CO129-453 - Acting Governor Claud Severn - 1919 [1-3] — Page 41

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HONGKONG.

No. 25.

-14-

DOWNING STREET,

5th February, 1907.

SI,-in continuation of my despatch No. 11 of the 16th of January, I have the honour to inform you that in view of the delay which las occurred in the transfer of the Widows' and Orphans' Pension Fund to the Government, it would be well to alter the date on which the valuation of the Fund should be taken from the 31st of December 1905 to the 31st of December 1907.

Governor

SIR M. NATHAN, K.C.M,G.,

&c.,

&c..

&c.

1 have, &,

(Signed)

ELGIN.

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were to be substantially equal in amount, no loss or gain would accrue to the Fund through the variation of the dollar; but this will not be the case, as the ratio of the annual sterling contributions to the annual sterling pensions will obviously lecrease, at least, as soon as all the posts to which sterling salaries are attached are filled by officers on sterling salaries,

6. I have therefore come to the conclusion that the original proposal that the Govern- ment should take over the Fund and guarantee Pensions on the Ceylon Pension Tables in return for the four per cent contributions must be adopted, and I have to request that you will take steps at an early date to introduce and pass the necessary ordinance.

7. Although, as I have explained, it is not possible to carry out a valuation of the Fund which would be actuarially accurate, I consider that in order to treat the Hongkong officers as nearly as practicable in the same way as those of the Straits Settlements and the Federated Malay States it is desirable that a valuation should be made in order that the surplus, if any, lisclosed by it may be distributed among the beneficiaries of the Fund in the shape of increases to the pensions. For this purpose an arbitrary rate of exchange must be assumed for the purposes of the valuation. The exchange value of the dollar has recently fallen from about 2/3 to below 1/10. As the value of the sterling liabilities must be greater than the value of the future sterling contributions, the higher the sterling value assumed for the dollar the more favourable to the Fund will be the results of the valuation, and I should be prepared to allow the valuation to be carried out at a rate, not exceeding 2/3, which you and the Legislative Council may consider fair and reasonable.

HONGKONG,

No. 275.

DOWNING STREET,

28th December, 1907.

SIR, I have the honour to acknowledge the receipt of Mr. May's despatch No. 169 of the 24th of June with regard to the transfer of the Hongkong Widows' and Orphans' Pension Fund to the Colonial Government.

2. Mr. Max states that the great majority of the contributors of the Fund are still opposed to the transfer, and he suggests that the proposal should be dropped and the actuary consulted as to whether the Ceylon Pension Tables can with safety be adopted by the Hong. kong Fund.

He adds that the majority of the Directors and contributors are considering a scheme of compulsory insurance which would remove the unpopularity of the present Fund, due, I gather, to the fact that under the system upon which the fund is based the contributions of members who do not happen to leave widows or orplan children help to provide adequate pensions for the dependants of those who do. Mr. May also states that the Directors and contributors feel that the Hongkong Fund has had such a specially favourable start and is aevumulating so rapidly that they may confidently look forward to the possibility of an increase in pensions, even on the Ceylon rates, if the Fund is kept serparate and fresh valita- tions are made from time to time".

3. 1 may say at once that I am not prepared to consider the substitution of an insurance scheme for the Fund.

4. As regards the views of the members on the future prospects of the Fund, I fear that they have not paid sufficient attention to my despatch No. 11 of 16th January last and especially to the memorandum by Messrs. YotsG and RYAN enclosed therein. But at any rate they must admit that the Fund cannot be maintained without periodic valuations; and, as I will proceed to explain, such periodic valuations are practically impossible.

5. The Fund is a dollar fund, the accounts are kept in dollars, and the balance of the Fund at any time is represented by a debt due by Government of so many dollars. In the case of a considerable (and increasing) number of officers, however, the contributions are fixed in sterling and the Widows' and Orphans' pensions will ultimately be payable in sterling currency. As the sterling contributions of officers on sterling salaries are credited to the Fund in dollars at the current rate of the dollar at the time when the contribution is paid, it follows that the value to the Fund of the future contributions of existing members on sterling salaries can only be estimated with accuracy if the future values of the dollar for (say) the next thirty-five years are known. Similarly the burden which may be imposed on the Fund in respect of the existing sterling pensions and the future sterling pensions of the widows or orphans of existing contributors also depends on the future fluctuations of the dollar. Of course if the payments and receipts in sterling during each year

I have, &c.,

Governor

Sir F. D. LAGARD, K.U.M.G., C.B., D.S.O.,

dr..

we.

(Signed) ELGIN.

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