TNAG-2101-FCO40-2990-HM-Overseas-Civil-Service-(HMOCS)-policy-matters-1990 — Page 119

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put aside, sufficient to meet the pension payments for five

years, but only to be drawn from in lean years. Though the

size of the fund (estimated to be about $15 billion) will not

be as prohibitive as that required for full funding,

consideration needs to be given to its economical and

financial impact, the cashflow implications and the question

of how the fund should be maintained at an appropriate level,

its management, investment of balances etc.

11.

Some staff have suggested full

commutation

of

pensions. This would enable retirees to receive their earned

pension benefits in a lump sum. Again, this would have

cashflow implications which need to be carefully assessed in

the light of our current financial position. It is also

necessary to consider the acceptability of the proposal to

younger officers. The alternative of a 75% commutation of

pensions has also been suggested.

12.

The staff suggestion of a provident fund scheme is

in line with private sector practice. It would offer staff a

higher

degree of flexibility,

help

recruitment and could

reduce pension costs in the long term. However, for the same

reasons which argue against full funding of pensions, it will

not be possible to have a scheme which covers the pension

benefits accrued in respect of past service. The structure

of any provident fund scheme for the civil service must have

CONFIDENTIAL