TNAG-2427-FCO40-3529-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 182

CONFIDENTIAL

106203

19

MDLOAN

WOULD BE NECESSARY. WE RECALL THAT YOU TOLD THE CHINESE SIDE OF THE JLG ON 10 JANUARY 1991 THAT YOU FORECAST TOTAL PENSIONS EXPENDITURE IN 2004/05 OF ABOUT HKD 18.7 BILLION IN MONEY-OF-THE-DAY PRICES:

IF DEFLATED AT 9 PERCENT PER ANNUM THIS

IS UNDER HKD 5 BILLION IN 1992 PRICES. IF IT WERE REASONABLE TO GUESS THAT LUMP SUMS WOULD AMOUNT TO A MAXIMUM OF 50 PERCENT OF THE ANNUAL OUTGOINGS, THEN THE FUND WOULD NEED TO BE ABLE TO GENERATE ONLY HKD 2.5 BILLION (1992 PRICES) IN THAT YEAR IN ORDER TO COVER THE COMMUTABLE ELEMENT: AS SEEN FROM HERE THAT LOOKS MANAGEABLE. (WE APPRECIATE THAT THE PROFILE OF THE CIVIL SERVICE MEANS THAT THE PENSIONS LIABILITY WILL RISE FURTHER AFTER 2004/05, SO IT WOULD PROBABLY BE NECESSARY TO KEEP TOPPING UP THE FUND FOR SOME TIME.)

5. ON FURTHER REFLECTION WE WONDER WHETHER IT MIGHT BE BETTER FOR CONFIDENCE IF ANY SUCH TRUST FUND WERE BUILT UP WITH THE AIM (INITIALLY AT LEAST) OF COVERING THE NON-COMMUTABLE ELEMENT OF

PENSIONS.

CHALKER

YYYY

MAIN

39

DISTRIBUTION

39

.HER MAJESTY'S OVERSEAS

.CIVIL SERVICE RESTRICTED

HKD

LEGAL ADVISERS//MISS BROOKS

FED

NEWS D

RAD//MR WYE

OVERSEA PENSIONS/ODA//MR FISH

PS

PS/MR GOODLAD

PS/PUS

SIR J COLES

MR HUM

MR KERBY

RMD

NNNN

PAGE

2

CONFIDENTIAL