Good life
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Written by: Xie Deqin
2021-02-04 12:00
Last update date: 2021-02-04 12:00
Entering 2021, the global economy continues to be uncertain, and it is still very difficult to effectively accumulate wealth and prepare him for retirement.
According to a study by the Organization for Economic Co-operation and Development (OECD), sufficient retirement reserves should be enough for everyone to maintain a similar standard of living after retirement.
Calculating retirement needs can be used as an alternative to ratio calculation, that is, the benefits and available funds after retirement are compared with the funds available before retirement.
Generally speaking, the monthly cash flow required for the reserve of low-income workers is similar to the monthly income before retirement. Even the middle and high-level working population needs a replacement rate of about 70% of the available funds¹ each month, which is equivalent to retirement. 70% of the previous month's income.
When the tax season is approaching, have you ever thought that you can use the deferred annuity to enjoy tax deductions and turn the tax saved into a pension?
There are some deferred annuity products on the market that allow you to make your own long-term food and guarantee a good internal rate of return, which has considerable advantages in a low interest rate environment.
As a wage earner, the savings accumulated bit by bit through salary are hard-earned money.
Today's hard work is nothing more than to achieve life goals and to have enough reserves for retirement.
However, how much do you need to save to enjoy your old age?
The Organization for Economic Cooperation and Development pointed out that retirement reserves should be enough to provide you with at least 70% of the monthly income before retirement.
Meager interest on bank deposits or "dead savings" to save living expenses may not be enough to achieve the goal.
Therefore, it is necessary for everyone to plan for retirement as soon as possible.
In recent years, in order to encourage everyone to prepare for retirement as soon as possible, the government has actively introduced some tax concessions. As long as you purchase a qualified deferred annuity policy or make voluntary MPF contributions, you can enjoy tax deductions, with tax deductions of up to HK$60,000² each year.
Calculated at the 17% tax rate of the highest tax band, annual tax savings of up to HK$10,200 can be achieved.
Put your savings into deferred annuities and other products wisely, and you can accumulate more pensions faster over the years, and provide substantial returns. You can also make good use of tax deductions to reduce your monthly burden or increase your savings. This can be combined with MPF and Other retirement reserves can more easily reach the 70% monthly income target before retirement.
Eligible deferred annuity insurance policies help you save for retirement and enjoy tax concessions.
There are countless options for deferred annuities
With the tax concessions provided by the government, there are more and more deferred annuity plans available in the market, which is unavoidably dazzling.
In addition to tax savings, the annuity period and internal rate of return of the deferred annuity plan are both decisive factors.
An eligible deferred annuity policy allows policyholders to pay premiums within a specific period, such as 5 years or 10 years, and then start receiving deferred annuity payments after reaching a specified age (eg 65, 70, 75, etc.).
In this way, policyholders can use the growth potential brought by the deferred annuity plan to accumulate the premiums paid into rich wealth.
You can choose to start receiving deferred annuity income when you are about to retire, so as to achieve the effect of "self-made long grain".
You need to know that the average life expectancy is getting longer and longer, and if you want to enjoy your twilight years, it is naturally more at ease with a deferred annuity plan with a longer annuity period.
Take Sun Life Financial’s Fengshuo Deferred Annuity Plan as an example. If the starting age of the annuity is 65, the annuity period can be as long as 35 years, allowing you to earn annuity income at the age of 100.
If the premiums placed on the deferred annuity plan can obtain a higher rate of return, of course it will help the insured to receive a higher return during the annuity period.
The rate of return is generally divided into two parts: guaranteed and expected. Guaranteed return is a responsibility that insurance companies must perform in accordance with the policy contract. Expected returns are affected by a basket of factors such as economic conditions and insurance company dividend policies.
Suppose that the policyholder chooses to start a 5-year premium payment period at the age of 45 as an example, and starts to receive an annuity at the age of 65, calculated on the basis of the guaranteed annuity income received and the guaranteed death benefit available to the beneficiary, looking at the market The major deferred annuity products listed above, Sun Life Financial’s Plenty Deferred Annuity Plan has a guaranteed internal rate of return ranging from 2.2% to 2.6% per annum, and the return is considerable.
To save taxes and plan for life after retirement, the deferred annuity can be said to satisfy the two wishes of working people at the same time.
From now until March 31, 2021, if you successfully apply for the Fengshuo Deferred Annuity Plan and meet the specified premium conditions, you can also enjoy up to 8% of the first-year annualized premium premium rebate*.
For details, please go to: https://bit.ly/2MNf3PF
1. OECD (1998), Maintaining Prosperity In An Ageing Society: the OECD study on the policy implications of ageing, https://www.oecd.org/els/public-pensions/2429016.pdf(accessed on 25 Jan, 2021 ).
2. Please note that the tax deduction arrangements for qualifying deferred annuity policies on this page are for reference only, and it does not mean that you will be eligible for tax deduction for the premiums paid for qualifying deferred annuity policies.
The tax deduction arrangements for eligible deferred annuity policies on this page depend on the general product characteristics and the certification of the Insurance Regulatory Authority (the "Insurance Regulatory Authority"), rather than your personal circumstances.
You must meet all the eligibility requirements set out in the Inland Revenue Ordinance and any guidelines issued by the Inland Revenue Department of the Hong Kong Special Administrative Region ("Inland Revenue Department") before you can claim tax deductions.
All general tax information is for reference purposes only, and you should not make any tax-related decisions based on these information alone.
If you have any questions, you should consult a professional tax advisor.
Please note that tax laws, regulations, or interpretations may change, which may affect relevant tax incentives, including eligibility requirements for tax deductions.
Hong Kong Sun Life Financial Co., Ltd. has no responsibility to notify you of any changes in relevant laws and regulations or interpretations, and how such changes affect you.
Please note that only eligible annuity premiums due and paid within the tax year are eligible for tax deductions for the tax year.
Subject to the decision of the Inland Revenue Department, some or all of the premiums paid during the grace period for the previous tax year may or may not be eligible for tax deduction in that tax year.
For details of the tax relief applicable to eligible deferred annuity policies, please refer to the CIRC website www.ia.org.hk/tc.
For any tax-related inquiries, you can also refer to the website of the Inland Revenue Department or contact the Inland Revenue Department directly.
If you are interested in purchasing a qualifying deferred annuity policy, you should understand the policy features disclosed by different insurance companies in the market and the risks associated with qualifying deferred annuity policies and related risks (including but not limited to early withdrawal And suffered major financial losses).
Note: The above information is based on the belief that it comes from reliable sources, but Sun Life Hong Kong Financial Co., Ltd. does not guarantee its accuracy and completeness, and will not be responsible for such information.
The information in this document is for reference only and is not any guarantee or professional advice.
3. Take a 45-year-old non-smoker as an example. He (1) has paid the premium in full at maturity; (2) during the annuity period or within 30 years after the start of the annuity period (whichever is shorter) ) Collect the full monthly annuity payment every month; (3) During the coverage period, no cash or loan is withdrawn.
The calculation of the guaranteed internal rate of return includes the premiums paid for the basic plan, the guaranteed monthly annuity payment, and the guaranteed cash value or guaranteed death protection (if applicable).
*Information provided by the customer
*Fengshuo Deferred Annuity Plan and premium rebate are subject to terms and conditions and conditions determined by Sun Life Financial.
For details including product features, risk details and investment philosophy, please refer to the relevant product promotion publications, leaflets and sample policy documents.
Savings tax
