CONFIDENTIAL
provider. Although it would probably be reasonable to stipulate that the transfer values must be used to purchase benefits payable in retirement, each individual would be free to choose his or her own insurance company or other pension provider, based in Hong Kong or elsewhere, and whether the benefits would be paid in Hong Kong Dollars, Sterling, or in some other currency. Placing the individual's pension value in private sector hands and on a funded basis would protect against a liability on HMG for default on payment. Those who fear future currency devaluations would have the option choose to convert their pension value to Sterling or another hard currency at any time they wished.
We recognise that for the Hong Kong Government this approach entails bringing forward payments to meet pensions liabilities for HMOCS. But there should be no argument that these liabilities already exist and would have to be financed by the Hong Kong Government or the SARG in due course as they emerge. There might be some scope for discussion about how the amounts of the transfer of the liability payments should be calculated to reflect the bringing forward of the liability. There might also need to be a contribution by HMG to discharge our own existing liability for index linking the HMOCS pensions which the Hong Kong Government awards. These issues will need further detailed discussion.
Arrangements of this kind obviate the need for a Sterling safeguard and the substantial problems associated with it (not least in securing Ministerial agreement). The arrangements will need to be worked through carefully with the Hong Kong Government; but we think that the option described offers sufficient promise for it to be pursued with vigour. We would propose that the Hong Kong Government and HMG should work together to see how an acceptable version this scheme might be developed."
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Please let me know if you have any difficulties with this redraft. I am copying this to Dave Fish.
Regends
Simon Rew
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