Hong Kong’s HK$10 billion (US$1.27 billion) public annuity plan received a mixed response on Monday, after application forms became available through 20 local banks.HSBC and Bank of China (Hong Kong) reported queues outside some branches. The forms are available at 700 branches of local banks, with registration for the scheme open from July 19 until August 8. HKMC Annuity, the government agency handling the scheme, said it would announce further details once the registration period has ended.
The plan, announced on Thursday, is the latest welfare initiative by the Hong Kong government aimed at the city’s ageing population. Hong Kong, which does not have a comprehensive social security system, has 1.3 million people who are 65 or older – about 18 per cent of its total population. This number is expected to increase to 31 per cent by 2036.
The low returns promised and difference in earnings for men and women dominated the response to the scheme on its first day.
The scheme allows residents to invest a maximum lump sum of HK$1 million, which will earn women HK$5,300 every month and men HK$5,800. The minimum investment of HK$50,000 will earn women HK$265 a month and men HK$290. The monthly payments are for life and the government will shoulder any losses.
If popular, the government will double the amount it will accept to HK$20 billion, while the scheme will run every year with a different quota.
Allan Yu, a 66-year-old retired insurance salesman, plans to invest HK$1 million in the scheme. “The scheme will give a guaranteed monthly lifelong payment. The returns are expected to reach 4 per cent, which is reasonable,” said Yu.
CT Hew, a 68-year-old public affairs consultant, was also considering investing in the annuity scheme.
“It is a government scheme that guarantees a monthly payment regardless of stock performance. The returns may not be very high, but they are acceptable,” said Hew. “Investing in stocks may bring higher returns, but then they also involve higher risks.”
A 70-year-old housewife said she would invest in the scheme only if the monthly payments would not affect other social benefits she was enjoying now.
May Wong May-ping, a 64-year-old co-owner of the Yixin Restaurant in Wan Chai, however, said she was not interested.
The scheme pays more to men than women, which is unfair,” she said. “In addition, if I invest HK$1 million in exchange for the monthly payments, it will restrict my cash flow. I prefer to keep my money in my pocket,” she said.
An HKMC Annuity spokesman said the difference in earnings for men and women was down to men’s lower life expectancy, a consideration also adopted by the insurance industry. The rate of returns are the same for both genders if life expectancy is taken into account.
Jensen Wong, 64, a retired manufacturer, was not planning to subscribe to the scheme as he thought the return was not attractive enough.
“I discussed it with my wife and we concluded the scheme did not make sense. It was better to invest in stocks or time deposits,” said Wong.
James Yip, a 70-year-old retiree, shared this view. “The 4 per cent return looks acceptable during a low interest rate era. But as the interest rate is now on a rising trend, I do not think the public annuity scheme is attractive,” he said.