【Buying Insurance Yourself】Which type should a Slash prioritise? What should they look out for? (2)

Many Slashes in Hong Kong earn a living by taking on Freelance work. Their income can be quite substantial during prosperous periods, but may be close to zero during the low season. Their income is less stable than that of regular employees, and they tend to have a weaker saving habit, potentially leaving a significant protection gap in retirement. In fact, they should plan ahead by establishing a savings plan and planning for retirement as early as possible. Today, 10Life will discuss how Slashes should manage their finances.

In many cases, Slashes do not make MPF contributions. In fact, under the law, anyone aged between 18 and 65, whether employed or self-employed, who provides services or goods in return for income is required to contribute to MPF. However, if relevant income is less than HK$7,100 per month or HK$85,200 per year, contributions are not required.
 

MPF is one of the pillars of retirement planning
 

Making MPF contributions is not only a legal requirement, but also a very important pillar of retirement planning for Slashes. They should participate actively to prepare for retirement. In addition, they may consider making tax-deductible voluntary contributions (TVC). TVC is a type of MPF contribution. Contributions can be increased, reduced, suspended or resumed at any time according to individual circumstances, offering a high degree of flexibility. TVC contributions, together with premiums for qualifying deferred annuity policies (QDAP), are eligible for a maximum tax deduction of HK$60,000 in each assessment year.
 

Of course, whether a Slash should purchase TVC in addition to MPF depends on their income stability and asset liquidity, as, like MPF, TVC cannot be withdrawn before the age of 65, except under specific circumstances prescribed by law. In addition, returns from funds held in TVC are not guaranteed, so Slashes must bear the investment risk.
 

QDAP and savings insurance can help with retirement planning
 

In addition to MPF and TVC, QDAP, mentioned above, is another tool that Slashes may consider for retirement planning. As QDAP offers tax incentives, it is also commonly known as a “tax-deductible annuity”. It provides both guaranteed and non-guaranteed returns. If the tax benefits are taken into account, the product’s rate of return will increase further. Annuity products available on the market can be divided into three categories according to their objectives: savings, retirement and longevity. The contribution period is usually between 5 and 10 years.
 

As for short-term savings insurance products, the contribution period is generally between 1 and 3 years. They offer guaranteed returns, have a low entry threshold and provide a higher rate of return than ordinary bank time deposit rates. A small number of products currently also offer flexible surrender options, helping to balance investment returns and liquidity risks.
 

However, it is worth noting that short-term savings insurance and QDAP involve regular contributions. Slashes with unstable incomes should first assess their income situation before taking out a policy. If the policy is surrendered early, the amount received may be less than the premiums paid. Slashes can also use the 10Life Insurance Decoder to compare insurance products:
 

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

Further reading:
 

1. 〈【Buying insurance without assistance】Which type should Slashes prioritise? What should they pay attention to? (I)〉
2. 〈【Short-term savings insurance comparison 2021】Guaranteed returns and liquidity: must you always sacrifice one for the other?〉
3. 〈2021 QDAP tax-deductible annuity comparison guide〉

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

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.