TNAG-2426-FCO40-3528-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 21

CONFIDENTIAL

HONG KONG: HM OVERSEAS CIVIL SERVICE:

I.

OPTIONS FOR HMG-FUNDED ARRANGEMENTS

A.

STERLING SAFEGUARDS FOR PENSIONS

Option A:

HMG to under-write pensions at a fixed exchange-rate, ie HMG would pay supplements if the Hong Kong dollar fell below this trigger-point. Possible exchange-rates are:

(a) HK $13.76 : £1 (likely HMOCS proposal:

the 1991 average-exchange-rate)

(b)

HK $16: £1

(FCO/ODA proposal:

the "historic" rate, but about 50% below average rate 1972-1992)

(c)

HK $22 : £1

(Treasury "compromise" proposal)

(a)

HK $30 : £1

(Treasury preferred option)

POTENTIAL ANNUAL COSTS: see graphs attached

Option B:

HMG to under-write pensions at an exchange rate related to (and lower than) that prevailing on the date of each officer's retirement or on 30 June 1997 for officers retiring

thereafter, ie HMG would pay supplements if the Hong Kong dollar fell below this trigger-point. Possible rates are:

a) 25% above prevailing or 1997 rate

(eg HK $15 £1 for officers who retired when the rate was HK $12 : £1)

(b) 33% above prevailing or 1997 rate

(c) 50% above prevailing or 1997 rate

POTENTIAL ANNUAL COSTS: see graphs attached.

CONFIDENTIAL