6.
CONFIDENTIAL
STERLING SAFEGUARDS
i)
ii)
The sterling safeguards would apply to all existing and
future pensioners.
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 "safeguarded 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; at 1997 £11M pa; and at the peak year 2011 about
£15M pa.
If the Dollar were to stabilise at, say,
HK$ 20 to £1, the cost would then be about £2M pa at 1991
and 1997 and about £3M pa for 2011. The final cost of
providing a safeguard will of course depend on various factors including the sterling/Hong Kong Dollar exchange rates at any given time, and there is no satisfactory way of predicting what this will be.
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[NB You will see that the peak year figure of £15M pa differs from that given in the earlier submission (£29M pa). This is because the base data provided by Hong Kong was unfortunately misinterpreted. Similarly, the figure of £35M pa given in the earlier paper for the peak year at current exchange rates should have read £19M pa.]
7.
SPOS PROPOSALS
The SPOS modifications can be viewed as a mechanism to rationalise
some of the present anomalies which arise under the existing pensions increase arrangements. Essentially, we propose to take into account any shortfall in the value of an officer's basic
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