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164431
MDHOAN 8822
16 FEB 1993 TOP COPY
Q
DIST?
FM FCO
TO IMMEDIATE HONG KONG
TELNO 126
OF 151644Z FEBRUARY 93
INFO IMMEDIATE PEKING, UKREP JLG HONG KONG
سم
PERSONAL FOR GOVERNOR FROM RICKETTS, HKD
HMOCS
1. The Chief Secretary has written to the Secretary of State in We response to your letter of 21 January to the Prime Minister. are faxing his letter, dated 3 February, to you.
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2. There has as yet been no reaction from No 10. We consider that the next step should be for the Secretary of State to respond to the Chief Secretary's letter with the best and most political arguments that we can muster (largely for No 10's benefit). We are faxing a draft to you, and would be grateful for any comments or additional arguments which may strengthen our
case.
3. The experts here have meanwhile been doing more work on how the sterling safeguard scheme will operate. Your advisers may wish to have the following details. The essential feature of this scheme is that the safeguard will apply to a notional pension calculated with reference to 1992 salary/pension levels uprated in line with UK RPI, and not to an officer's actual pension. This is a very important point given that by 1997, when a significant number of the officers will retire, their actual pensions will almost certainly be far higher than their notional pensions on which the safeguard will be based (this of course assumes that Hong Kong pension increases over the next 4 years will be greater than UK RPI). What this means in practice is that the exchange rate would have to fall to well below 16:1 before officers received any supplements.
4. We believe that the mechanics of the safeguard scheme, based
a safeguard of 16:1, should operate as follows:
on
identify the officer's grade upon retirement
calculate the pension for that grade as at 1 January 1992
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