TNAG-2426-FCO40-3528-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 45

aef1.1g/kw/2.2.3

Mrs Brown

HMT

Mr Rayson

CONFIDENTIAL

Mr Brancen

Mr Woodfield

Mr Stone

FCO

Mr Fish

ODA

Mr Raikes

Bank of England

Mr Dobney

Mr Norris

Barings

Mr Best

Carbon.

MEETING WITH BARINGS ON HONG KONG HMOCS

PENSIONS SAFEGUARD ON 28 FEBRUARY 1992

Mrs Brown invited Mr Norris to comment on the possibilities for a

private sector solution to a sterling safeguard for the value of HK HMOCS pensions. Mrs Norris said that a private sector scheme

could only involve a relatively small group, such as HMOCS;

including Hong Kong nationals would put the scale of monies involved beyond the private sector. Secondly, someone would need to take a view of the exchange rate risk following the handover to

China. If the government were to do SO by discounting an

actuarially assessed capital sum now and putting it across the exchanges, it would be relatively simple to purchase an insurance plan or pension. If the government were not prepared to do this, it would be difficult to see what combination of private sector

parties would assume the risks involved. He outlined the risks

as:

actuarial; which could be increased or reduced;

default risk: the post 1997 certainty of pension plans;

assumptions used in the

discount rate to reflect

inferred earnings rates in the HK economy post 1997.

Someone with a presence in HK would be best placed to appraise the

Even so, it was not clear whether there would be

sufficient interest in HK to price such risks.

risks.

CONFIDENTIAL

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