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compensation due to them see paras 12, 13 and 14 of the draft Schomo. Is there any milçaqo in asking the Chinese to pay for or reimburse HMG the cost of the balance of compensation navable to officers under para 12 of the draft Scheme?
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18. Payment of interest. Interest should be payable on outstanding balances of compensation whether or not the officer chooses to retire service before 30 June 1997. There is no reason why we should depart from past practice since we are in effect holding back an officer's lump sum calculated at the appointed day. Interest at the rate of 5% per year based on the previously assessed balance of compensation would be paid at the time of the next instalment. Where a recalculation of all officer's entitlement to compensation is made on the anniversary of the appointed day interest would become payable on reassessed balance from the date when the recalculation is made, ie the date the next instalment is due.
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19. Where a recalculation is made at the time of an officer's retirement interest would be paid at the time the next instalment of compensation is due, le
20.
(a) 5% a year on the balance of compensation due at the
previous anniversary of the appointed day for the period between the anniversary of the appointed day and the date of retirement;
(b) Officers who retire in the circumstances described in paras
12 or 13 of the Scheme, or indeed die while in service, will be paid interest calculated under (a) at the same time the final payment of compensation is made.
(c) Officers who retire voluntary will also be entitled to 5% a year on the balance of compensation due on recalculation at the date of retirement from the date of retirement Lo the next anniversary of the appointed day. This of course implics that the intercct calculated under (a) and (0) would not be paid until the time the next instalment of compensation is due.
Interest on delayed payments. In the event of the first instalment not being paid to an officer within three months of his appointed day the Scheme should provide for the payment of interest at the rate of 5% a year on the basis of each completed month of delay. Similarly, interest would be paid on the same basis if any subsequent instalment is not paid within one month of the due date.
21. Application of RPI. In para 11 above I said that we would not wish to take account of any further movements in RFI after the appointed day. I am not sure if this policy is sustainable or indeed a policy which we would wish to pursue. As you know RPI is used in the formula to bring HK Salaries (and the resulting compensation) up to acceptable levels at the appointed day. Under earlier Schemes we would have used the actual HK salaries at 1996 or 1997. The RPI is therefore a substitute salary increase and all reason suggests that we should continue to apply RPI (and indeed the CAP) in the formula for calculating the instalments
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