CONFIDENTIAL
(d) we should discard the non-asterisked options, ie all options should be presented in 1992 UK prices (no re-calculation required: in practice we would safeguard a notional pension derived from the 1992 pension payable for the retirement rank point etc, converted into sterling at the average 1991 exchange-rate)
(e) Option C (trigger-rate of HK$24:£1) should be re-calculated at the rate of HK $22 to £1. (ACTION: GAD/ODA) (The Treasury believed that such a rate would eliminate the differential between public sector pay in Hong Kong and in the UK. They undertook to provide their working figures. (ACTION: HMT))
(f) Option E (use of exchange-rate at date of retirement) should be recast so that the trigger-point for HMG to intervene would be set 25%, 33% and 50% above the
exchange-rate on date of retirement. Mr Cox suggested that for officers retiring after 1 July 1997 it would be necessary to take the rate on 30 June 1997 as base-point: otherwise this option would give them no significant safeguard for the future. It was noted that this option would be particularly difficult to cost, given the uncertainties of future exchange-rates at different times, but GAD agreed to attempt some calculations on the basis of ODA data concerning existing pensioners (ACTION: GAD/ODA).
(g) Option F (safeguarding only the non-commutable element) would not be defensible as a pensions safeguard option and should be dropped (except perhaps as a complement to a private-sector scheme safeguarding the commutable element for a few years?) Mr Rayson suggested that one might envisage setting different trigger-points for the commutable and non-commutable elements of pension. He argued that if a safeguard were agreed it would be in the taxpayer's interest that those benefiting should commute the maximum possible. Cox said that this was not certain it would depend on the timing of any fall in the value of the HK dollar; but he agreed that one could consider requiring HMOCS officers to commute their maximum entitlement as a provision of the safeguard scheme. Mr Rayson agreed that we could not dictate officers' choice as between old and new pensions schemes.
Mr
(h) Option G (HKG/SARG to pay pensions to HMG each year and HMG to pay individuals at the fixed rate) should be calculated in graph form for fixed rates of HK$16:£1, HK$22:£1 and HK30: £1 and showing how HMG might gain if the Hong Kong dollar appreciated to HK$8: £1, HK$12:£1 and HK$14:£1 (ACTION: GAD)
(i) Options H and I (long-term private sector schemes) should be mentioned (with comments about their technical, feasibility).
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