Tax deductions for qualifying deferred annuity premiums & tax deductible MPF voluntary contributions
As the average life expectancy for Hong Kong people is more than 80 years, retirement can potentially last for around 20 years. During retirement, your monthly living expenses, medical fees as well as cost of inflation can cost much more than you expect. Many market research reports and studies have revealed that each Hong Kong citizen would need several millions of dollars for their retirement, which can be an astronomical sum for a typical wage earner. Relying solely on the 10% MPF mandatory contributions made by employers and employees monthly is hardly sufficient. To enjoy a secure retirement life, the best way is to start saving for retirement as early as possible.
Take advantage of the power of compound effect and start saving or investing early. The longer your investment time horizon, the stronger the compound effect. Assuming that you invest $2,000 per month and the annual rate of return is 5%, you would have accumulated $140,000 after 5 years and $310,000 after 10 years. Keeping this up for 30 years and the total amount will add up to $1.67 million! This is the power of long term investment and compound effect.
If you have not yet started your retirement savings plan, there is good reason to do so now. Starting from April 2019, retirement savings by way of qualifying deferred annuity policies (“QDAP”) or tax deductible MPF voluntary contributions ("TVC") could entitle you to tax deductions. The deduction cap is $60,000 per year, which is an aggregate limit for both qualifying deferred annuity premiums and TVC. Based on the prevailing highest tax rate (i.e. 17%), the maximum tax savings can reach up to $10,200 every year!
The education materials are jointly provided by FSTB, IFEC, IA and MPFA.
20 March 2019