SECRET
HKA 233/1
SECRET
FM HONG KONG
TO IMMEDIATE FCO
TELNO 1647
OF 181055Z JUNE 92
INFO PRIORITY PEKING, UKREP JLG HONG KONG
405
126657
MDHIAN 8425
TOP COPY Q DIST?
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b= Chare a tera
time
0414
PERSONAL FOR RICKETTS, HKD.
PEKING:
FROM GOVERNOR.
PERSONAL FOR AMBASSADOR
UKREP JLG: PERSONAL FOR GALSWORTHY
(395
YOUR TELNO 957: PUBLIC SERVICE PENSIONS FUNDING.
1.
IN OUR EFFORTS TO MEET STAFF CONCERNS OVER THE SECURITY OF PENSIONS, WE HAVE CONSIDERED FOUR OPTIONS: A ONE YEAR ROLL- FORWARD FUND, INCREASED COMMUTATION OF PENSIONS INTO LUMP SUM GRATUITIES, A PROVIDENT FUND SCHEME FOR FUTURE SERVICE AND THE SO-CALLED HYPOTHECATED PENSION FUND (MARGOLIS) SCHEME. AS THINGS STAND, WE DO NOT SEE MUCH CHANCE OF BEING ABLE TO PROCEED WITH ANY OF THESE OPTIONS.
2.
THE CHINESE SUGGESTED A DOLLARS 15 BILLION PENSION RESERVE FUND DURING THE TALKS LEADING TO THE AIRPORT MEMORANDUM OF UNDERSTANDING. WE REJECTED THIS PROPOSAL ON THE GROUNDS THAT IT WOULD CREATE SEVERE FINANCIAL DIFFICULTIES AND THAT IT WOULD BE POLITICALLY DIFFICULT TO JUSTIFY SETTING ASIDE SUCH A LARGE AMOUNT, WHICH WOULD NEVER BE NEEDED, FOR A SMALL SECTION OF THE COMMUNITY. THESE OBJECTIONS REMAIN VALID. WE HAVE THEREFORE NOT OURSELVES CONSIDERED A MORE AMBITIOUS PARTIAL FUNDING PROPOSAL.
3.
HOWEVER, WE ARE WORKING ON A LEGISLATIVE AMENDMENT WHICH WOULD LINK PENSION INCREASES TO THE CONSUMER PRICE INDEX. THIS IS OUR CURRENT PRACTICE, BUT THE AMENDMENT WOULD ADD CERTAINTY AND BE WELCOMED BY STAFF.
k =
WE SHALL BRIEF COX (HKD) IN MORE DETAIL WHEN HE VISITS HONG KONG ON 19 JUNE, AND WILL GO OVER WITH HIM OUR CONCLUSIONS ON THE FOUR OPTIONS IN PARA 1 ABOVE.
WILSON
YYYY
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