Twin solutions for saving tax and retiring well

If you want your retirement to be enjoyable, a steady income and medical protection are indispensable! Want to save for your retirement and save on tax now? Let’s take a look at how Simon does it!

When it comes to securing your retirement, the earlier you start planning, the better! Simply put, creating a steady post-retirement income and backing it up with adequate medical protection should be a key component of your financial strategy moving forward. If you are not sure how to go about it, Simon’s example below may help get you started.

Simon’s retirement plan

The following example is for illustration only. Part of the projected monthly annuity payment is non-guaranteed.

Simon and his wife, both 34¹, have a young daughter who’s attending an international primary school. Simon is a big believer in life planning. Even though he’s still in his prime, he’s already started planning his retirement to ensure sufficient savings and medical protection for the second half of his wonderful life journey.

Simon’s retirement plan has to meet the following criteria:

Steady wealth growth and a regular income

Flexible withdrawals of monthly annuity income

Comprehensive, flexible medical coverage

Tax deduction

Creating a steady retirement income

Simon chooses both HSBC Income Goal Deferred Annuity Plan² and HSBC VHIS Flexi Plan³ to complement his overall retirement plan. Here is the setting of Simon’s Income Goal Deferred Annuity Plan:

The above example is based on the following assumed figures: Initial Annuity Guaranteed Portion⁴ of 50%, a Project Total Internal Rate of Return of 3.25% and a Projected Guaranteed Internal Rate of Return of 0.91%. The internal rates of return of the above deferred annuity plan vary with policy currency, premium payment period/method, annuity payment option, etc. Using the issue age of 35 (age next birthday) as an example (for reference), irrespective of gender and smoking status, the guaranteed Internal Rate of Returns can range from 0.85% - 0.91%, while the total Internal Rate of Returns can range from 3.22% - 3.25%.

Backing up the future with Voluntary Health Insurance Scheme (“VHIS”) medical protection

Simon is the main income earner of his family. Even though he currently has a group medical policy, he’s mindful of the fact that he’ll have to pay for his own medical expenses after his retirement, and that his group policy’s critical illness coverage may be insufficient. Apart from the above annuity plan, he also takes up HSBC VHIS Flexi Plan to enjoy the comprehensive medical protection thus making sure he won’t become a burden to his family if he becomes ill.

Guaranteed renewal until the age of 100	Cashless arrangement for all private hospitals in Hong Kong ensures his peace of mind	Covers unknown pre-existing conditions7 with no waiting period
Full coverage8 of hospitalisation and surgical expenses with no sub-limits	90-day home nursing services to support the recovery journey	Covers both surgical and non-surgical cancer treatments

Building a dream retirement while saving on tax

Simon’s HSBC Income Goal Deferred Annuity Plan² and HSBC VHIS Flexi Plan³ Simon are both qualifying tax-deductible insurance plans. That means, as a taxpayer, he could enjoy tax savings by applying for personal income tax deduction⁹.

Tax-saving tips:

1. If Simon also applies for the HSBC VHIS Flexi Plan for his wife and daughter at the same time, he may be eligible for a higher total tax-deductible⁹ amount of up to HKD24,000 and save even more.
2. Taxpayers who have made contributions to a Qualifying Deferred Annuity Plan on or before 31 March of a tax assessment year are eligible for personal income tax deduction of up to HKD60,000. If a married person also pays premiums for his/her spouse, the combined tax-deductible amount for the couple can be up to HKD120,000¹⁰.

Retirement can be stress-filled or worry-free. It all depends on how you prepare for it today. Simon’s Qualifying Deferred Annuity Policy and VHIS Flexi Plan give him the financial confidence to plan for the future even while he’s enjoying potential tax savings now. Don’t delay your retirement planning anymore. Talk to your professional financial advisor about how to make financial planning effectively and giving yourself and your family the protection you deserve.

