The head of Hong Kong Mortgage Corp’s annuity team says the life-annuity scheme is more popular among those aged 65 to 70.

Speaking ahead of today’s deadline for subscriptions, chief executive Edmond Lau Ying-pan said the overall response to the scheme has been within expectations, RTHK reported. Lau said one subscriber is more than 90.

Lau said take-up of the HK$10 billion quota for the scheme should not be used as a yardstick to judge its success. Mortgage Corp will instead look at discussion in the community and whether general awareness of the scheme has been raised. He added: “The HK$10 billion ceiling on subscriptions is actually not our sales target. It’s only a ceiling reflecting our risk management concerns. So it will not be judged by whether we’ll be able to achieve that amount.”

Lau said he thinks it is “more important to look at the result by way of judging the public reaction, whether the first sale of the scheme has indeed aroused interest among the public about various pros and cons of the scheme and also other investment products.”

Mortgage Corp will consider future adjustments to the scheme after analyzing the subscription data.

But Lau said it is unlikely that the minimum age of 65 for subscribers will be lowered in the short term. He said the age limit was set to fill a gap in the market, and that other products are available for those under 65.

Lau also said the 4 percent rate of return is unlikely to be adjusted. But he did not rule out the possibility of increasing the maximum amount a subscriber can invest. It is currently HK$1 million.

Applicants can invest in a single premium ranging from HK$50,000 to HK$1 million in exchange for monthly payments. For a single premium of a maximum HK$1 million, the guaranteed monthly annuity payment for a 65-year-old man would be HK$5,800, while it is HK$5,300 for women.

Monthly returns for men are higher than those for women because females have a longer life expectancy. Applicants will receive notices of allotment from next month and will be told to attend sales meetings to complete the procedures.

Subscribers may receive the annuity payment as early as November. The plan can be surrendered within the guaranteed period but may incur a loss.

Source: The Standard
Read More

The head of the Mortgage Corporation’s annuity team says the government’s scheme to provide pensioners with a guaranteed income for life has been more popular with those who are just over 65.

Speaking ahead of tomorrow’s deadline for subscription to the Life Annuity Scheme, Edmond Lau said the overall response to the scheme has been within expectations. This includes the fact that the scheme is more popular among those aged 65 to 70. But Lau said one subscriber is over 90 years old, RTHK reports.

Lau said take-up of the HK$10 billion quota for the annuity scheme should not be used as a yardstick to judge its success. He said the Mortgage Corporation will instead look at discussions in the community and whether general awareness of the scheme has been raised.

“The HK$10 billion subscription amount of ceiling is actually not our sales target. It’s only a ceiling reflecting our risk management concerns. So it will not be judged by whether we’ll be able to achieve that 10 billion amount,”

“I think it is more important to look at the result by way of judging the public reaction whether the first sale of the LAS has indeed aroused interests of the public about various pros and cons of the LAS and also other investment products,” he said.

Lau said the Mortgage Corporation will consider future adjustments to the scheme after analyzing the subscription data.

But he said it is unlikely that the minimum age of 65 for subscribers will be lowered in the short-term. He said the age limit was set to fill a gap in the market, and that other products are available for those under 65.

Lau also said the 4 percent rate of return is unlikely be adjusted. But he didn’t rule out the possibility of increasing the maximum amount a subscriber can invest. It is set at HK$1 million.

And for younger people who have some money to spare, Lau said, they can consider subscribing to the annuity scheme for their parents as a show of love.

Source: The Standard
Read More

Critics of a new public annuity scheme say low-income people do not stand to benefit because they prefer greater flexibility with their money.

The public annuity scheme offers subscribers a life-long, guaranteed monthly payment after they invest a lump sum, RTHK reports.

But participants must be a permanent resident of Hong Kong, and it would take at least 15 years for the money to break even.

The Confederation of Trade Unions conducted a poll last month, asking more than 100 grassroots workers how they feel about the scheme.

They said 80 percent of the respondents will not invest in the plan.

Half of those who are not interested, said they do not want to lock up their savings in the scheme.

Another 20 percent said they think there are better investment options out there that can generate higher returns, such as blue-chip stocks.

“Every dollar to these workers are very important. They want to keep their money, their savings inside their pockets so that they can control it … so that when they have some incidents, such as medical consultation, they will have enough money or enough savings to solve this problem”, the confederation’s Patrick Ng said.

