FCR(98-99)76

For discussion
on 5 February 1999

HEAD 120 - PENSIONS
Subhead 017 Surviving spouses' and children's pensions,
widows' and orphans' pensions and increases

Members are invited to approve supplementary provision of $11.3 million under Subhead 017 Surviving spouses' and children's pensions, widows' and orphans' pensions and increases.

PROBLEM

The approved provision under the subhead is not sufficient to meet increased expenditure in 1998-99.

PROPOSAL

2. The Director of Accounting Services (DAS) requests supplementary provision of $11.3 million under Subhead 017 Surviving spouses' and children's pensions, widows' and orphans' pensions and increases.

JUSTIFICATION

3. On the basis of the actual expenditure for the nine months from April to December 1998, DAS estimates that expenditure for the whole of the financial year under Subhead 017 will exceed the approved provision by $11.3 million. A breakdown is given below -

4. The reasons for the supplementary provision are -

1. a statutory increase of 5.4% in dependant pension payments provided under the Pensions (Increase) Ordinance and the Widows and Orphans Pension (Increase) Ordinance with effect from 1 April 1998. This accounts for $10.4 million of the supplementary provision sought; and

2. a higher than expected number of new awards of dependent pension payments in the year amounting to about $2.9 million, which is partly offset by reduced requirement of $2 million in the refund of contributions under section 11 of the Widows and Orphans Pension Ordinance and section 14 of the Surviving Spouses's and Children's Pensions Ordinance. The net effect of these accounts for $0.9 million of the supplementary provision sought.

FINANCIAL IMPLICATIONS

5. If Members approve the proposal, we shall offset the supplementary provision by deleting an equivalent amount under Subhead 015 Public and judicial service pension benefits and compensation of the same Head of Expenditure. The reduced requirement under Subhead 015 is mainly due to a lower than originally anticipated number of new retirees in 1998-99.

BACKGROUND INFORMATION

6. Subhead 017 is for meeting pension payments and increases under the Surviving Spouses' and Children's Pensions Scheme and the Widows and Orphans Pension Scheme. The pension payments include -

1. the payment of pensions to surviving spouses and children of deceased contributors to either the Surviving Spouses' and Children's Pensions Scheme or the Widows and Orphans Pension Scheme, and for increases in payment for these two types of pensions under the Pensions (Increase) Ordinance and the Widows and Orphans Pension (Increase) Ordinance;

2. the refund of contributions plus interest or addition under section 14 of the Surviving Spouses' and Children's Pensions Ordinance to contributors who are never married or are widows/widowers/ divorcees, or who are not eligible for a public or judicial service pension on leaving the service; and

3. the refund of contributions plus interest under section 11 of the Widows and Orphans Pension Ordinance to contributors who, on leaving the public or judicial service, remain bachelors or widowers without children who are eligible to receive these pensions.

7. To maintain the real value of pension payments to beneficiaries under the Surviving Spouses' and Children's Pensions Scheme and the Widows and Orphans Pension Scheme, we adjust them annually on 1 April in accordance with the increase in the Consumer Price Index (A) in the previous year as stipulated in the Pensions (Increase) Ordinance and the Widows and Orphans Pension (Increase) Ordinance. The statutory increase of such payments with effect from 1 April 1998 was 5.4%. In line with normal practice, we do not make any provision for such inflation adjustments under the relevant subhead in the original Estimates but would deal with any net additional requirement that may be required during the financial year through supplementary provision.

Civil Service Bureau
January 1999