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rates of exchange in excess of PERS, i.e. the current market rate, would be unacceptable.
14. Sir Philip again stressed that, ever since the link system had been introduced in 1983, post- 1976 expatriate pensioners had been exposed to an unexpected US dollar risk and the sterling counterpart of their HK dollar pensions had been artificially depressed, with no redress. At first,
the impact of the link was masked because sterling depreciated, but as the US dollar depreciated from the mid 30s onwards, the risk became apparent and, now that sterling had entered the ERM, the old swings and roundabouts argument could no longer be invoked and the realistic prospect was for a permanent loss in the future.
15.
Sir David said that he noted that existing pensioners were seeking compensation plus enhancement of pensions to take account of current losses, and remarked that should HMG be unwilling to pay then the HKG would have to look at the matter. He doubted whether the HKG could assist for a variety of reasons but principally on political grounds. He wondered if it would be an attractive proposition to pensioners to be offered the possibility of commuting the rest of their pensions. Mr Haye said that it would depend on the offer and Mr. Blye said commutation might attract 25% or even 40% tax on the capital amount, which would reduce its attractiveness. This would need to be considered.
16. Sir David said that he unsympathetic because the felt it would be better to
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felt the FCO were perhaps petitioners were well off ". He involve "
18 poorer pensioners. Sir Philip said that the present petitioners " had never stooped to invidious comparisons but that in any event losses were losses, it was only a matter of degree. Mr Haye added that when the FCO had first advanced the notion that HK UK pensioners had little to complain about because they were relatively well off, Mr Burns, the Assistant Under Secretary, had been told in no uncertain terms that equity not envy ought to be his yardstick. The loss of any hard-earned pension was unjust, but as losses now amounted to more than 30% the position had become intolerable. Retired Directorate officers might be able to manage on unfairly depleted pensions, but pensioners lower down the scale were in trouble. A modest £12,000 a year was now worth only about £8,000 in real terms. In any event present petitioners were speaking to principle on behalf of themselves and their less fortunate bretheren.
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17. Mr Blye asked whether it would be helpful to the Chief Secretary's attempts to assist if pensioners petitioned the Governor in Council, and Sir David said that he felt this could do no harm. Mr Blye reiterated his contention that pension increases should take account of the sterling purchasing power of pensions at the time of retirement. Despite
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