GAD
Government Actuary's Department
22 Kingsway, London WC2B 6LE Telephone: 071-242 6828 ext. Fax: 071-831 6653
Mr C G Brancen,
Superannuation Division,
HM Treasury,
Parliament Street,
LONDON, SW1P 3AG
Dear Clive,
Your reference:
Our reference:
8766/6/3,S1810\col
Date:
28 July 1993
PENSION PROTECTION FOR HONG KONG HMOCS Comparison of estimated costs of HMT & FCO proposals
This letter explains the figures we faxed to you and colleagues on 23 July 1993. I am also faxing this letter to Kevin Woodfield, Richard Plumb, and Nigel Whitney.
We were asked to estimate figures for the FCO proposal of safeguarding the basic pension, separately from the SPOS protection, on the same basis as our earlier figures for safeguarding the total pension. During the course of this work, we realised that officers retiring after 1997 in conditions when the HK$ was assumed to be worthless would not be entitled to receive SPOS payments, because their basic pension would have no sterling value. However, this would leave these officers' pension increases completely unprotected, which would be unrealistic. We therefore assumed that, in these circumstances, SPOS would be modified to protect pensions increases in a similar way (or at a similar cost) to the method proposed by Treasury. The costs of this modification are included in the estimates for the FCO proposal.
These estimates are shown in column (5) of the table, which gives the capitalised present values of the two proposals, for various trigger levels, when the HK$ is assumed to be worthless from 1997. If SPOS were not modified to protect the pension increases of members retiring after 1997 in conditions when the HK$ is assumed to be worthless, the figures in column
(5) would fall.
The differences shown in column (8) are due to the different protection given to existing pensioners under the Treasury and FCO proposals. The SPOS-weighted average exchange rate at the retirements of existing pensioners is about HK$13.7. The effect of not safeguarding existing pensioners' increases (neither accrued nor future increases) at a trigger level of HK$13.76 reduces the figure of £377 million (column (2)) to £283 million (column (5)). This is the source of the revised
1
20'd
LOECOLZ
ΟΙ
FLCHOLIⱭ SNOISNAD ⱭYO WOYD
¿PT 2661-40-82
No comments yet.
Private notes are available after approval.