Hong Kong to launch retirement annuity scheme in July as it eyes an ageing population
The scheme will offer a monthly income for life guaranteed by the government, but analysts note that it will only cover a limited number of people
Hong Kong will launch in July its first public annuity scheme, which will allow any permanent resident aged 65 or above to invest a lump sum in exchange for a guaranteed monthly income for life, the government’s latest effort to provide for an ever-ageing population.
The HK$10 billion (US$1.3 billion) scheme will give men who invest the maximum HK$1 million premium at age 65 to receive HK$5,800 per month, while women would get HK$5,300 as they usually live longer, according to Edmond Lau Ying-pan, chief executive of HKMC Annuity, which will operate the scheme. The government first announced its intention to launch the scheme last April.
The city has 1.3 million people aged 65 or over, about 18 per cent of its total population, but the number is expected to increase to 31 per cent of the population in 2036. The average life expectancy for Hong Kong men will increase from 81.3 years in 2016 to 87.1 by 2066, and for women it will rise from 87.3 years to 93.1, according to a Hong Kong government estimate.
HKMC Annuity is a unit of the government-owned Hong Kong Mortgage Corporation. It will collect the money from buyers of the annuity, up to the maximum HK$10 billion allowed, and will invest the money to provide the guaranteed monthly payments. It will shoulder any investment losses.
Buyers can invest between HK$50,000 and HK$1 million each through 20 Hong Kong banks. If total subscriptions are over HK$10 billion, HKMC Annuity may use a lucky draw mechanism to determine who can buy an annuity and how much they can invest. Lau said.
“We have carefully calculated that our model can afford the payout,” said Lau, though he worried that retirees might not understand annuities, which are new to Hong Kong.