TNAG-2690-FCO40-3892-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1994 — Page 129

If yo Whitney,

Hong Kong Dept

1.2-

314

HMA 233/1

Reference

From:

GJAL 1994

D TROTTER

(Ext.3444)

Pate:

2 October

93

HONG KONG: ARRANGEMENTS FOR MEMBERS OF

HER MAJESTY'S OVERSEAS CIVIL SERVICE (HMOCS)

Thank you for sight of the draft brief for the Secretary of State's meeting with the Chief Secretary about Hong Kong HMOCS. I understand the meeting has now been moved to 27 October.

2. I am generally content with the brief, except for its reference to an exchange rate of HK$22:£1 providing parity between UK and Hong Kong civil servants' salary levels. This may be tiue in average terms, but there would be many heavy losers, notably the Police Gradés. Un the basis of a serriement at Zyi Their notional salaries and consequently the underpinning

of their pensions would be 20-30% below UK levels. I attach a copy of the relevant page from the 1992 comparability exercise which shows the exchange rates necessary, at each-grade 46 sahleva-salary-parity.. There is little to choose between the accrual rates of HK and UK Police pensions to affect the validity of this comparison if anything the UK scheme provides slightly more favourable benefits.

3. In the circumstances I suggest an addition to

to the final sentence of Section 2 of the background note along the lines of:

4.

We have always argued that the principle of parity is without precedent in HMOCS arrangements, but in any case 22.1 would only achieve parity on average.

There would

be many heavy losers, norably rhe Police Grades whose pensions would be protected at levels some 25% below those of their UK counterparts. A safeguard of about 16:1 would be needed to achieve parity in their case.

Understandably, there is no mention in the brief about the calculations and comparisons being based on HK salary levels at 1.1.92 increased in line with UK inflation. However I trust that all the relevant parties (especially the Governor) remain aware of this. I mention it only because since 1.1.92 HK salaries have moved some 10% ahead of those in the UK. Thus, from an HMOCS point of view, the safeguard, exchange rates now being, considered of 16:1, 22:1 or 26:1 would be equivalent to 18:1, 24:1 or 29:1 respectively based on current salaries; and these at a time when the current exchange rate is 12:1, not the 14:1 or thereabouts at the time this debate began.

Frotter

Javid

D TROTTER

Overseas Pensions Department Enc.