Hong Kong’s retirement annuity scheme refined after 40 per cent of initial subscriptions failed

The Hong Kong government has revised its public annuity retirement plan after complaints about inflexibility and after 40 per cent of the initial subscribers either pulled out or could not be contacted.

The changes now allow for the full premium to be returned in the event of a subscriber’s death, one withdrawal for medical and dental purposes and a relaxation of the premium cap per person, scheme operator HKMC Annuity said on Wednesday.

“We have received opinions from the market about inflexibility and the incomprehensive protection offered by the plan, so we decided to launch these enhancement measures to make our product more suitable and favourable for the city’s retirees,” said Edmond Lau Ying-pan, executive director and chief executive of the HKMC Annuity.

Poor response to Hong Kong government’s annuity scheme as senior citizens subscribe to less than 50pc of US$1.27b target

The initial annuity scheme, announced earlier this year as part of an effort by the government to prepare for an ageing population, ­allowed senior citizens to invest a maximum lump sum of HK$1 million and in return receive a lifelong monthly income of HK$5,800 for males and HK$5,300 for females after retirement, with the government shouldering any losses.

But the plan was criticised by many for generating a low return, locking up liquidity and having a cap that limited the monthly ­income received.

Among the subscribers who registered between July and ­August this year, 10 per cent could not be contacted while 30 per cent said they needed more time to think about it.

“Some found themselves crash-strapped because of recent health conditions or the stock market rout, while some were sceptical about the products in terms of liquidity and the level of protection,” Lau said.

After talking to around 60 subscribers, the authority decided to raise the maximum premium to HK$2 million.

It will also allow subscribers to make one withdrawal for medical and dental purposes. Although the monthly payments thereafter would be reduced proportionally, there would be no extra discount, as stated in the initial plan.

Also scrapped was a reduction in the lump sum death benefit payment. If a 65-year-old male who paid a premium of HK$1 million were to die after one year in the scheme, the beneficiary would now get back the full premium amount, compared to only HK$732,748 under the old rules.

The scheme is now open to investors all year at two sales offices in Hong Kong and Kowloon, as well as by phone and the internet, instead of being sold through banks within a designated subscription period, as previously.

The first tranche of sales saw 9,410 subscriptions, with an average premium amounting to HK$506,000 from 5,500 applicants, according to HKMC.

“The government is releasing these measures now probably because of the unsatisfactory sales earlier. But I do not think this will attract many new investors, as many may probably have other investment products to cover their future expenses,” said ­lawmaker Fernando Cheung Chiu-hung.