CONFIDENTIAL
OPTION G: PRIVATE SECTOR SCHEME
Officers would take out a HK dollar loan from a financial institution equivalent to the maximum commutable element of their pension. The loan would be converted to sterling and placed on deposit with the institution. The institution would hold the sterling as security and would release it to the officer on retirement when the HK dollar loan was repaid.
The institution would charge the officer a margin to protect itself from HKG/SARG defaulting on the commutable element of the pension and from currency fluctuations. There would be a further cost to the officer if the interest received on the sterling deposit was less than the interest charged on the HK dollar loan. If the costs involved were so expensive as to make the scheme unattractive, HMG could consider subsidising an element of the costs.
Correspondence with Hong Kong Bank suggest that such a scheme might be feasible. However, if the Bank did offer this facility it would be for a maximum of 10 years, ie to 2002 and the costs involved have yet to emerge.
Advantages:
(a) Reduced cost to and involvement of HMG
(a) If this facility could be offered on reasonable terms,
both HMOCS and local HK civil servants could benefit (c) If HMG provided some subsidy, HMG and officers would be
sharing the risk
Disadvantages:
(a) Would not protect the non-commutable element
(b) Would not be available to officers retiring after 2002 (c) Any HMG subsidy would be actual cost as opposed to
contingent liability
options.1.HMOCS
MVS
CONFIDENTIAL
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