TNAG-2097-FCO40-2986-HM-Overseas-Civil-Service-(HMOCS)-general-correspondence-1990 — Page 24

Tel: Aldingtons 507

STD Od)

0233 720597

Kimberley House

The Forstal

Mersham

Near Ashford

Kent TN 25 6 NY

28th October, 1990.

Keith Speed, Esq., RD MP, Houses of Parliament,

Westminster,

London.

Dear Keith,

We spoke briefly last Friday about the problems Hong Kong Government pensioners were having principally because of the deteriorating value of the HK dollar vis a vis sterling.

Briefly the background is that the UK Government pays retired members of Her Majesty's Overseas Civil Service a supplement known as Supplementary Pension for Overseas Service (SPOS) which is "

(SPOS) which is "designed to increase one's pension in line with UK inflation". Simply put this means that if UK pensioners receive a 10% increase in pension and HK pensioners receive only 5%, then SPOS will make good the difference of 5%.

The method of calculation is rather complicated and not widely understood by those who stand to benefit nor by those who administer it! Suffice it to say that the regulations now in force assume that a pensioner's sterling pension is paid at the rate prevailing on the date of his retirement, unless the exchange rate moves in his favour (i.e. is lower than at his date of retirement) when it is deemed to be an increase to his pension and deducted from any SPOS payable.

=

To quote a simplified but real example, Mr. X retired from HK in September, 1985 and his annual HK pension was HK$110,000 per annum. The exchange rate prevailing on the date of his retirement was $11.00 £1 and therefore his sterling pension was worth £10,000 per annum. During the past five years the Hong Kong Government has awarded pension increases amounting to 34.8% and therefore his HK pension is now HK$148, 280. However because of the declining value of the HK$ vis a vis sterling his pension is now only worth £9,672 (HK$15.3 = £1).

During the same period his UK service counterpart, Mr. Y, who retired at the same time on an annual pension of £10,000 has received UK increases amounting to 24% and therefore his annual pension is now £12,400. However, for the purposes of SPOS, Mr. X is deemed to receive £12,502 (£10,000 basic pension + increases of $38,280 @ $15.3 = £2,502) and therefore receives no SPOS. Mr. X is therefore £2,728 worse off than Mr. Y. How therefore can Mr. Maude on behalf of the UK Government state that

that "most HK pensioners continue to do reasonably well, certainly in comparison with their UK public service counterparts". (Please see copy of Mr. Maude's letter to Mrs. Edwina Currie attached.)

All HK pensioners realise that they must expect some fluctuation in the value of the HK$ and that one is expected to take the rough with the smooth as far as currency fluctuations are concerned. However two factors influence the poor value of pensions, the first being the fact that for reasons best known to themselves the HK Government continue to maintain the fixed link with the US$ despite the poor performance of that economy, and secondly, a bitter blow for HK pensioners, UK has now joined the ERM and any prospect of a weakening pound seems unlikely. So Mr. X has to live with a substantial reduction in his standard of living.

continued.