TNAG-2426-FCO40-3528-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 22

CONFIDENTIAL

Option C:

HKG/SARG to pay to HMG each year the total sum payable in respect of that year's HMOCS pensions; HMG then to

pay individual pensions at a fixed rate as under Options A or B above.

POTENTIAL ANNUAL COST:

Maxima would be as under Options A and B above, depending on the exchange-rate chosen, plus some extra administration costs; but these could be offset by savings in years when the Hong Kong dollar market value is higher than the safeguard rate. The attached graphs show the effect under several possible scenarios.

Option D:

HMG to under-write only non-commutable element of pensions, paying supplements in respect of these as under Options A or

B.

POTENTIAL ANNUAL COST:

Would depend on number of officers opting for new or old pensions schemes (ie 25% or 50% commutatable) and on trigger-point chosen as at Options A and B. In the best case the potential cost could be a little more than 50% of potential costs under Options A and B.

Option E:

HMG to subsidise a private-sector scheme providing loans at fixed interest rates for up to 10 years (ie up to 2002) against the commutable portion of the pension; HMG possibly guaranteeing the loan against default by HKG/SARG.

ANNUAL COST: see attached graphs.

NOTES:

1. In order to fix in 1992 UK prices the potential

liability under Options A, B and D (ie to insulate the scheme

CONFIDENTIAL