Hong Kong's state-funded pension scheme

Few takers for US$1.27 billion annuity plan as Hong Kong retirees complain returns don’t justify investment

Gripes range from ‘returns are too low’ to ‘I’ll have to live until I’m 100 to benefit from the scheme’, while some would rather keep their money in the pocket

PUBLISHED : Friday, 20 July, 2018, 7:34am
UPDATED : Friday, 20 July, 2018, 8:12am

The Hong Kong government’s HK$10 billion (US$1.27 billion) public annuity scheme got off to a slow start on Thursday as only a few senior investors turned out to subscribe to the programme on day one.

The scheme, which is open until August 8, allows those aged 65 or above to invest between HK$50,000 to HK$1 million in exchange for a lifelong monthly payment.

The government originally set the maximum amount of investment it would accept in the first year of the scheme at HK$10 billion, but said it would double it to HK$20 billion if there was sufficient demand.

A HK$1 million of lump sum investment in the scheme would earn HK$5,300 every month for women and HK$5,800 a month for men. The lower figure for women takes into account their longer life expectancy. The minimum investment of HK$50,000 would earn HK$265 a month for women and HK$290 for men.

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The lacklustre debut now raises the question whether the cap would need to be lifted.

Although all major lenders, including HSBC, Hang Seng Bank, Standard Chartered Bank, Bank of China (Hong Kong) and Bank of East Asia, have opened special counters to accept applications, reporters from the South China Morning Post noticed only a few investors had showed up at these banks’ branches in Central, Admiralty and Mong Kok.

Some of the elderly buyers of the annuity product said they planned to invest the maximum HK$1 million while others said they would invest HK$500,000.

A male customer, who refused to be identified, said he had put HK$1 million in the scheme. He was one of four senior investors to visit HSBC’s Mong Kok branch during the first hour of the day’s business.

“While the monthly income to be paid by the public annuity scheme will not be sufficient to cover all my monthly expenses, it will still allow me to enjoy a certain level of quality of life during my retirement,” he said, adding that he planned to use the rest of his savings to make other investments.

Another retiree, who only gave his surname as Ko and said he was below 70, planned to invest HK$500,000 in the scheme.

“I have some spare money that I want to invest in the annuity scheme as it can provide a stable monthly income and can guarantee a nice post-retirement life. I also invest in stocks but the scheme carries low risks and saves me the trouble of watching the market every day. I’m only buying as it is managed by the government,” he said.

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However, there were others who were not interested or said that they did not have any money to buy into the scheme.

Lai Ming, 70, said he could not afford to invest in the annuity scheme.

“I don’t have enough money to lock into this annuity or any other investment. My retirement financial plan is just to live a frugal life,” Lai said.

A 73-year-old who identified herself as Mrs Ho, said the public annuity scheme does not offer a high return.

“I will have to live until I’m a 100 years old to profit from the scheme. If I had a HK$1 million, I would rather invest in other investment products as there are so many options in the market,” she said.

I prefer to keep my money in my own pocket
Chen, retiree

Another retiree surnamed Chen, who said he was over 65, feared he would not live long enough to break even.

“I will not invest in the public annuity or other privately run annuity schemes as I am not sure that I would even live for a dozen more years. The annuity scheme will only benefit those who will live until they are very old. I prefer to keep my money in my own pocket,” he said.

A spokesman for HKMC Annuity, which runs the scheme, declined to the reveal the subscription amount on Thursday, saying that it will be only announced after the end of the registration period.

“Today is the first registration day for the HKMC Annuity Plan. It takes time to observe and find out the registration status as there are 732 designated branches of the agent banks in Hong Kong to distribute and receive forms,” he said.