TNAG-2690-FCO40-3892-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1994 — Page 111

HMOCS: STERLING PENSION SAFEGUARD SCHEME

Purpose of the Scheme

The purpose of the proposed sterling pension safeguard scheme

is to provide HMOCS pensioners with protection against a

serious decline in the sterling value of their pension due to

movements in the exchange rate between the Hong Kong Dollar

and Sterling.

Principal Features of the Scheme

A fundamental concern for HMG in devising a proposed sterling

pension safeguard scheme has been the need to assess

accurately the maximum contingent liability under the scheme

and to control as far as possible any increase in this

liability.

HMG has therefore decided that it would not be appropriate for

the scheme to apply to a pensioner's actual pension since HMG

does not know what their pension level will be at their date

of retirement or the amount of pension increases which will be

awarded by the HKG/SARG thereafter. Instead, HMG proposes that the safefguard should apply to a "notional" pension

calculated with reference to January 1992 pension levels

uprated in line with UK RPI.

A second fundamental feature of this scheme is the exchange

rate to be applied to the "notional" pension to determine the

sterling value of the the pension which HMG will protect.

propose that the exchange rate should be HK$21:£1.

HMG

The scheme will come into operation on or before 30 June 1997.

oper.nte.ADM

SLM