TNAG-2101-FCO40-2990-HM-Overseas-Civil-Service-(HMOCS)-policy-matters-1990 — Page 216

CONFIDENTIAL

PRIORITY

pressure, both in Hong Kong and from pensioners associations in the UK, for action on sterling safeguards for pensions, we have concluded that it would no longer be appropriate or feasible to consider compensation arrangements in isolation from the wider issue of sterling safeguards. From various informal discussions we have had with your experts in Hong Kong, I understand that

you have now reached a similar conclusion.

3. I am afraid that the linking of these two issues will inevitably mean further delay before we are in a position to make firm announcements (and we must of course bear in mind the

need to allow sufficient time to consult the Chinese). Nor, in

advance of Ministerial consideration of the sterling safeguards. issue, am I in a position to give any firm undertaking about the prospects for a sterling safeguard regime, either before or

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As you will appreciate, the financial implications

for HMG would be substantial considerably more so than those

for any compensation arrangements.

4. In this context, the Treasury have asked me to put forward another option for safeguarding pension values for your

consideration. This would involve the transfer of funding for

pensions to individual HMOCS members, so that they could make their own arrangements to safeguard the value of their pensions. Briefly, such an approach would involve individual HMOCS members being able to transfer the value of their accrued pension rights

at any time between now and 1997. The transfer value would be used to purchase a differed annuity or personal pension from a

private sector provider. Each individual would be free to choose his or her own insurance company or other provider, and

to decide whether the benefits should be paid in Hong Kong

dollars, sterling, or in some other currency. It would be helpful to have your views on the feasibility and acceptability