07:16PM SNCHK CONFIDENTIAL (852) 8455571
P.2/3
Mrs Sandra D Brown
HM Treasury
Parliament Street
London SW1P 3AG
UNITED KINGDOM
18 A Broadwood Park 38 Broadwood Road Hong Kong Tel: (852) 881-0152 Fax: (852) 890-1611
Dear Sandra,
BY FAX
reca 201
15 March 1992
Hong Kong Pensions
Thank you for your letter of 23 January. I found our discussions interesting. Since then, I have conducted further research and received comments from a number of
FARKTIS ON MY NUGLÍMÍvary report. Although my final and njega rally sad in mind
would not be possible without at least some support from the Hong Kong Government in the form of an interest rate cap or guarantee.
As you know, the terms of reference for my study did not include any requirement to look at the specific issue of HMOCS officers, nor at the British Goverment's obligations to such officers. I have given this question careful thought since our discussions. I have come to the following conclusions;
(a) My proposals, whatever form they finally take, will provide Hong Kong Government officers who believe the Hong Kong dollar will decline in value against other currencies with the option of hedging that risk. Like all hedges, if the risk does not materialise or the opposite happens, the officers subscribing to the scheme will lose money. Furthermore, any scheme could at best protect part of officers' lump sum entitlements - it could not be applied to their ongoing pension payments.
(b) If I were to put myself in the shoes of an HMOCS officer in Hong Kong, I would seek to compare the risks of the hedging option with the prospects for obtaining compensation from the British Government in the event that the sterling value of my retirement benefits from Hong Kong were to decline appreciably.
(c) I know that the British Government will not bind itself in advance to do what it has done consistently in the past. But any HMOCS officer in Hong Kong will be bound to assume that the British Govenment's consistent willingness to make good the sterling value of pensions would apply in this case as woll: I am talking about suicune who has to take a real ure decision, as opposed to analysing the finer constitutional points of this question.
(d) HMOCS officers would therefore find any scheme which might emerge
from my study totally unattractive.
No comments yet.
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