TNAG-2060-FCO40-2938-Hong-Kong-Overseas-Service-Pensioners--Association-(OSPA)-1990 — Page 33

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A further facet in the Regulations was that where the sterling value of the basic pension was more than its base sterling value, then this excess was treated as a pension increase and also deducted from SPOS (this excess was termed a 'devaluation bonus'

'devaluation bonus' devaluation being from the point of view of sterling). As the sterling value of the pension was re-calculated each 30 June, and there were no adjust- ments during the ensuing twelve months, this complication did not arise for HK pensions pre-1977.

SITUATION POST

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30/6/76

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Pensioners retiring on or before 30/6/76

The sterling value of their pension on 30/6/76 became their 'base pension' and with the SPOS payable from 1/12/76 was the basis for the calculation of increased SPOS from 1/12/77 - i.e. in the example the $1134 + 868 was increased by 17.7% w.e.f. 1/12/77. compounding % indexation has then been applied in subsequent years.

Up to 1/7/80 the sterling value of the local pension increases, including devaluation bonus at 30/6/77 and 30/6/78. when the HK$ exchange rate had appreciated above that on 30/6/76, as at each 30 June was as previously deducted from the nominal SPOS irrespective of what might happen to the exchange rate during the ensuing twelve months.

However, from 1/7/80, when the Crown Agents had a new computer and more sophisticated programmes in operation the amount of SPOS payable could be and has since been adjusted each month according to the sterling value of the pension increases at the mid- month exchange rate. A deduction of devaluation bonus only occured in March and April 1985 when the exchange rate was above that on 30/6/76.

Pensioners whose last day of service was after 30/6/76

The sterling value of their pension is calcualted at the rate of exchange on their last day of service; this becomes the 'base pension' for all future compounding SPOS calculations. Although there have been considerable fluctuations since 1976 there has generally been a depreciation of HK$ to sterling from $8.8 to $13.3; the main departure from this pattern was in 1977/8 and in 1984/5 when in April 1985 it strengthened to $8.45 to £1. However, in view of the variability of the exchange rate on pensioners' last day of service, pensioners retiring on the same HK$ pension can have different sterling base pensions and this will affect all the future compounding SPOS calculations to the benefit of those whose base pension is a larger amount in sterling and to the disadvantage of those whose base pension is a smaller amount in sterling. HK pension increases, and devaluation bonus which can be more relevant due to the occasions when the HK$ appreciates above the rate on an individual pensioner's last day of service, are deducted from the nominal SPOS in the same way as described above based on annual calculations for pension payments up to 30/6/80, but adjusted monthly for payments made after 1/7/80.

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Whilst the general depreciation of the HK$ in terms of sterling has seriously eroded the monthly sterling value of the pension,

it has on most occasions provided a higher base pension' than its current value and so enhanced the SPOS calculations and meant that there have been fewer occasions for devaluation bonuses to be deducted. Many HK pensioners are unaware of this situation as the pension increases awarded by the HKG have usually exceeded the SPOS which would other- wise be payable; and so while HK pensioners have a notional SPOS, they have not in practice received any or very much SPOS, yet they see the sterling value of their pension decreasing.