TNAG-2426-FCO40-3528-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 59

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 1991 average exchange-rate (HK $13.76 £1), ie HMG would pay supplements if the Hong Kong dollar fell below this level.

POTENTIAL ANNUAL COST:

If HK dollar at or above this rate: Nil

If HK dollar fell to HK $20 : £1 :

in 1998: £ 3.8 m

in 2011: £ 5.7 m

If HK dollar fell to HK $24 : £1 :

in 1998: £ 5.2 m

in 2011: £ 7.8 m

If HK dollar became worthless (or if SARG defaulted):

in 1998: £ 12.1 m

in 2011: £ 18.2 m

Option B:

HMG to under-write pensions at "historic" rate of HK $16: £1 (about 50% below average rate 1972-1992) :

POTENTIAL ANNUAL COST:

If HK dollar at or above this rate: Nil

If HK dollar fell to HK $20 : £1 :

in 1998: £ 2.1 m

in 2011: £ 3.1 m

If HK dollar fell to HK $24 :

in 1998: £ 3.5 m

in 2011: £ 5.2 m

If HK dollar became worthless (or if SARG defaulted):

in 1998: £ 10.4 m

in 2011: £ 15.6 m

CONFIDENTIAL