The new hot item on Hong Kong parents’ shopping lists for their teenagers: a retirement annuity plan

MassMutual Asia says it is seeing more teenagers and young people in their 20s buying annuities, and has hired boxing champion ‘Wonder Kid’ Rex Tso to promote the products

PUBLISHED : Tuesday, 02 January, 2018, 7:34pm
UPDATED : Tuesday, 02 January, 2018, 10:59pm

What to get for the teenager who has everything? An annuity policy to give them a monthly income in their retirement, of course.

Such policies, which pay out a fixed monthly income after retirement, are the latest trend among Hong Kong parents keen to give their offspring not just a good start in life, but a good end too.

“We have seen an increasing trend among parents to buy annuity products for their teenage children or those who are in their early 20s, in a bid to protect their retirement needs,” said Tay Keng Puang, managing director and chief executive of MassMutual Asia, the largest annuity provider in Hong Kong with a 50 per cent market share.

The company has hired Hong Kong boxing superstar Rex Tso, nicknamed “Wonder Kid”, who has a record 22 consecutive victories in his career, to promote annuity products. Policyholders can pay a lump sum or a certain amount each month for 10 or 20 years and will receive a monthly income after their retirement for the rest of their lives.

“We all know the Mandatory Provident Fund is not going to offer enough protection for retirement needs,” Tay said, referring to Hong Kong’s pension system.

“This is why some younger people have started to pay for an annuity at a young age. There are also many parents who have started buying the products for their children who are either teenagers or still studying in their early 20s,” he said.

The buying power of the “Bank of Mum and Dad” has helped MassMutual see an average annual growth in profit from its annuity business of 51 per cent over the past five years.

Young people between 20 and 29 are now the biggest buyers of annuities, representing 38 per cent in 2017 and up from 30 per cent in 2012, Tay said. The number of annuity buyers between the ages of 40 and 50 declined to 14 per cent of the total, from 18 per cent in 2012, he said.

Would you buy your children a flat in Hong Kong? Seven out of 10 parents in the city say they would

Hong Kong parents have already been looking to the property market to give their children some financial security. A survey in November by insurer AIA found that 70 per cent of parents were willing to buy a flat for their children, with those who had already done so forking out an average of HK$900,000 (US$115,164) to help their offspring onto the property ladder.

Tay said he believed the ageing population in Hong Kong would encourage more people to start buying retirement products at an early age.

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.

Globally, the World Health Organisation projects that the number of people aged 65 or older will grow from an estimated 524 million in 2010 to nearly 1.5 billion in 2050, with most of the increase in developing countries.

Insurers adapting to ageing Hong Kong and China with policies that cover longer lives

“We add in some more protection elements in the products so that we also cover some critical illnesses. There is also an option in some policies for couples whereby if one dies, the surviving spouse can still receive the monthly payouts for their whole life,” Tay said.