Notes:

1. Age means actual age.
2. HSBC Income Goal Deferred Annuity Plan is a deferred annuity insurance policy offering features certified by the Insurance Authority (“IA”) to be compliant with its Guideline on Qualifying Deferred Annuity Policy. It is a long-term participating life insurance product with a savings element and is not equivalent or similar to any kind of bank deposit. The plan is underwritten by HSBC Life (International) Limited (“HSBC Life” or “the Company”), which is authorised and regulated by the Insurance Authority ('IA') of the Hong Kong SAR to carry on long-term insurance business in the Hong Kong SAR. The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) is an insurance agent authorised by the Company. You will be subject to the credit risk of HSBC Life and your premiums paid will form part of HSBC Life’s assets. You do not have any rights or ownership over any of these assets. Your recourse is against HSBC Life only. This is a product of the Company but not HSBC, and it is only intended for sale in the Hong Kong SAR. In the event that you have to fully or partially surrender your policy during the early years, you may receive an amount significantly less than the premiums paid.
3. HSBC VHIS Flexi Plan is underwritten by the Company and it is only intended for sale through HSBC in the Hong Kong SAR. The Company is authorised and regulated by IA to carry on long-term insurance business in the Hong Kong SAR. HSBC is an insurance agent of the Company. The Company will be responsible for providing your insurance coverage, while our partner, AXA General Insurance Hong Kong Limited, will handle network management under your policy.
4. Initial Annuity Guaranteed Portion is a rounded percentage of the Monthly Guaranteed Annuity Payment divided by the Monthly Annuity Payment and is subject to change if a re-calculation of the Monthly Non-guaranteed Annuity Payment is triggered. Please refer to Policy Provisions for detailed terms and conditions.
5. Monthly Annuity Payment means Monthly Guaranteed Annuity Payment plus Monthly Non-guaranteed Annuity Payment, if any. Monthly Non-guaranteed Annuity Payment is not guaranteed and determined by the Company from time to time. The actual future amount may be lower or higher than that illustrated above.
6. Total premium paid refers to the total amount of premiums due under the Basic Plan (whether or not actually paid) as of the date of death of the life insured. Please refer to the Policy Provisions for detailed terms and conditions.
7. Pre-existing condition(s) shall mean, in respect of the insured person, any sickness, disease, injury, physical, mental or medical condition or physiological degradation, including congenital condition, that has existed prior to the policy issuance date or the policy effective date, whichever is earlier. An ordinary prudent person shall be reasonably aware of a pre-existing condition, where – (a) it has been diagnosed; (b) it has manifested clear and distinct signs or symptoms; or (c) medical advice or treatment has been sought, recommended or received. The Company may impose case-based exclusion(s) to the pre-existing condition(s) notified to the Company in the application for the plan and any subsequent information or document submitted to the Company for the purpose of the application. Unknown pre-existing condition(s) refers to any pre-existing condition(s) that the policyholder and/or insured person was not aware of and would not reasonably have been aware of at the time of application. Please refer to the Policy Provisions for detailed terms and conditions.
8. Full coverage shall mean the actual amount of eligible medical expenses and other expenses charged and payable in accordance to the terms and benefits of this policy.
9. Tax deduction eligibility is only applicable to policyholders or his/her spouse who are Hong Kong taxpayers. Tax deduction for the qualifying premiums paid under VHIS policy (not including levy) will be based on the premiums paid after deducting the premium discount (if any) for each year of assessment. The actual tax savings may be lower than the illustrated amount and is subject to review and agreement by the Inland Revenue Department on a case by case basis. For more information, please refer to www.ird.gov.hk or seek independent tax advice.
10. Maximum tax deductible limit per year is HKD60,000 for a single taxpayer in Hong Kong. It is an aggregate limit for deferred annuity premiums and Mandatory Provident Fund Tax Deductible Voluntary Contributions (“MPF TVCs”), meaning that an eligible taxpayer may claim tax deductions for deferred annuity premiums and MPF TVCs in aggregate up to this maximum limit per year. An eligible taxpayer is allowed to claim tax deduction for deferred annuity premiums covering his/her spouse up to a combined total maximum tax deductible limit per year of HKD120,000.