Public annuity plan — getting to grips
associate professor at Hong Kong Baptist University’s Department of Finance and Decision Sciences past four years — 2.7 percent in 2013, 1.4 percent in 2014, minus 0.6 percent in 2015 and 1.8 percent in 2016.
The plan will also provide a death protection of a 105-percent premium insured for annuitants to allow beneficiaries to receive the remaining unpaid monthly installments or a lump-sum amount if the annuitant dies before getting 105 percent of the premium paid.
There’s also a “surrender” option that allows participants to get a lump sum back by opting to stop investing for contingency reasons.
Siu, however, has a word of caution: “The HK$10 billion fund may not be a great pool of capital to generate sufficient returns. Besides, the scheme may not have ample time to grant adequate returns although it promises participants a stable stream of income immediately after retirees start contributing at 65.”
To spur the local annuity market, she urged the government to consider offering tax incentives to residents who voluntarily save up for their annuity investment. The government should consider designing an annuity product with the age of entry set at 50, and contributors allowed to withdraw their money at 65.
Financial academics warned that the program might not be sufficient to cover the retirement needs of the city’s less well-off.
“Residents without any financial assets are not eligible to join the scheme at all and, thus, the financial burden will still fall on the city’s social welfare system,” said Mak.
“To tycoons with big fortunes under their belts, the proposed annuity scheme will not make any difference at all,” he added.
Residents without any financial assets are not eligible to join the scheme at all and, thus, the financial burden will still fall on the city’s social welfare system.”