【Buy Insurance Yourself】Which type should Slash prioritise? What should be noted? (Part 2)

In Hong Kong, many Slashers earn a living by taking on freelance work. During good times, their income can be quite substantial, but in off-seasons, it may drop to nearly zero. Their income stability is often lower than that of regular employees, and their savings habits tend to be weaker, potentially leading to significant protection gaps in retirement. In reality, they should plan ahead and start formulating savings plans and retirement strategies as early as possible. Today, 10Life will discuss how Slashers should manage their finances.

Many Slashers do not contribute to the Mandatory Provident Fund (MPF). According to the law, anyone aged between 18 and 65, whether employed or self-employed, must contribute to MPF if they provide services or goods for income. However, if their monthly income is below HKD 7,100 or their annual income is below HKD 85,200, they are exempt from contributions.
 

MPF as a Key Pillar of Retirement
 

Contributing to MPF is not only a legal requirement but also a crucial retirement pillar for Slashers. They should actively participate and prepare for their retirement. Additionally, they may consider making Tax Deductible Voluntary Contributions (TVC)—a type of MPF contribution that offers flexibility to increase, decrease, suspend, or resume contributions based on personal circumstances. TVC also provides tax deduction benefits, with a combined annual tax deduction limit of HKD 60,000 when paired with premiums for Qualifying Deferred Annuity Policies (QDAP).
 

Of course, whether Slashers should purchase TVC in addition to MPF depends on their income stability and asset liquidity. Like MPF, TVC funds cannot be withdrawn before the age of 65 (except under specific circumstances stipulated by law). Moreover, the returns on funds within TVC are not guaranteed, and Slashers must bear the investment risks.
 

QDAP and Savings Insurance for Retirement Planning
 

Besides MPF and TVC, QDAP, as mentioned earlier, is another tool Slashers can consider for retirement planning. Often referred to as a "tax-deductible annuity" due to its tax incentives, QDAP offers both guaranteed and non-guaranteed returns. When factoring in the tax deduction effect, the product’s return rate can be even higher. Annuity products in the market generally serve three purposes: savings, retirement, and longevity, with contribution periods typically ranging from 5 to 10 years.
 

As for short-term savings insurance products, they usually have contribution periods of 1 to 3 years, offering guaranteed returns with low entry thresholds. Their return rates are often higher than those of regular bank fixed deposits. Currently, a few products also provide flexible surrender options, balancing investment returns and liquidity risks.
 

However, it is worth noting that short-term savings insurance and QDAP involve regular contributions. Slashers with unstable income should carefully assess their financial situation before purchasing. Early surrender may result in receiving an amount lower than the premiums paid. Slashers can also use the 10Life Insurance Decoder to compare insurance products:
 

• Compare short-term savings insurance
   
• Compare QDAP (savings annuity)

Further Reading:
 

1. 〈【Buying Insurance Made Easy】Which Type Should Slashers Prioritise? What Should They Be Aware Of? (Part 1)〉
2. 〈【Short-Term Savings Insurance Comparison 2021】Guaranteed Returns vs. Liquidity: Do You Have to Choose?〉
3. 〈QDAP Tax-Deductible Annuity Comparison Guide 2021〉

Note: The above information is provided by 10Life and is updated as of 30 November 2021. It is for reference only and does not constitute a sales proposal.

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.