TNAG-2689-FCO40-3891-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1993 — Page 169

PENSION PROTECTION FOR HONG KONG HMOCS

Scenario (a)

PI in UK < PI in HK

but exactly offset by weaker HK$

SPOS costs for current pensioners unchanged

SPOS costs for new pensioners

Costs of safeguarding

BP + PI

Trigger Actual

HK$

HK$

26

28

22

28

16

20

Capitalised Present

Values in £ million

43

say 0

net of SPOS

14

0

51

8

65

22

Scenario

(b)

Note: 1. Costs depend on difference between trigger and actual HK$

2. Assuming that current SPOS can be used to offset safeguard supplement because trigger level weaker than exchange rate at retirement.

PI in UK = PI in HK

but HK$ becomes worthless (or nearly so) SPOS costs for current pensioners

SPOS costs for new pensioners

Costs of safeguarding

80

??

3388

net of

SPOS

200

120} +

236

156} -

324

244}

BP + PI

Trigger

HK$

26

22

16

Scenario (c)

PI in UK > PI in HK

and HK$ strengthens

SPOS costs for current pensioners

Say 48

SPOS costs for new pensioners

??

Nil costs of sterling safeguard