Annuity plan not enough to sustain Hongkongers after retirement: Allianz survey

AllianzGI survey finds Hongkongers will need HK$5 million as the ideal amount of savings to sustain 14 years of retired life, but expects it to fall short by HK$1.83 million

PUBLISHED : Wednesday, 15 August, 2018, 6:31am
UPDATED : Wednesday, 15 August, 2018, 6:54am

Hongkongers have little interest in the Hong Kong government’s annuity scheme, a survey has found.

More than 50 per cent of the 800 respondents surveyed by Allianz Global Investors for its fifth retirement confidence study do not plan to join the annuity scheme because of a lack of incentives and poor understanding of annuity products.

The lacklustre response to the Hong Kong government’s public annuity plan reflects the public’s lack of knowledge about how annuity schemes work, said Philip Tso, head of institutional solutions for Asia-Pacific at AllianzGI.

Only 9,410 senior citizens said they intend to invest a total of HK$4.94 billion (US$629.3 million), less than half the HK$10 billion target, the Hong Kong government said last Friday, announcing the subscription details of the programme.

A HK$1 million investment will give a monthly income of HK$5,800 for men and HK$5,300 for women over the age of 65.

“Annuity is as yet an emerging concept in Hong Kong. For annuity to become widely accepted it will take time and more education from the government,” Tso said. “I think elderly investors should look into as many possible types of investment for their retirement and diversify their risks amid rising uncertainty in the capital markets.”

Hong Kong is tackling social and health challenges arising from a rapidly ageing population. About 18 per cent or 1.3 million of the city’s population is 65 years or older, and this is forecast to increase to about 31 per cent of the population by 2036.

Hong Kong currently only has the Mandatory Provident Fund as the compulsory pension plan, whereby the employers are required to put 5 per cent of the monthly salary, capped at HK$1,500, into the fund which can be withdrawn after a participant turns 65.

The AllianzGI survey also found that respondents have postponed their planned retirement to 62.4 because of the high cost of living and inflation, reflecting low confidence in their twilight years.

Hongkongers expect they would need HK$16,950 a month to lead a comfortable retired life and see savings of HK$5 million as ideal to sustain 14 years of retired life, but they expect to save only HK$3.15 million, leaving a shortfall of HK$1.83 million, higher than the gap of HK$1.18 million in the 2016 study.

The average life expectancy for men and women in Hong Kong is 81.3 and 87.3 years.