CONFIDENTIAL
increase in UK pensions will lead to a 10% increase in the pensions for HMOCS members. This system works well for all the previous colonies where the basic pension is fixed at a sterling exchange rate. Such pensioners are guaranteed a certain percentage increase on their basic pension, whether or not the original Government meets the bill.
7. The situation for Hong Kong is complicated by the fact that basic Hong Kong pensions are paid in Hong Kong dollars and so their sterling value fluctuates. Thus it is
difficult to arrive at a base figure for the sterling rate of any given individual's pension from which the
appropriate SPOS figure may be produced. After a number of changes to the method used, in 1977 HMG decided that in future for the purpose of calculating SPOS, the sterling value attributed to the basic pension of an individual
should be the sterling exchange rate at the effective date
of their last day of service. SPOS is accordingly awarded on the notional basic salary that the officer is receiv all calculator in sterling terms of course, since the actual exchange flow from
rate fluctuates the base pension that the officer is that figure./receiving fluctuates. Thus while SPOS guarantees a certain rate of increase over his notional pension, his actual base pension may well have decreased significantly because of an unfavourable movement of the Hong Kong dollar/pound exchange
Two examples are shown at the Annex.
when he
retired and
B
rate.
8. This problem over SPOS can really only be resolved if
Hong Kong pensions are payed at fixed exchange rate. We are not in a position yet to do anything about this, although as mentioned above, the question is under consideration. Therefore again in replying we should not go further than we have in the past on the SPOS arrangements for Hong Kong.
ROFANE/3
CONFIDENTIAL
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