A closed-door Post Forum Roundtable of the 8th Cross Straits Pension Forum 2016 event was held with attendance of representatives from the Government, the regulator, the Associations and the industry practitioners.  Below is an event summary and aggregate discussion results.

At the beginning of the event, Forum Convenor, Ms Ka Shi Lau, provided an overview of the HKRSA and the Cross Straits Pension Forum.  Convened by HKRSA, the first Forum was held in 2009 to provide a platform for experience sharing in retirement protection.  Since then, the 4 associations comprising the cross straits forum take turns in holding this annual event in China, Taipei, Macau and Hong Kong; with delegates coming from government departments, academics, social security bureau, consultantsand industry providers/participants.

 

Forum taskforce member, Ms Janet Li, then provided an overview to the HK research of the Forum titled:  Methods of Pension Withdrawal in Hong Kong: A Comparative Study and Discussion.  Longevity is an eminent risk faced by ageing societies in which decumulation stage may be as long as accumulation stage.  Historically, more focus has been on accumulation stage than decumulation stage and so as product availability. The research team assessed annuity development in various key markets and drawn the following as possible good reference for Hong Kong – flexibility in withdrawal arrangements and ease of product design, and government support with tax incentives highlighted as key.  Moving the panel back to Hong Kong, the research team reviewed that such products have not gained popularity locally and awareness is generally low.  This can be boiled down to a number of reasons – limited government support and tax incentives, the lack of HKD long-term bonds to support product development and low public awareness to income stream as retirement protection tool.  The research called for industry to work together in order to build this market segment which ultimately offer better pension protection to HK citizens.

 

The Roundtable then opened up for free flow of ideas among the participants and HKRSA Vice-Chairman, Ms Vanessa Wang, was the moderator. 

 

The participants generally agreed with the observations from the HK research and that it is an area which calls for support from the industry in order to build better retirement protection for HK citizens.  It was observed that there is currently limited incentives from the Government to support development of annuity products, including lack of tax incentives and general public awareness is also low.  Coupled with the lack of long-term bond market locally, it makes it hard for such products to exist by nature.  There needs to be an economic environment to facilitate the annuity market to exist in Hong Kong.  It was also raised that public perception towards such initiative needs to be taken into account.

 

The participants also generally agreed that stream of income offer better protection during retirement.  However it does not necessarily comes from annuity products but possibly from its substitute as well, an example is renting out an apartment.  Ultimately, diversification to retirement portfolio is important and annuity perhaps can be considered as the minimum required protection while diversifying into other investments as well.

 

There was a discussion related to where the annuity arrangement/ income stream protection can be hosted and there were different views.  The current MPF platform is convenient for leverage but the investment restrictions are stringent.  If product design is suppressed, the incentives to contribute more voluntary savings may also be defeated.  Nevertheless, it may also be confusing to have another platform built for retirement saving arrangements. 

 

The annuity issue was included in the previous HKSAR Government’s pension protection consultation and there was general consensus that the topic of the Roundtable is an area which the Government wish to devote efforts as well.  More developments in this area are expected in this area.

 

The Roundtable adjourned at 6pm.

Isabella Ho

Isabella Ho has blogged 80 posts