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Annuity Consulting Service

Qualifying Deferred Annuity Policy

The government launched the “Qualified Deferred Annuity Policy (QDAP)” to encourage citizens to save for retirement voluntarily. Each person can enjoy a tax deduction for up to 60,000 HKD per year while having capital gain in the annuity policy. The amount of tax deduction can be shared between couples, meanwhile the tax deduction cannot exceed  60,000 HKD per person. 

Each taxpayer can save up to 10,200 HKD per year based on the highest tax rate (17%) by applying for QDAP. It helps you to save more when planning for your retirement throughout the premium contribution period.

Premium contribution period and annuity period

The premium contribution period of QDAP approved by the Insurance Authority is generally 5 years or 10 years. The total annuity premium should not be less than 180,000 HKD (i.e. monthly premium of 1,500 HKD or 3,000 HKD depending on the length of premium contribution period). 

In order to plan for retirement, the insured can choose when to receive monthly annuities starting from the age of 50 or later. The annuity period can be 10 years, 15 years, 20 years , or even to the age of 100. QDAP will keep earning throughout the entire annuity period. The insured must decide the age to receive annuity and the length of annuity period before the policy is in-force. It cannot be changed once the annuity policy takes effect. 

Since the annuity is regarded as a "long-term insurance plan", if the insured chooses to surrender early or stop paying premium during the contribution period, it may lead to a significant loss. The surrender value is about 15% to 20% of the premium paid.

Return of annuity

The return of annuity is determined by guaranteed return and non-guaranteed return. Annual return of the annuity can vary from 2% to 4%, mainly determined by

  1. The length of the premium contribution period; 

  2. The age of receiving the annuity;

  3. The length of the annuity period; and

  4. The return of non-guaranteed profit. 

The guaranteed return should be disclosed in the product leaflet. Whereas the non-guaranteed return is determined by factors including the investment performance of the insurer. Since the purpose of the annuity is to pursue a stable return in the long term, a large portion of assets is allocated into fixed income assets, including real estate, national bonds, corporate bonds, etc… Meanwhile a small portion of assets is allocated into the market for capital gain, including stocks, private equity etc… 

If you wish to learn more about annuity, you could share your retirement plan with us, and we plan for your annuity together. 

What else is available for retirement planning?

At present, many people adopt premium financing to plan for their retirement. Premium financing is about purchasing a high value saving product with a low cost by borrowing from the bank, and earning the marginal interest between the return of the saving product and interest of the loan. At the same time, the principal keeps multiplying once the policy takes effect.The projected return of premium financing is more substantial, but the level of investment return is often related to its risk. The investors should estimate their condition before making investment decisions.

If you would like to learn more about Annuity, feel free to contact our professional consultant at 3575 6888!

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