CONFIDENTIAL
ANNEX D(1)
STERLING SAFEGUARDS
Traditional Arrangements
1.
A traditional scheme would commit the Hong Kong Special Administrative Region (SAR) Government:
a) to provide early payment of earned pension to any HMOCS officers who wished to retire in 1997; and
b) to guarantee the sterling value of all HMOCS officers' pensions.
2. In other Dependent Territories the White Paper commitments to safeguarding HMOCS officers' pensions were normally fulfilled by HMG's concluding a Public Officers' Agreement (POA) with the successor Government just before independence. The safeguards in these POAS included the right to retirement at independence with early payment of pension and an undertaking to pay all HMOCS pensions at a fixed rate of exchange in sterling (the fixed rate normally being the one effective when the POA entered into force). (In practice however HMG subsequently took over the financing of the sterling safeguard in almost all Dependent Territories: see Annex D(2)).
3. The Joint Declaration on Hong Kong incorporated some of the pensions safeguards usually found in POAS, but it did not provide sterling safeguards for pension values or the opportunity to retire in 1997 with early payment of pension.
4. In 1985 OD (K) agreed that we should aim to negotiate safeguards for the sterling value of pensions earned by HMOCS members in Hong Kong up to 1997, with the cost being met by the SAR Government; and that further study should be given to the nature and timing of such safeguards, in consultation with the HKG.
5. Since payments would have to be met by the SAR Government and since they would constitue a major change to the pensions arrangements existing when the Joint Declaration was signed in 1984, we would need to obtain the agreement of the Chinese to make these special arrangements for HMOCS members. Consultations on the question would be conducted in the Joint Liaison Group.
6. The level of any sterling safeguard would need to be carefully considered. The average exchange rate over the last 20 years has been HK$11.5 to fl. Over the last 30 years it has been 12.8 to 1. It is currently about 14 to 1. But civil servants in Hong Kong generally do well by UK civil service standards, and it would be very difficult to set a rate more favourable than the current rate. A rate of 16 to 1 could be defensible both in Hong Kong and in Parliament: and the Hong Kong dollar has never sunk below 16 to 1.
NC3AAB
CONFIDENTIAL
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