For discussion
FCR(96-97)111
on 28 February 1997

ITEM FOR FINANCE COMMITTEE

HEAD 120 - PENSIONS
Subhead 015 Public and judicial service pension benefits and compensation

Members are invited to approve supplementary provision of $51 million under Subhead 015 Public and judicial service pension benefits and compensation.

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PROBLEM
PROPOSAL
JUSTIFICATION
FINANCIAL IMPLICATIONS
BACKGROUND INFORMATION
Head 120 - Pensions - Subhead 015

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PROBLEM

The approved provision of Subhead 015 under Head 120 Pensions is not sufficient to meet increased expenditure in 1996-97.

PROPOSAL

2. The Director of Accounting Services (DAS) proposes supplementary provision of $51 million under Subhead 015 Public and judicial service pension benefits and compensation.

JUSTIFICATION

3. On the basis of the actual expenditure for the ten months from April 1996 to January 1997, DAS estimates that expenditure for the whole of the financial year under Subhead 015 will exceed the approved provision by $51 million, calculated as follows -

4. The shortfall under Subhead 015 is due to increased expenditure on pension payments as a result of -

5. The additional requirement of $610 million is partly offset by an over-estimate of $559 million in the commuted pension gratuities and annual pensions. As a result, we are seeking a supplementary provision of $51 million.

FINANCIAL IMPLICATIONS

6. If Members approve the proposal, we shall offset supplementary provision of $51 million under Subhead 015 by deleting an equivalent amount under Head 106 Miscellaneous Services Subhead 251 Additional commitments.

BACKGROUND INFORMATION

7. Subhead 015 is for meeting various pension payments under the relevant legislation. A full description of the ambit of the subhead as contained in the Estimates is reproduced at the Enclosure. Pension payments to officers retiring in the year are based on the prevailing civil service pay. To maintain the real value of payments to existing pensioners, we adjust them annually on 1 April in accordance with the increase in the Consumer Price Index (A) in the previous year. In line with normal practice, we do not allow for these inflation-related 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.

8. By virtue of the Pensions (Increase) Ordinance, pensioners receive an increase of 7.9% to their pensions with effect from 1 April 1996. This is in line with the increase in the Consumer Price Index (A) in the previous year.

9. In July 1996, Members approved an increase of about 7.7% in the salaries of civil servants with effect from 1 April 1996.

Civil Service Branch
February 1997
(Revised on 27 February 1997)

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Enclosure to FCR(96-97)111

Head 120 - Pensions
Subhead 015

Subhead 015 Public and judicial service pension benefits and compensation is for the payment of -

(a) pensions, gratuities and other allowances under the Pensions Ordinance, the Pension Benefits Ordinance and the Pension Benefits (Judicial Officers) Ordinance to current pensioners and officers who will retire in the Estimate year, and increases in such pensions under the Pensions (Increase) Ordinance;

(b) pensions under the Police Force Ordinance, 1932 and Police Officers (Special Cases) Pensions Ordinance, 1954 to police officers who retired on or before 1 January 1947, and increases in such pensions under the Pensions (Increase) Ordinance;

(c) pensions to agreement officers, or dependant pensions to dependants of deceased agreement officers, on account of injuries received whilst on duty, and increases in such pensions; and

(d) compensation under the Limited Compensation Scheme.

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