CONFIDENTIAL
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HKA 233/1
CONFIDENTIAL
FM FCO
TO PRIORITY HONG KONG
TELNO 1190
OF 061748Z AUG 92
INFO ROUTINE PEKING, UKREP JLG HONG KONG
486
106203
MDLOAN 3019
TOP COPY Q DIST?
PUBLIC SERVICE PENSIONS FUNDING
YOUR TELNO 2056:
1.
MANY THANKS.
2. WE SHALL LOOK AGAIN AT THE 1984 AND 1986 STUDIES WHICH ODA/GOVERNMENT ACTUARY'S DEPARTMENT (GAD) MADE OF HONG KONG'S PENSIONS LIABILITIES. HOWEVER YOU MAY WISH TO CONSIDER WHETHER IT WOULD BE DESIRABLE FOR YOU TO HAVE AN UP TO DATE ACTUARIAL VALUATION OF YOUR PENSIONS LIABILITIES IN THE YEARS AFTER 1997. (PARTICULARLY SINCE, AS UKREP JLG TELNO 336 INDICATES, THE CHINESE REMAIN INTERESTED IN THE SUBJECT OF PENSIONS SAFEGUARDS). SINCE YOU DO NOT HAVE THE NECESSARY EXPERTISE LOCALLY, WOULD YOU LIKE TO COMMISSION GAD TO PRODUCE THE FIGURES? WE THINK THAT THEY WOULD BE HAPPY TO DO THE WORK, IF YOU HAVE FUNDS AVAILABLE TO PAY FOR IT. (TO AVOID ANY CONFUSION WITH THE UNRESOLVED HMOCS BUSINESS, IT WOULD BE BEST NOT/NOT TO MENTION THE PARTIAL FUNDING PROPOSAL IN COMMISSIONING SUCH WORK FROM GAD: WITHIN WHITEHALL ONLY FCO AND ODA ARE SEEING TELEGRAMS IN THIS SERIES.)
3. WE AGREE THAT AN ANNUAL SET-ASIDE OF HKD 7.5 BILLION LOOKS AN UNATTRACTIVE PROPOSITION. HOWEVER IN PRODUCING THE 1984 CALCULATION WE WONDER WHAT ANNUAL INCOME THE ODA ASSUMED THAT THE FUNDS SET ASIDE WOULD GENERATE, OR WHETHER THEY SIMPLY CALCULATE THE SIZE OF THE FUND THAT WOULD ULTIMATELY BE REQUIRED AND DIVIDED IT BY 13. MOREOVER YOU WILL RECALL THAT WE ENVISAGED THE ANNUAL SET-ASIDE INCREASING IN REAL TERMS EACH YEAR. (IF THE CALCULATIONS DO NOT ALLOW FOR RE-INVESTMENT OF INCOME WHILE THE FUND IS BEING BUILT UP, A SET-ASIDE OF HKD 3.5 BILLION IN THE FIRST YEAR, RISING EACH YEAR BY 10 PER CENT, WOULD AMOUNT OVER 15 YEARS TO ABOUT THE SAME AS 15 ANNUAL SET-ASIDES OF HKD 7.5 BILLION. AND THE ANNUAL INCREASE IN THE AMOUNT SET ASIDE COULD BE LESS IF THE CHINESE WERE TO AGREE THAT HKG'S PRE-1997 CONTRIBUTIONS COULD BE MATCHED BY AN INJECTION FROM THE LAND FUND
IN 1997/98.)
IN ANY CASE WE WERE RATHER SURPRISED TO LEARN THAT EXTRAPOLATION FROM THE 1984 FIGURES SUGGESTS THAT SO LARGE A FUND
4.
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CONFIDENTIAL
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