUND AND PRESENT POSITION
Compensation Scheme
1. Our proposal was for a compensation scheme costing, on the basis of latest estimates, some £46M, whereas the Treasury were
prepared to agree to a scheme costing around £32M. We have now agreed at the working level that it should be possible to provide a scheme acceptable to HMOCS members costing £39M at current prices. The reduction in cost could be achieved by setting compensation factors specific to the HMOCS scheme which
are lower than the full factors in the Hong Kong Limited
Compensation Scheme (LCS) on which our original proposal had
been based. These lower factors could be defended on the
grounds that HMOCS members do not need to be compensated for compulsory retirement unlike those under the LCS. Officials
have also agreed there should be a cap on payments of £120,000 at January 1992 prices. Other less significant technical
features of the scheme are still under discussion; but we
expect that agreement on these can be reached soon.
Sterling Pension Safequard
2. The two areas where we have been unable to reach
agreement with the Treasury are:
The safeguard rate: the Treasury had offered a rate of HKD
26: £1, whereas we had proposed HKD 16:£1.
The safeguard mechanism: the Treasury had proposed that the safeguard should come into effect after the sterling value of the total pension (ie including basic pension, local increases,
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CONFIDENTIAL
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