POLACI
servants in the Hong Kong Government. It is also highly probable that the Chinese would be hostile to the favourable treatment of HMOCS or to the transfer of Hong Kong reserves to the UK for this purpose. (They want the HKG to put HK$15 billion aside for pensions liabilities). The FCO now therefore appreciate the need for satisfactory proposals funded by the UK Government to be rapidly put forward.
13.
It is now accepted that the previous proposal whereby HMOCS members would receive in 1997 only one fifth of compensation for the ending of their service in HMOCS and would have to continue in the service of the HKSAR Government for eight years to receive the remaining instalments should be replaced by a scheme on traditional lines, calculating compensation according to full acturial figures and with payment in five or six equal annual instalments and interest.
14. Regarding sterling safeguards, at present, the Treasury still do not accept that HMG should protect HMOCS pensioners against a fall in the value in the Hong Kong dollar (the risk of such a fall is low but the size of the contingent liability is very high) although this was done in all 42 other cases since 1954. However, the Treasury do accept that because of past Ministerial statements and practice, there is a contingent liability to take over payment of Hong Kong HMOCS pensions if the HKSAR Government defaults in paying pensions as it is committed to doing under the Joint Declaration (in Hong Kong dollars).
15. The right for HMOCS members to retire in 1997 with immediate payment of pension is still causing difficulty. Hong Kong HMOCS want this escape route but payment of pensions is a matter of Hong Kong law and practice. Given the likelihood that EXCO and Legco will oppose this and the Chinese may threaten that such pensions will not be paid after 1997, the FCO consider that no assurances can be given on this matter to HMOCS members other than a 'best endeavours' proposal to keep matters under review. Discussions with the Chinese will seek to agree arrangements such as a faster localisation programme which would presumably allow HMOCS officers prematurely retired to have immediate payment of earned pension. It is also proposed quietly to encourage the Hong Kong Government to look sympathetically at applications for early retirement.
I have drawn heavily on Mr Fifoot's recent paper on the HMOCs for much of the above.
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