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Busting 5 myths in HKMC Annuity Plan

Annuity Classroom

2023-07-05

Prepare early for a better outcome – this wisdom also applies to retirement financial planning. That's why it's crucial to choose the right financial products that best suit your ideal retirement lifestyle promptly. We know that you may be interested in the HKMC Annuity Plan1, but may also have some questions. Let's debunk the five myths about the HKMC Annuity Plan. 

Myth 1: Will my eligibility for Old Age Living Allowance (OALA)2 be affected if I subscribe to the HKMC Annuity Plan?

Those approaching retirement might have considered applying for the OALA of the HKSAR Government. The following information and scenarios would help you better understand whether the relevant items under the HKMC Annuity Plan would be counted in the financial test of the OALA. 

Asset and Income Limits for the OALA

Applicant

Total asset value (HK$)

Total income per month (HK$)

Married couple

$608,000

$16,330

Single person

$401,000

$10,710

Which items under the HKMC Annuity Plan will be counted in the financial test of the OALA?

Will it be counted?

Total asset value

Total income per month

No

One-off lump-sum premium payment

Guaranteed cash value of the policy

Yes

Surrender value

Monthly annuity income

Example: Getting paid monthly from both the HKMC Annuity Plan and the OALA to boost monthly income

The HKMC Annuity Plan applicant: Mr. Kim (single person)
Age: 65 years old
Asset: HK$1 million
Assuming Mr. Kim has a saving of HK$1 million and no other income4. After subscribing to the HKMC Annuity plan with HK$650,000, Mr. Kim would meet the asset and income limits of the OALA, and his total monthly income would increase as well:

 

Before subscription

After subscription

Total asset value according to the definition of assets under the OALA (HK$)

$1,000,000

$350,000

(After subscribing to the HKMC Annuity Plan with $650,000)

Monthly income according to the definition of income under the OALA(HK$)

$0

(Assuming no other income)

$3,770

(Monthly annuity income) 

Does it meet the asset and income limits of the OALA?

(The total asset value exceeds the limit)

(Both the total asset value and the monthly income DO NOT exceed the limits)

Monthly income (HK$)

$0

(Annuity income $0 + the OALA $0) 

$7,965

(Monthly annuity income $3,770 + the OALA $4,195)

 (Total annual income: $95,580)

1 The product subject to terms and conditions and involves risks. 
2 Information as of 1 February 2024 and for reference only. For the details, the eligibility criteria, and the latest news of the OALA, please contact the relevant government department or refer to the relevant government website.
3 The case is for reference only and does not take into account other assets and income of the applicant.

 

Myth 2: Why should I let others manage my savings?

Keeping money on hand is of course good, and it's also important to have sufficient liquid funds for unexpected needs. However, it's crucial to consider everything carefully - after retirement, income ceases while expenses continue, so it's important to calculate if your savings are enough for a lifetime and also make proper asset allocation to cover expenses during your retirement. In addition, as you age, managing wealth may become more challenging too. 

The HKMC Annuity Plan helps transform your savings into a steady stream of lifelong retirement income, so you can retire with greater peace of mind and start a new chapter in life.

 

Myth 3: If my time comes earlier, will I get less than the premium I paid?

The HKMC Annuity Plan offers death benefit4, both lump sum death benefit payment and monthly death benefit payment options guarantee breakeven5.

In the unfortunate event of the insured person's death within of the Guaranteed Period, the designated beneficiary(ies) may choose to continue to receive the remaining unpaid Guaranteed Monthly Annuity Payments until the end of the Guaranteed Period, or receive the death benefit in a lump sum.

4 Please refer to the product brochure and policy provisions for the details and terms and conditions applicable to Death Benefit.
5 Assume no partial surrender or full surrender has been made under the policy.

 

Myth 4: Will I receive more annuity income if I apply for the HKMC Annuity Plan later?

Let's illustrate with a hypothetical scenario.

Assuming Mr. Kim is considering to apply for the HKMC Annuity Plan with HK$1 million at the age of 60 or 65, what would be the cumulative monthly annuity payment he would receive?

Age at application6

Monthly annuity payment (HK$)7

Cumulative guaranteed monthly annuity payment received by the age of 75 (HK$)

60

$5,100

$918,000

65

$5,800

$696,000

In terms of monthly annuity payment, if Mr. Kim applied for the HKMC Annuity Plan at 60, he would indeed receive less. However, by the time he reached 75, the cumulative annuity payment over the years would be around HK$220,000 more than that if he had applied at the age of 65 (HK$918,000 – HK$696,000)!

Use the HKMC Annuity Plan Calculator to find out how much annuity income you can receive!

6 Age last birthday of insured at application.
7 If partial surrender or special withdrawal has been made, the subsequent amounts of the guaranteed monthly annuity payment will be reduced. Please refer to the policy provisions for details.

 

Myth 5: Is the HKMC Annuity Plan tax deductible?

To encourage the younger generation to start their retirement planning early, the government has introduced a tax deduction policy for "Qualifying Deferred Annuity Policy". As suggested by its name, the tax deduction policy is only available for qualifying deferred annuities. Being an immediate annuity designed for those who are retired or planning to retire, the HKMC Annuity Plan is not tax deductible.

Every step in your retirement planning matters. If you have any questions, please feel free to contact us at 2512 5000.

Schedule an appointment now to start planning for your retirement.


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 which does not constitute a product recommendation or invitation. This information is only intended for use in Hong Kong and shall not be construed as an offer to sell, solicitation to purchase or provision of any insurance products outside Hong Kong by HKMC Annuity Limited.

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