Under 1977 Regulations
SPOS payable after one year
As intended by the Act
Pension due
£
Pension due
£
Basic:
Basic:
$120,000 @ $10 = £1
12,000
$120,000 @ $10 = £1
12,000
Increase: 5%
600
Increase:
5%
600
Total
12,600
Total
12,600
Pension payment calculation
Pension payment calculation
HK Govt. basic:
$120,000 @ 10 = £1
12,000
HK Govt: $132,000 @ $12
www.
£1 11,000
HK Govt. increase:
$12,000 @ $12 = £1
1,000
SPOS Total
Nil
13,000
SPOS Total
1,600 12,600
The flaw in these new regulations is illustrated by the use of a historical rate of exchange to determine the actual amount of pension received from the Hong Kong Government. The pension actually received in sterling is only £11,000, £1,600 short of the amount needed to maintain the original purchasing power of the pension. In the ODA's calculation, the pensioner is deemed to receive a surplus, which is a false surplus, of £400 over what is due.
The ODA has admitted the drafting mistakes in the early regulations but has not yet admitted those in the 1977 Regulations. However, there remains the contradictory statements in the official records which the ODA cannot/has refused to explain. They say only that those statements that they have made which contradict what they are doing are erroneous and have no authority.
A regulation that conflicts with its enabling Act is ultra vires. All that is needed to correct the mistakes and bring the regulations into line with the Act's intentions, is for Regulation 17(1) to be amended so that the monthly pension payments from Hong Kong are converted to sterling at the current rate of exchange for both the basic pension and the pension increases. This was the position in 1972. If this is done, the pensioner
will get no less than what is necessary to maintain
the original purchasing power of the pension in all exchange rate situations. SPOS would not be paid if the pensioner gets more.
The effect of the 1977 Regulations on other pensions
Under the 1977 Regulations, the Hong Kong pensioner with only his Hong Kong pension will, irrespective of its overall sterling value, receive no benefit from SPOS as long as inflation is higher in Hong Kong than in the UK because HK increases will always be higher than UK increases. Hong Kong pensioners who have other pensions paid by the ODA will be even worse off. This is because any false surplus derived from the pension payment calculation, such as the false surplus of £400 shown in Table 2, will be used to reduce the SPOS on those other pensions, even though the value of the aggregated pensions may have been below their original sterling purchasing power. On the other hand, if UK inflation is higher than Hong Kong's, the pensioner would get back the