Mr. Well-Planned FAQs-Answered Series: HKMC Annuity vs Silver Bond

Mr. Well-Planned has been inundated with messages from friends asking about the new round of Silver Bond issuance. They are asking whether it is worth subscribing to, and whether to choose the HKMC Annuity Plan or Silver Bonds. Mr. Wong, known for being a fast runner and always in a hurry, immediately sought Mr. Well-Planned's advice after reading the news.

Mr. Wong: Both the HKMC Annuity Plan and Silver Bonds are designed for senior citizens like us, but what are their differences?

Mr. Well-Planned: Although the HKMC Annuity Plan and Silver Bonds are both intended for Hong Kong residents aged 60 or above, they are entirely different products with distinct purposes.

Firstly, the HKMC Annuity Plan is an insurance product underwritten by HKMC Annuity Limited, which is regulated by the Insurance Authority. It helps senior citizens convert their savings into a stable, lifetime monthly annuity income¹ that is unaffected by market fluctuations, addressing the "longevity risk." As you know, it is not uncommon for people in Hong Kong to live into their eighties or nineties² nowadays. Without a lifelong income, savings could eventually deplete. The HKMC Annuity Plan is a life annuity designed to meet the long-term needs of retirees, so its annuity income is paid for life.

On the other hand, the Silver Bond is a bond, meaning when you subscribe, you are lending money to the issuer, which, in this case, it is the Hong Kong Government. The Silver Bond is an inflation-linked bond that pays interest semi-annually, and it is primarily designed to address the "inflation risk." Note that the Silver Bond is mainly for short-term use (they usually have a three-year maturity term) and it is issued irregularly. Also, there is a cap on issuance size, meaning subscriptions may not always be fully allocated³.

Mr. Wong: So should I choose the HKMC Annuity Plan or Silver Bonds?

Mr. Well-Planned: There's a saying among youngsters: "Kids choose, adults want it all." Considering we are already senior citizens, why force yourself to choose just one?

Both the HKMC Annuity Plan and the Silver Bond are government initiatives designed to assist citizens in retirement financial planning. Each has unique features and strengths that can complement each other, so you can consider choosing both, depending on your abilities and needs.

Let me remind you again, the golden rule of retirement financial planning is balance. Each retirement product serves different purposes and fits different needs, so you can customise your financial portfolio according to your own needs, without having to "go all-in" on just one option.

¹ 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.
² According to the Hong Kong Census and Statistics Department's website, the average life expectancy for 60-year-old males in Hong Kong is 86 years, while for 60-year-old females, it is 90 years (Browsing date: July 2024).
³ For details on Silver Bonds, please refer to the Government Bonds website: https://www.hkgb.gov.hk/en/retail/Silver_Key.html.

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.