DEFENSIVE POINTS
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WHY SHOULD HMG PAY?
HMG's duty is to ensure that suitable arrangements are made. Our starting point historically was that the local government should pay for the cost (though from the outset we paid 50% in almost all cases). Where the local government could not afford to pay or refused to do so, we stepped in. HKG is unable to pay, so we must do so.
CHINESE INTEREST IN CAPITALISATION OF HMOCS PENSIONS?
No. The Chinese have a completely different idea: they want HKG to "set aside" HK$15 billion from the reserves to help meet post-1997 pensions liabilities, because they are suspicious that HKG will otherwise squander the reserves or siphon off a part for HMG. The idea of capitalising expatriate pension entitlements and handing over the money to HMG would stimulate their worst fears. It could lead them to demand that HMG/HKG pay over to them extra funds to meet the accumulated pre-1997 pension entitlement of the 180,000 or so civil servants. They could threaten that the SARG would otherwise not pay these pensions.
WHY NOT A PRIVATE SCHEME TO SAFEGUARD PENSIONS?
- We spent a lot of time looking at the possibilities here. I note that the Bank of England has advised that such a scheme may be feasible. However, Hong Kong Bank has stated that they do not believe it possible to provide an effective scheme without the benefit of an acceptable external guarantee. if a scheme could be put in place, it would only cover a relatively short period and would not meet the needs of many officers. I am satisfied that this option has been fully
explored.
HONG KONG SALARIES INFLATED?
Even
- True that Hong Kong civil service salaries are high by UK standards, but Hong Kong has to pay the rate for the job and compete with the private sector. However, we have taken this factor into account in proposing a cap on compensation, and a sterling safeguard trigger which is 35% lower than the current exchange rate.
OBJECTIVE OF COMPENSATION SCHEME?
- Our initial proposal designed to provide a measure of compensation and incentive to encourage officers to serve after 1997. Consultations with the Association made clear that many officers do not want to serve the SARG, and that the scheme would effectively force them to do so. If we pursue the original scheme many officers may leave before 1997.
We cannot now honourably expect to offer less than a traditional compensation scheme, and in so doing to encourage officers to stay at least until 1997.
def.pnts.ADM
SLM
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