CONFIDENTIAL
OPTION E: HMG PAYS PENSION AT FIXED RATE FROM FUNDS PROVIDED BY HKG/SARG
HKG/SARG to pay to HMG each year the total sum payable in respect of that year's HMOCS pensions; HMG then to pay individual pensions at a fixed rate as under Options A, C or D above.
POTENTIAL ANNUAL COST
Maxima would be as under Options A, C and D above, depending on the exchange-rate chosen, plus some extra administration costs; but these could be offset by savings in years when the Hong Kong dollar market value is higher than the safeguard rate. The attached graph and table show the effect under several possible scenarios.
Advantages:
(a) The officer would share the risk with HMG
(b) Likely to be inflow of funds to HMG which would help
cover any liability in later years.
(c) Some officers may not opt for the scheme, thus reducing
HMG's contingent liability
(d) officers would have certainty about the sterling value of
their pension
Disadvantages:
(a) Profit making by HMG has never been a feature of other
safeguard schemes. This would be difficult to present and would be criticised
(b) If the HK dollar became worthless, HMG would have to
assist those who had not participated in the scheme
(c) SARG payment of pension costs direct to HMG might increase temptation to default or at least failure to pay HMG any 'profit' element
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options.1.HMOCS
TVS
CONFIDENTIAL
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