TNAG-2690-FCO40-3892-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1994 — Page 5

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THIS IS A COPY THE ORIGINAL HAS BEEN CLOSED UNDER

FOI EXEMPTION NO.....27(1)

XCX(93)54

follows closely the schemes in other HMOCS territories, the compensation cap of £120,000 at 1992 prices is below a cap of about £200,000 which could be expected by strict reference to HMOCS schemes elsewhere.

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Whilst the General Compensation Scheme will be funded entirely by HMG, payment of earned pensions in Hong Kong dollars will rest with the HKG/SARG. In this context it should be noted that payment of a smaller pension for a longer period of time is, because of inflation and annual pay adjustments, significantly cheaper than payment of a larger pension for a shorter period of time based on an actuarial life expectancy of 74. The premature retirement of some HMOCS officers in 1996/97 would therefore result in long term pensions savings to the HKG/SARG. In order that this may be done with the necessary authority, it is the intention to seek this Council's approval to treat HMG's General Compensation Scheme as an approved compensation scheme for the payment of normal HKG pensions in Hong Kong dollars to the HMOCS officers concerned.

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Nevertheless there will in another sense arguably be some cost to the HKG/SARG because, in addition to pension payments, it will be necessary to employ replacements for retired HMOCS officers. However taken together with likely pension savings, the overall effect is likely to be cost neutral.

Sterling Pension Safeguards And SPOS

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In all other HMOCS territories a Sterling pension safeguard for HMOCS officers and pensioners was introduced with a fixed safeguard rate set at the prevailing exchange rate at the time of the change of sovereignty. In the case of Hong Kong, HMG proposes a rate of HK$21:£1 in view of the fact that Hong Kong salaries and pensions are significantly higher than those in the UK and in other HMOCS territories and having regard to the UK cost of living. This is a significant departure from past practice and precedent elsewhere to the detriment of Hong Kong HMOCS officers alone.

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The Sterling safeguard would operate as a backstop. Pensions will be paid to the pensioner by the HKG/SARG in Hong Kong dollars and, if converted into £ Sterling, will be converted at the prevailing rate of exchange. If the amount received by the HMOCS pensioner falls below a £ Sterling base pension figure calculated at the prescribed safeguard rate, HMG would make up the difference.