TNAG-2425-FCO40-3527-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 85

Annex A

(a)

(b)

(c)

(d)

CONFIDENTIAL #3

higher commutation of pensions;

a Provident Fund Scheme for civil servants;

an hypothecated pension fund scheme; and

partial funding of pensions.

Higher Commutation

6.

Existing

pensions

legislation permits

maximum

commutation of 50% of pension benefits under the New Pension

Scheme (NPS).

One proposal is simply to allow officers on

NPS who leave at the normal retirement age to commute a

higher percentage of their pension benefits, say 75%.

7.

If 75%

commutation is introduced with effect from

1992/93, the additional cashflow by 1997798 could amount to

about $3.9 billion (an average additional cost of $645

million p.a.). A forecast of the annual pension expenditure

for 50% and 75% commutation at 1991/92 prices is at Annex A.

8.

The major limitations of this proposal are : the

number of officers who would benefit in the next few years is

majority of staff who still have some years

retirement therefore would not see it as an

small; the vast

to serve before

effective

pension

safeguard.

It would also lead

in the short to medium term.

to an

There

additional cash outflow

G.F. 326

CONFIDENTIAL #

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