Ng said most respondents would rather see a universal pension scheme for retirement protection.

Source: The Standard
Read More

The Hong Kong Mortgage Corp’s annuity plan started to accept subscriptions from permanent residents aged 65 years or above yesterday – but only a few applicants were seen at banks.

No queues were seen in one of the designated branches in Mong Kok. Only six elderly people had submitted applications yesterday morning, RTHK reported.

The firm said the response to the scheme will be assessed after the registration period, as it is too early to say whether the scheme has drawn a good response only through the number of applicants seen at a single branch.

For a single premium of a maximum HK$1 million, the guaranteed monthly annuity payment for a 65-year-old man would be HK$5,800. It’s HK$5,300 for women, who generally have a longer lifespan.

The annuity plan can be surrendered within the guaranteed period but may incur a loss. There is no death benefit after the guaranteed period.

One of the applicants at the Mong Kok branch of HSBC said he intended to invest HK$1 million to diversify his investment portfolio. But he added the monthly payment of HK$5,800 is not sufficient for general expenses.

Financial Secretary Paul Chan Mo-Po has said the plan allows seniors to transfer part of their savings to a determined periodic income that is reliable.

Financial consultants said the scheme will lower the liquidity assets of the elderly, and they should be aware of potential losses with early surrender.

Like other annuity products offered by private insurance companies, applicants should note that it is a long-term investment plan and early surrender may bring financial losses, said an actuary of 10Life insurance company, Lun Hoi-yan.

The registration period for the annuity plan is open until August 8. Applicants can obtain or submit the subscription forms at 700 designated branches of 20 banks, or register online.

Applicants are not required to pay a premium at this stage but will need to fill in the subscription intention form with basic personal information.

They have to submit the subscription amount and name three agent banks to assist in completing the procedures.

Source: The Standard
Read More

Paying the government HK$1 million in exchange for a pension of up to HK$5,800 a month may sound stupid. But in a society where life after retirement is far from adequately protected, this does offer many retirees a real choice.

Some call it a bet on life expectancy.

That comparison is true – for the longer a pensioner lives, the greater the dividends he or she will get. The only chance it would lead to a loss is if the pensioner dies young – before reaching 80 – assuming they join the government annuity scheme at 65.

But it should be a safe bet since their beneficiaries would continue to receive the payments, unless they don’t have the patience to sit out the initial period. In such cases, the amount won’t be returned in full.

So, is the scheme as unattractive as some have claimed? I think not.

It’s attractive for many, except for those who think they’re smarter than the Hong Kong Monetary Authority, which will be responsible for managing the funds, to be collected by a subsidiary created by the Hong Kong Mortgage Corp and passed on to HKMA.

Known as the HKMC Annuity Plan, its registration opened yesterday. Residents aged 65 or older have until August 8 to enter their intent to subscribe to the first tranche of HK$10 billion. According to Financial Secretary Paul Chan Mo-po, that would most likely double to HK$20 billion if demand is overwhelming.

Under the annuity scheme, residents investing the maximum HK$1 million will get HK$5,300 a month for women, and HK$5,800 for men, the gap being due to their different life expectancies.

The minimum subscription is HK$50,000, which will generate HK$265 for women, and HK$290 for men monthly.

However, I must say the most interesting aspect is that the annuity scheme should be viewed together with the Higher Old Age Living Allowance.

Curiously, the government is rather forthcoming on this, even revealing how the Sandwich Class – those considered too “rich” to claim the allowance, but too “poor” to lead a retired life without fear – may tap the maximum benefits using the annuity scheme.

The official website cited the case of a 65-year-old man now receiving a pension of HK$2,500 a month, and who has assets worth HK$600,000. Since his assets exceed the HK$146,000 limit, he can’t apply for the higher old age allowance, currently set at HK$3,485 monthly.

But he would be able to apply for the allowance if he puts HK$500,000 into the annuity plan. Then, he may expect to have HK$8,885 in total – HK$2,500 as currently received, HK$2,900 from the annuity plan, and HK$3,485 in old age allowance – every month.

That’s not too shabby, eh?

Understandably, the attraction begins to drop along with one’s wealth. But then they obviously aren’t the targets the government aims at helping under the plan. In the absence of comprehensive retirement protection, this is a feasible way to meet the needs of the sandwich class.

Source: The Standard
Read More