TNAG-2687-FCO40-3889-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1993 — Page 92

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Dear Nigel

HONG KONG: STERLING SAFEGUARD AND RULES

Thank you for letting me have sight of Paul Fifoot's latest draft of the Sterling Safeguard Scheme.

The

2. The draft is well written but it still requizes a lot of work to bring it through to something resembling what we have in mind. The first point to bear in mind is

is that we have (at least internally) moved away from the idea of protecting the Hong Kong basic pension at the rate of £1:HK$16 to a position where we wish to create a new "benchmark" pension which Paul calls the "notional Hong Kong pension". The preamble to the Scheme where it refers to a trigger exchange ïale is therefore wrong. Scheme will be triggered on an individual basis where the officer's (or dependant's) pension falls below the benchmark. The exchange rate (or rates if we go down the road of having a number of comparator rates) is only one component of the calculation. 3. The second point is the need to provide an arrangement which will be fair to all pensioners whether they have retired before or after the operative date of the Scheme. In order to do this we need to bring the pensions of retired officers up to 1991/1992 levels even if this results in early liablity. I understand that Dave Fish has cleared this with Mr Woodfield (HMT).

4. Commencement of Scheme. Although there may be some slippage we should aim for the beginning of the next finnacial year as the operative date. This, of course, would be subject to the legislative process, and indeed the computer and procedural changes needed to introduce a scheme like this.

5. Definitions. We think the definition of those who are eligible to benefit under the Scheme is about right, ie for those officers still serving in Hong Kong they must have become members of HMOCS by 1 May 1993; for those officers who have retired they must have been members of HMOCS during their service in Hong Kong and in both cases eligible to receive a pension from Hong long or the SAR Government in respect of that service. The dependant's of former members of HMOCS would also be eligible for topping-up under the Scheme.

6. We do not, however, see the need to refer to the Compensation