TNAG-2417-FCO40-3519-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 183

CONFIDENTIAL

all Civil Servants in Hong Kong are worried about the possibility of the Hong Kong dollar declining in value: but HMG's commitment is limited to HMOCS members. The compensation scheme outlined in Annex B will do nothing to allay these worries. There are essentially six possible ways of addressing this issue:

(a) to introduce traditional arrangements whereby officers

can retire in 1997 with full payment of pension at a

rate safeguarded by HMG;

(b) for HMG to accept a contingent liability that if the

Hong Kong dollar/sterling exchange rate drops below a certain value - say 16 to 1 HMG will make up the

difference;

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(c) to persuade the Hong Kong Government to pay to HMG a

capitalised sum representing HMOCS pension entitlements for service up to a given date, and for HMG then to pay

the pensions;

(d) to introduce a scheme whereby HMOCS members (and other civil servants) can take out a commercial loan against

their pension entitlements;

(e) to make a firm decision not to introduce a safeguard

scheme;

(f) to delay a decision on safeguards until much nearer

1997.

Each of these options is explained in more detail in Annex

C.

The political and financial consequences of each option

are considered below.

8.

Traditional Scheme

9.

This is what HMOCS members are seeking, but it would be very expensive and would ensure that almost all HMOCS officers would leave. As most HMOCS officers would be

likely to take advantage of the scheme, the cost could approach its maximum £150 million. It would also be hard

NFJABA/4

CONFIDENTIAL