TNAG-2396-FCO40-3483-Hong-Kong-Civil-Service-policy-1992 — Page 14

CONFIDENTIAL

scheme are that only people retiring between now and 1997

would feel reassured and the additional cash flow up to 1997

would amount to about HK $4 billion.

(d) A Provident Fund Scheme

This could involve the establishment of a Contributory

Provident Fund Scheme with the Government paying in a

percentage of salary (say 5%, 10% or 15% increasing with

length of service) and civil servants likewise (5% in other

Hong Kong schemes). Singapore, for example, runs a highly successful scheme. The main disadvantages of such a

scheme would be that (a) it would take considerable time to

set up and therefore its benefit would be limited because of

the nearness to 1997 and (b) it could result in considerable

cash flow implications for HKG (about HK £6 billion in the first 6 years).

HKG have therefore concluded that nothing further can be

done to reassure existing civil servants about their pensions.

HMG'S INTEREST AND PROPOSAL

HMG has several reasons to be interest in this issue:

(a) HMOCS.

The Treasury feel that Hong Kong have plenty of money and

should be paying for any HMOCS sterling guarantees. An

effort by HKG to do something for all civil servants would

help with the Treasury. We are also concious that if HMG introduces a sterling safeguard for HMOCS officers, this may

cause some divisiveness with the local officers. If HKG

were to do something for them, the divisiveness would be

reduced.

JUDADG/3

CONFIDENTIAL