TNAG-2270-FCO40-3269-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1991 — Page 11

CONFIDENTIAL

2

The existing

5.

interest rate for refund of contributions was set on the advice of the UK Government Actuary's Department (GAD). According to GAD, the 1.5% per annum simple interest when applied to the aggregate amount of contribution for the entire period of contributory service and allowing for salary increases, would be about the same as applying 3% per annum compound interest to the contributions paid in each year from date of payment to date of refund. Simple interest is preferred as it would be adminstratively straightforward, without the need to ascertain the date of payment and maintain a running total of each member's contributions.

6.

The staff suggestion indicates that they are unaware of the rationale for the current arrangement.

7.

With regard to the salary for buying back contributory service, the present arrangement was set on the grounds that -

8.

(a)

(b)

(c)

if the arrears of contributions were based on an officer's past actual salary, it would be less than the full actuarial cost in relation to his salary on entry into the scheme;

the

coverage enjoyed by an officer at the time of entry into the scheme is based on his current salary, he therefore gets what he has paid for;

past salary details would be difficult if not impossible to obtain and they would result in heavy administrative and staffing requirements.

1

In the light of the background for setting the existing interest rate for refund of WCPS contributions and the salary for buying back contributory service, it is considered that the existing arrangements are fair and not inconsistent as implied by staff. We therefore do not support the staff proposal.

informed of the background of

Staff would instead be existing arrangements.

Concessionary Arrangements for Serving Model Scale I Staff

9.

the

Staff suggest that serving Model Scale I staff who wish to join the voluntary WCPS should be allowed to contribute at the old rate of 3% of salary instead of the revised rate of 3.5% because they were formerly denied the opportunity to join the scheme. Their admission should also not be subject to any medical examination.

CONFIDENTIAL