Introducing HKMC Annuity Mr. Well-Planned FAQs-Answered Series!

When it comes to retirement financial planning, don't hesitate to ask questions. And if you have any question, we will do our best to help you get the answer. Mr. Well-Planned will address trending questions about the HKMC Annuity Plan and retirement financial planning in the new "Mr. Well-Planned FAQs Answered Series" section.

Netizens' FAQ: "Are the HKMC Annuity Plan, Government Annuity Scheme, and Public Annuity Scheme the same thing? Are they all government's initiatives?"

Netzines: I often come across the terms "Government Annuity Scheme" and "Public Annuity Scheme".  Is the HKMC Annuity Plan a "Government Annuity Scheme"?

Mr. Well-Planned: HKMC Annuity Limited's (HKMCA) establishment was spearheaded by the Government, it is also fully owned by the Exchange Fund¹. Therefore, some people may refer to the HKMC Annuity Plan as a "Government Annuity Scheme" or "Public Annuity Scheme".

Netzines: Is HKMCA reliable? Where do the premiums for the HKMC Annuity Plan go?

Mr. Well-Planned: HKMCA is fully owned by the Exchange Fund¹ and operates under the authorization and regulation of the Insurance Authority². The premiums received by HKMCA are managed by the Exchange Fund, with the Hong Kong Monetary Authority (HKMA) providing support to the HKMCA and the HKMC Annuity Plan through management and investment of these premiums. 

Netzines: What are the benefits of having the premiums managed by the Exchange Fund? 

Mr. Well-Planned: The HKMA aims to provides stable, long-term investment returns by managing the premiums received by HKMCA. This provides a strong foundation for the financial viability and sustainability of the HKMC Annuity Plan. HKMA's investment management expertise and experience also enables the HKMCA to provide a long-term, guaranteed, and fixed monthly annuity income³ to policyholders.

Netzines: Private insurance companies offer annuity plans too, and their returns seem attractive. How does the HKMC Annuity Plan differ from those in the market, and how should I choose?

Mr. Well-Planned: The HKMC Annuity Plan is an immediate life annuity that provides retirees and soon-to-be-retirees with an immediate and lifelong retirement income. In contrast, the private market mainly offers savings-oriented deferred annuity plans for younger, working individuals to prepare early for retirement. These two types of annuity plans can complement with each other at different life stages.

The HKMC Annuity Plan is an insurance product focused on assisting retirees and soon-to-be-retirees in managing longevity risk. When considering the HKMC Annuity Plan, one should focus on its "stable" and "lifelong" elements, rather than just the "gains" or "losses". As it is a life annuity, its actual return depends on insured's lifespan; the longer the lifespan, the higher the return. However, since we cannot predict how long we will live, no one can estimate its actual return.

In short, when choosing a retirement insurance product, you should not only evaluate the potential returns but also ensure that the protections are adequate.  We have previously discussed why returns should not be the sole selection criteria for annuity products in an earlier article, click here to refresh your memory.  

¹ HKMC Annuity Limited is a wholly-owned subsidiary of The Hong Kong Mortgage Corporation Limited which is wholly owned by the Hong Kong Special Administrative Region Government through the Exchange Fund.
² HKMC Annuity Limited is an authorized insurer under the Insurance Ordinance to carry on long term insurance business of Class A (Life and Annuity) in or from Hong Kong.
³ Guaranteed monthly annuity payment varies with the insured's age and gender at application. If partial surrender or special withdrawal has been made, the subsequent guaranteed monthly annuity payments will be reduced.

Disclaimer: The HKMC Annuity Plan is a life insurance product subject to terms and conditions and involves risks. The information above is for reference only and intended for use in Hong Kong only. It shall not be construed as an offer to sell, solicitation to purchase or provision of any products outside Hong Kong by the HKMC Annuity Limited.