Hong Kong is set to launch a public annuity scheme to be managed by the government-owned Hong Kong Mortgage Corporation (HKMC).
The scheme allows retirees to invest a lump sum in order to receive a guaranteed monthly income until their death.
Here are six things you need to know about the scheme:
1. Returns differ by gender
Due to the expectation that retired women tend to live longer than their male counterparts, their monthly payment will be slightly less.
The tentative, estimated levels of monthly payout are shown below:
2. Principal Protection is 105%
If an annuitant dies before receiving 105 percent of the premium paid, the beneficiary of the annuitant will receive the remaining unpaid monthly installments or a lump-sum amount.
3. Lifetime commitment
The majority of annuities in the market possess a limitation on the annuity period (e.g., 20 years), instead of a lifetime commitment.
As reported by media, the Guaranteed Lifetime Immediate Annuity scheme by MassMutual is one of the few annuities that offer lifetime annuity income. It is locked in an annuity rate of up to 5 to 7 percent per annum with a minimum premium of US$65,000 (HK$505,000).
4. There is a surrender arrangement
No surrender charges are required for an annuitant to withdraw. But the surrender value equals to the present value of the remaining unpaid installments of monthly annuity payment, while the discount rate is not yet disclosed.
5. Worry about the fee
The HKMC says the management fee would be waived. However, as the annuity will be sold through banks, whether there will be charges by distributing banks is under discussion.
6. It is to be launched by mid-2018
The HKMC will proceed with the preparatory work for implementing the scheme, with a view to launching the scheme by the middle of 2018.
This article first appeared in the Hong Kong Economic Journal on April 11.
Translation by Ben Ng with additional reporting
[Chinese version 中文版]
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