TNAG-2422-FCO40-3524-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 34

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152046 MDLOAN 4675

RATHER MORE AMBITIOUS PARTIAL FUNDING PROPOSAL COULD BE

ENVISAGED?

5. WE HAVE NO DETAILED SCHEME OF OUR OWN TO PROPOSE AND ARE HESITANT ABOUT CONSULTING THE TREASURY OR BANK OF ENGLAND AT THIS STAGE.

HOWEVER WE WONDER WHETHER ONE OPTION MIGHT BE FOR HKG TO ANNOUNCE ITS INTENTION, SUBJECT PERHAPS TO CERTAIN CONDITIONS, OF TRANSFERRING EACH YEAR A RISING TARGET FIGURE (STARTING

WITH SAY HKD DOLLARS 3 BILLION IN 1992/1993) FROM THE FISCAL RESERVES TO A SEPARATE TRUST FUND. THE FUND COULD BE CONSTITUTED UNDER THE ADMINISTRATION OF RESPECTED TRUSTEES. THE OBJECTIVE WOULD BE TO ACCUMULATE A FUND FROM WHICH EVENTUALLY (SOME TIME AFTER

1997) THE COMMUTABLE ELEMENT OF PENSIONS WOULD BE PAID: MEANWHILE THE TRUSTEES COULD BE EMPOWERED TO AUTHORISE TRANSFERS

TO THE GENERAL REVENUE IN RESPECT OF PENSIONS PAYMENTS IN SPECIFIED CIRCUMSTANCES (EG A DEFINED ECONOMIC/REVENUE

DOWNTURN).

6. IDEALLY ONE WOULD ALSO WISH TO INCLUDE IN THE SCHEME

ELEMENTS TO REASSURE CIVIL SERVANTS ABOUT THE EXCHANGE VALUE OF

THEIR ENTITLEMENTS. IT WOULD BE REASONABLE TO AUTHORISE THE

TRUSTEES TO INVEST THE FUND OR A LARGE PART OF IT OFFSHORE. WOULD IT ALSO BE CONCEIVABLE TO DEFINE THE TRUST OBJECTIVE AS BUILDING UP A FUND WHICH WOULD ENABLE OFFICERS TO RECEIVE THE COMMUTABLE ELEMENT OF THEIR PENSIONS EITHER IN HONG KONG DOLLARS IN US DOLLARS CONVERTED AT A FIXED RATE OF HKD 7.8: USD 1?

OR

•

7 OF COURSE NO SUCH SCHEME COULD PROVIDE COMPLETE SECURITY AND REASSURANCE: THE SIZE OF THE LOOPHOLES NECESSARY IS A MATTER FOR CONSIDERATION. BUT IF HKG STARTED TO BUILD UP A FUND AND THE CHINESE INDICATED THAT THEY SAW NO OBJECTION TO THE SARG CARRYING ON THE TASK, IT MIGHT PROVIDE A BOOST TO CONFIDENCE.

8. WE ACCEPT THAT ANY SCHEME COULD APPEAR TO BE A TACIT ADMISSION THAT CONCERN ABOUT PENSIONS WAS JUSTIFIED, BUT WE DO NOT SEE THIS AS AN OVERWHELMING OBJECTION. CONE MIGHT ARGUE

THAT ALL PENSIONS LEGISLATION IS A TACIT ADMISSION THAT GOVERNMENTS CANNOT BE TRUSTED TO HONOUR THEIR OBLIGATIONS AS EMPLOYERS UNLESS THEIR HANDS ARE TIED BY LAW.) PARTIAL FUNDING COULD BE PRESENTED PUBLICLY AS A PRUDENT WAY OF PROVIDING FOR FUTURE PENSIONS LIABILITIES, IN LINE WITH PRACTICE IN MANY OTHER DEVELOPED ECONOMIES, EG JAPAN AND SINGAPORE (WHICH, WE BELIEVE, ARE BOTH FULLY FUNDED).

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