TNAG-2101-FCO40-2990-HM-Overseas-Civil-Service-(HMOCS)-policy-matters-1990 — Page 202

CONFIDENTIAL

4

the

staff suggestions.

We are therefore conducting а

Chorougn examination of the proposals put forward. So far,

w= nave established that full funding of pensions is not 2

feasible option. We need to conduct further studies before

we can reach a firm conclusion on the other suggestions, but

De pleased to inform the Chinese Side of our initial

ww

assessments.

Full funding of pensions is not possible because

generate sufficient

some $120 billion would be required

income to

the pension liabilities accrued by 1997.

size VI της Kuna 15 prohibitive and

without borrowing on a massive

FALES

The

cannot be established

scale or sharply increasing

OI taxation, neither of which can be contemplated.

Further, the fund would deplete the fiscal reserve and reduce

Government's overall credit standing and make its ability to DOCIOW In the markets more difficult. It would also, unless

invested with the Exchange Fund, have a significant impact on

the ability of the Exchange Fund to maintain the stability of

LIC currency. Offshore investment of the fund in other

currencies

would

have

serious

international value of the HK dollar.

implications

Оп

the

AS regards the option

of

partial funding

Of

Pensions,

Stall have suggested that a reserve fund should be

D