TNAG-1848-FCO40-2623-House-of-Commons-Select-Committee-on-Foreign-Affairs-enquiry-1989 — Page 70

I

For decision

on 31 January 1989

XCC (89) 22 Copy No..

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CONFIDENTIAL

Gei

MEMORANDUM FOR EXECUTIVE COUNCIL

VALUE OF PENSIONS FOR OVERSEAS PENSIONERS

CURRENCY PROTECTION

THE PROBLEM

Recent fluctuation in the sterling/Hong Kong dollar exchange rate has affected the value of Hong Kong pensions drawn in sterling. Many Overseas pensioners in the

the United Kingdom have called for special measures to alleviate this problem. This memorandum outlines possible options to assist them and addresses the result ant policy and political considerations.

A

ADVICE SOUGHT

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measures

overseas.

Members will be asked to consider whether should be introduced SO that the pensions of pensioners paid in foreign currencies overseas can be adjusted to protect them against currency fluctuations.

BACKGROUND AND ARGUMENT

Difficulties Faced by Overseas Pensioners

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Annex A shows sterling exchange rates since 1946. Prior to November 1967, the rate was fixed at £1: HK$16. This was changed to £1: HK$14.55 upon a 10% revaluation of the Hong Kong dollar in 1967. The rate began to fluctuate following the floating of sterling in 1972.

the past

five years, value of the HK dollar has fluctuated widely. For example, it fell by about 60% from £1: HK$9 in early 1985 to £1: HK$14.60 in April 1988.

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decline

In

living. difficulty

the

Some arises

In the UK, retired overseas officers entirely dependent on their pensions have suffered a reduction in the value of their pensions as a result of currency fluctuations in recent years. In some

cases, this is said to have caused a significant

in their

of standard pensioners feel very strongly that their directly from the Government's policy to link the HK dollar with the United States dollar, a decision which they believe was determined by political considerations. They claim that the HK dollar is seriously undervalued in terms of sterling. They consider that

CONFIDENTIAL