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HKMC Annuity Plan

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  1. #11

    Join Date
    Dec 2013
    Location
    Hong Kong
    Posts
    10,843
    Quote Originally Posted by freeier:
    had a quick run through.

    let's say, we have 1mio now... I put it in a relatively decent investment giving me a 4% compounding growth annually.
    on the first scenario of 65y.o. 5800/mth, at the end of 182 payments i still should have cash value of around 350k.
    Continue beyond 80y.o., my 350k should last me till i am 85.5 yo before it runs out.

    So numerically, i am betting with HKMC that i will live beyond 85.5 yo.
    if i die anytime before 80yo, i would lose around 200k (present value) of my annuity as on best scenario my family would only receive the payment only up to my 80yo. Beyond 80yo, until 85.5, what i receive is still smaller than my initial premium payment.

    only beyond 85.5, i would be pulling in additional value compared to a 4% investment of my 1mio. If you investment skill is not as good, e.g. just 3% p.a. compounding, then your breakeven age would be around 83.5y.o.
    How about this example?

    Compare it to putting your money in a crap investment that loses money (rather than makes 3 or 4% pa).

    Plenty of people do that. Plenty of people have no clue what a "good investment" looks like. More likely to take advice from "uncle fred heard on the grapevine that we should buy the Xaoimi IPO" than anything else.

    Its hard to evaluate the risk of people making bad investments and losing their shirt. Given that one probably wishes to have a comfortable retirement, certainty of income is probably more important than absolute gains. If you have no family, who cares about the residual value anyway? And if you do have family, why should they get more benefit than you do?
    TheBrit, z754103 and LEON108 like this.

  2. #12

    Join Date
    Nov 2005
    Location
    Cramped island
    Posts
    4,166
    Quote Originally Posted by HK_Katherine:
    How about this example?

    Compare it to putting your money in a crap investment that loses money (rather than makes 3 or 4% pa).

    Plenty of people do that. Plenty of people have no clue what a "good investment" looks like. More likely to take advice from "uncle fred heard on the grapevine that we should buy the Xaoimi IPO" than anything else.

    Its hard to evaluate the risk of people making bad investments and losing their shirt. Given that one probably wishes to have a comfortable retirement, certainty of income is probably more important than absolute gains. If you have no family, who cares about the residual value anyway? And if you do have family, why should they get more benefit than you do?
    I can agree with you, but i also think these guys that are going to be buying xiaomi or anything else on a whim because of other friends recommendation are going to end up to be the guys that feel after receiving 100 payments that they should draw out the surrender value and invest themselves etc.etc.etc... i.e. doing all the wrong things that should not be done once you purchase such a plan.

    but at least one thing good about this, it should be less predatory than the annuity plans that large insurance company or IFAs are bugging everyone to buy...
    HK_Katherine and z754103 like this.

  3. #13

    Join Date
    Aug 2012
    Posts
    11

    This is an old thread now, but does anyone know whether this government annuity would be taxed as and when one returned to the UK? Some overseas annuity payments there are taxed only on the interest portion and not on the return of capital. As this is a government backed annuity it could be argued that payments are all capital being returned until the 177th month out of 182 and thereafter.


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