TNAG-2060-FCO40-2938-Hong-Kong-Overseas-Service-Pensioners--Association-(OSPA)-1990 — Page 34

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The Problem and Possible Solutions

The fundamental problem is the decline in the HK$/Sterling exchange rate, and this arises from the link between HK$ and US$; with the US$ during recent years having dropped from almost parity ($1.03 = £1) to $1.8 = £1. Pensioners first of all look to the HKG to remedy this situation either by a general adjust- ment in the rate of exchange with sterling, or where overseas (HMOCS) pensions are paid outside HK (i.e. in UK) at a fixed more beneficial rate of exchange. The HKG's attitude is that neither of these are presently possible, that its only commitment is to pay pensions in HK$, and if any pensioner, whoever he might be, wishes to receive or remit his pension outside HK that is his affair.

Overseas pensioners feel very strongly that HMG should prevail upon the HKG to change its attitude.

If that solution is not possible, then overseas pensioners look to HMG to stabilise the situation either through SPOS or by some other means. One suggestion has been to revive the pre-1977 procedure as pensioners (wrongly) feel that this would mitigate against the decline in the value of their basic pension.

that procedure produced enhanced benefit when the HK$ was appreciating

Whilst against sterling, the reverse would occur when the HK$ is depreciating If the basic pension was now converted every 30 June into sterling it would almost year by year have provided a smaller base for the SPOS calculation.

One solution, and the most stable from the point of view of overseas pensioners, would be for HMG to take over their pensions under the Overseas Pensions Act 1973 against reimbursement by the HKG. There would be difficulty about agreeing on what should be the rate of exchange at which these pensions should be fixed and then paid. If the HKG's reimbursement of both pension and pension increases was at the current monthly rate of exchange, then HMG would stand to lose or gain depending on whether it was more less than the fixed rate. It would, however, produce stablility for pensioners.

or

Alternatively, any decline in the sterling value of the basic pension should be treated as a negative increase (i.e. the reverse of a devaluation bonus) and so deducted from the pension increases awarded by the HKG, before any balance of those increases is deducted from SPOS; in this way SPOS would in effect make good the loss in the value of the basic pension. stabilise the pensioner's monthly payment as long as the HK pension

This arrangement would increases exceeded the reduction in the sterling value of the base pension.