TNAG-1317-FCO40-1720-Future-of-Hong-Kong-meetings-of-the-Cabinet-Defence-and-Over-1984 — Page 15

OD (K) MEETING: 12 SEPTEMBER 1984,

PENSIONS

POINTS TO MAKE

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But

Have considered carefully Governor's request that HMG should accept contingent liability for Hong Kong pensions after 1997. no precedent for this. Wrong to commit future Governments in advance, especially to expenditure of this order. Moreover, danger that if it became public knowledge, this would encourage SAR Government to default.

2. Fully accept we must give what other reassurance we can to Hong Kong public service. Will need to make statement on pensions in context of White Paper. Agree with Governor we must say nothing that rules out possibility of future Government accepting responsibility in event of default.

Think this

3. First formulation uses word "responsibilities". justified: would be very difficult to argue HMG had no continuing moral responsibility in event of default. Would in response to supplementaries make it clear how HMG see their current responsibilities, while leaving open how future Governments might act in event of default. Think this is clearest statement we can make of our position. Do not consider it misleading.

4.

Governor considers second formulation would be much less effective in maintaining public service morale. Must accept his judgement. Hope colleagues will agree to use of first formulation.

[IF RAISED]

5. In consultation with Hong Kong Government about changes to pension arrangements. They are proposing: -

(a) raising retirement age from 55 to 60;

(b)

allowing commutation of pensions up to 50% rather than 25%; (c) allowing officers who resign to receive deferred benefits at retirement age.

This would have effect of reducing long-term costs of pensions

SECRET

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