Annuities play an important role in retirement planning. It is a long-term insurance product which helps consumers convert their money into a steady stream of income over the long term. It helps consumers spend their retirement savings in a disciplined way to address the financial risks brought about by longevity.
As the Hong Kong population continues to age, more annuity products are emerging in the market to address the growing demand for retirement products. With the launch of the "HKMC Annuity Plan”, the first public annuity scheme driven by the HKSAR government, annuities are gaining more attention.
When it comes to the topic of annuities, there is much discussion about the return. For example, some may say that the return from an annuity is not as good as the dividends from stocks or interests from long tenure time deposits. However, the objective, product structure, risk and return features of annuities are completely different from those of stocks, bonds and bank deposits. Therefore, it is not appropriate to make a direct comparison among such different kinds of products.
Annuities available in the market come with different premium contribution periods, income payout periods, guaranteed and non-guaranteed income as well as death benefit arrangements. Consumers should study the details and conduct thorough comparisons, and consider their personal needs and financial circumstances to decide whether an annuity is suitable for them, and how to make use of annuities and other wealth management products to formulate their retirement plans.
28 December 2018