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Foreign & Commonwealth
Office
12 October 1992
HKA 233/1
London SW1A 2AH
Telephone: 071-
Mr Kevin Woodfield
HMT
Dear Kevin;
Fill
558
HONG KONG HMOCS: PRIVATE SECTOR OPTIONS AND OPTIONS PAPER
1.
553
Further to John Morris's letter of 7 October, we have now received the advice from Hong Kong on private sector options for funding the commutable part of pensions. I attach the full correspondence between the Hong Kong Government and the Hong Kong and Shanghai Bank (HSBC). (The letter of 17 August from HSBC, not attached, was in response to a suggestion from HKG which had got hold of completely the wrong end of the stick- and is not relevant to this exercise.)
2.
Two things emerge from Mr Gray's letter of 7 October:
-
The two Margolis suggestions for a purchase of receivables at a discounted rate and the Exchange rate hedging mechanism are confirmed, yet again, as non starters.
- A scheme whereby an officer approaching retirement took out a loan against the commutable part of his pension might be feasible and the costs might not be prohibitive if the external quarantor was first-rate.
3. I should be grateful for your advice on whether you would wish us to pursue this any further with HKG. We could ask HKG to inform HSBC that the external Guarantor in mind was HMG, and to work out some concrete examples of the costs and benefits. I would not take this action without your agreement, for the following reasons:
It is surely imprudent to pursue a scheme in which it will become known that HMG is guaranteeing to a bank the payment of pensions of a certain sector of the HK public service. If circumstances were to arise when HMG had to step
draft.wood.HMOCS.mvs
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