CONFIDENTIAL
(b) the rate of exchange between the HK$ and sterling has deteriorated from HK$10 to £1 (at retirement) to a
to a current
rate of HK$15 to £1.
4.
The Hong
Under this scenario, the Home Civil Service pensioner would receive increases of £3,000 a year (or 25%), bringing his total pensionable income up to £15,000 a year. Kong pensioner would be paid locally awarded increases of HK$ 30,000 a year, which at the current rate of exchange would equate to £2,000 a year, plus SPOS of £1,000 a year to make good the difference between the sterling value of the overseas increases actually received and the UK "target figure". However, because his basic pension entitlement
would have been reduced to £8,000 a year, through the effects of exchange rate losses, his total pension would be
worth only £11,000 a year a shortfall of some £4,000 a year compared to his Home Civil Service counterpart.
5.
J
Presenting the figures in tabular form provides a
clearer illustration of the problem. In Appendix 1,
examples (i) and (ii) show the situation described above; examples (iii) (iv) and (v) show the position if the Hong
Kong increases had been awarded at 30%, 40% and 50%
respectively, whilst the UK increases remained at 25% over
the same period. Appendix II gives precisely the same
examples, but assumes a current exchange rate of HK$12.5 to
£1.
6. Our proposal is that the pensioner should be eligible to
receive up to the same level of increases from UK funds as
those paid to his UK equivalent, providing his total pension entitlement (including his Hong Kong basic pension increases) does not in any one month exceed the total pension paid to his Home Civil Service counterpart. Appendices III and IV respectively demonstrate the effects
of this new proposal on the various examples given in
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