TNAG-2428-FCO40-3530-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 23

TREASURY AEF DIV

MEH1327

CONFIDENTIAL

INTERNATIONAL DIVISIONS

Telephone:

071-601 4265

Facsimile: 071-601 5561

Kevin Woodfield Esq

HM Treasury

Treasury Chambers Parliament Street London SW1P 3AG

Dear Kevin,

HONG KONG HMOCS: PRIVATE SECTOR OPTIONS

P.27

BANK OF ENGLAND Threadneedle Street

London EC2R 8AH

4 November 1992

Thank you for your letter of 20 October and its attachments. sorry it has taken a little time to respond.

I am

I assume that I am being asked for views only on the (fairly limited) proposal designed to afford retiring HMOCS officers a degree of exchange rate protection for the commutable portion of their HK$-denominated pensions against a fall in the value of the HK$ against sterling. What we are not looking at here is protection against default in the payment of pensions by HKG or

HKSARG.

The proposal is aimed at covering those officers retiring between, in effect, now and 2002. I presume that the year 2002 applies because after that date there are no more HMOCS officers left to retire (or is it determined by the likely 5-year maximum life of the proposed arrangement?). What happens to the sterling value of the HK$ pensions of existing pensioners is also left to one side here. All this rests on the general assumption, which I trust is correct, that the pension liability rests with HKG and subsequently with HKSARG and that any commutable portion (and indeed any

additional subsequent payment flows

here) is payable in HK$.

though they are not covered