TNAG-2685-FCO40-3886-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1993 — Page 82

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OVERSEAS DEV ADM

раж

pu off not alread

Mr NC G Whitney

Hong Kong Department/FCO

NO.016

002

34-

HKA 233/1

Reference

From: R J PLUMB

NY (Ext 3514 AH507)

w

09 FEB 199 Date: 4 February 1993

DESK OFF

DEX

PA

HONG KONG HMOCS OFFICERS

1.

M

STERLING PENSTON SAFEGUARDA

When we met in your office on 27 January, Alan McDonald and I agreed to have a more detailed look at each of the clauses set out in Paul Fifoot's suggested outline for a Sterling Safeguard Scheme for Hong Kong HMOCS Officers, to see whether they met our precise requirements. In view of other work commitments, it will probably be another couple of weeks or so before we are in а position to address all of the complex issues involved.

But, == Paul is away from the office until the end of this month, I think you will agree that there is no immediate urgency attaching to this exercise.

2. My main purpose in writing is to highlight one of the major points which came out of the meeting. That le; that there is a very fundamental difference between our original proposal for a Sterling Safeguard which i a

sunported in principle hv the Governor) and the Scheme outlined in the Chief Secretary's letter of 15 January 1993 to the Secretary of State, which extends beyond the simple question of which rate of exchange it is most appropriate to use (ie HK$16, 18 or 26 to £1).

3.

Our Scheme is designed to provide guaranteed protection of the overseas entitlement if the Sterling value of the "notional" Hong Kong pension (taken in isolation) should fall below a certain level whether it be HK$16 to fl, as favoured by the Governor, or HK$26 to £l which Treasury are insisting upon.

The Chief Secretary's counter proposals are based on the premise that HMG's "safeguard supplement" will only come into play when the officer's total pensionable income from all Colonial Service sources including the UK index

UK index linked topping up supplement (SPOS) taken into account.

4.

Given the projected inflation rates for UK and Hong Kong public service salaries between 1992 (which effectively determines the level of the "notional" pension) and 1997 (the date from which the majority of contingent pensions will come on stream), the HK$ will, in practice, have to fall to far lower levels than 26:£1 before any "safeguard" supplement is paid. It is difficult to see how those who are scheduled to retire before, or shortly after 1997, (where the actual ("inflated"} value of the pension and exchange rate at retirement determine the base point for indexation) could ever qualify under the Scheme except in the most extreme circumstances, since the level of SPOS

SPOS payable would quickly exceed the "notional" Hong Kong pension value. For those who were not of an age to qualify for SPOS, the value of the "full" pension at retirement, plus any subsequently awarded local increases would have to fall, in Sterling terms, to a lower level than the (much?) reduced "notional" pension converted HK$26 to £1.

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