CONFIDENTIAL
service in 1997 (Option C on page 13 of the Options Paper).
Payments would be phased over six years starting in 1997, with a
cap set at £120,000. This would ensure that highly-paid Administrative Officers did not benefit disproportionately, and would help to target the scheme on senior and middle ranking police officers which is the group of HMOCS officers we most wish to
retain. The latest calculations show that this scheme would cost
in total £48 million (less than that estimated in the officials' paper) spread over six years from 1997 to 2003.
Sterling Safeguard
10. As a result of Ministerial statements going back to the 1960s,
HMG already have a contingent liability to take over the payment of Hong Kong HMOCS pensions in the event of a default after 1997. But previous schemes have all included provisions to protect HMOCS
pensioners against a fall in the value against sterling of the currency in which their pensions are paid, after British rule
ended. I consider that we have an obligation to provide similar protection for Hong Kong HMOCS pensions by undertaking to pay supplements if the Hong Kong dollar falls in value.
11. The HMOCS Association may argue for their pensions to be
protected at the current exchange rate. But I consider that in view of the high average salaries enjoyed by HMOCS officers in Hong Kong (not the case in other territories), it would be acceptable to
set a safeguard at a rate lower than the current exchange rate. I
propose that HMG should protect serving officers' pensions at the
level of HK$16:£1. The officials' paper sets out the costs of this
and other trigger levels, under Option A. The Hong Kong dollar has
never fallen this low against sterling. It represents a 35%
discount on current rates. If the HK dollar remained above this
level, the safeguard would of course cost us nothing. A safeguard set at this level would be very unpopular with officers, but it is
one I believe we can defend as fair and reasonable, both to them
cab.maj.ADM
SLM
CONFIDENTIAL
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