TNAG-2418-FCO40-3520-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 207

CONFIDENTIAL

(B) STERLING SAFEGUARDS

10.

Despite the present strength of the Hong Kong economy all Civil Servants in Hong Kong are worried about the possibility of the Hong Kong dollar declining in value: but

HMG's interest is limited to HMOCS members. The

compensation scheme outlined in Annex C will do nothing to allay these worries. There are in theory several possible ways of addressing this issue:

(a) to introduce traditional arrangements whereby officers

can retire in 1997 with full payment of pension guaranteed by the successor government;

(b) to introduce a scheme whereby officers can retire in

1997 with full payment of pension at a rate safeguarded by HMG.

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

Hong Kong dollar/sterling exchange rate drops below a certain value, HMG will make up the difference;

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

scheme at all;

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

1997.

Each of these options is explained in more detail in Annex

Their political and financial consequences are considered below.

D.

NC3AAV/4

CONFIDENTIAL