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SPOS) had fallen to the safeguard level. We proposed that the
safeguard should apply when the sterling value of the basic
pension (disregarding any additional income from SPOS) fell to
the safeguard level.
The
The latest estimate of the maximum contingent liability under
the Treasury proposal (ie HK$26:£1 and using their mechanism) is £106 million (spread over 50 years) compared to our proposal at £244 million. The Governor is prepared to accept the
Treasury mechanism if the safeguard rate is set at HKD 16:£1,
and if other elements of the HMOCS package are acceptable.
Government Actuaries Department have calculated that adopting
the Treasury's proposed mechanism could reduce the contingent liability for our proposal from £244 to £230 million. This
represents a reduction of only £14 million and is unlikely to
be sufficient to persuade Mr Portillo to agree to a rate of
HK$16: £1. (GAD's figures indicate a saving of approximately
£3 million on the contingent liability for each exchange rate point between 16:1 and 26:1). Mr Portillo may suggest compromising at 22:1 on grounds that this would safeguard the
pension at the point where Hong Kong and UK civil servants salaries are in parity. But neither the Governor nor the HMOCS
Association would agree to accept either the principle of parity or the exchange rate which would result.
(We have
always argued that the principle of parity is without precedent in HMOCS arrangements).
Supplementary Pensions for Overseas Service (SPOS)
3.
At present, officers receive SPOS payments when the value of local pension increases converted to sterling is less than the inflation increase in the UK on an equivalent pension.
However, these payments are reduced if the sterling value of
the local Hong Kong pension rises as a result of exchange rate
movements. If, on the other hand, the local pension decreases
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