CONFIDENTIAL
DIEU E
officers will be covered by the "Special Branch" Scheme, and that the holders of a further 90 to 100 "sensitive" posts will come within the scope of the Limited Compensation Scheme (LCS). These have been omitted from our calculations, but as many of the LCS officers are likely to be the more senior personnel, our estimates will be, if anything, a little on the high side.
ii) Included within the 829 are the 300 contract staff who have the option of going over to HMOCS terms and conditions. We have no reliable way of predicting how many of these will take up the option, so we have assumed that all will wish to take advantage of the facility.
iii) Payments under Compensation/Incentive Schemes have always been based on advice provided by the Government Actuary's Department. The Actuary constructs tables of compensation factors (multipliers of annual salary) which relate to the officers' age and length of service. The factors are based on actuarial assessments of how much salary and pension the officers concerned are losing, together with other less tangible aspects, like the availability of suitable alternative employment and loss of promotion prospects. To arrive at the latest estimate of costs, the Hong Kong Government have used the compensation factors set out in the Hong Kong Limited Compensation Scheme, which has already been promulgated for officers in sensitive posts who will have to retire before 1997.
iv) To arrive at the maximum costs of the proposed Compensation/Incentive Scheme we have assumed that all officers in post in 1997 will collect the initial 20% of their compensation entitlements, and that those who are not scheduled to retire before 2005 will remain in post to collect the remaining eight annual instalments. To obtain the "probable" costs we have simply used the Hong Kong Government's broad assumptions about the numbers likely to continue in service beyond 1997. Inevitably,
Inevitably, these are assumptions; indeed it is likely that many of the officers concerned cannot at this stage forecast their eventual departure dates, although some have already indicated that they will not work on after 1997 in principle. Annex C gives a breakdown of the incentive payments over the period 1997 to 2005.
Sterling Safeguards
4. i) The sterling safeguards would apply to all existing and future pensioners.
ii) To arrive at a crude maximum annual cost of providing a sterling safeguard on HMOCS pensions, it is necessary to take the pensions bill in Hong Kong Dollars and convert to sterling at the "safeguard exchange rate level". Assuming for illustration we take the safeguarded rate to be HK$ 16 to £1, and the Hong Kong Dollar were to become worthless, the cost of the safeguard today would be £10m pa;
COLADZ
CONFIDENTIAL
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