【Tax-Deductible Annuity Comparison 2021】Flexible Mid-Term Savings Tool QDAP! Tax Deduction Benefits Drive Guaranteed Annual Returns Over 5%

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On the eve of tax season, many individuals consider purchasing a Qualifying Deferred Annuity Policy (QDAP) to save on taxes. QDAP, commonly referred to as a "tax-deductible annuity," allows policyholders to enjoy tax benefits, akin to a tax refund, which is why some also call QDAP a "tax refund annuity" (see note 1). There is a common misconception that tax-deductible annuities are solely for retirement planning; in fact, they can also be used for medium-term savings. When the tax savings are factored into the return calculations, the return rate of QDAP increases further, especially for high-income taxpayers, where the tax deduction effect is more pronounced. Returns can be divided into guaranteed and non-guaranteed expected returns, involving varying degrees of risk. This article primarily compares the guaranteed returns and breakeven years of QDAP, using a 45-year-old policyholder as an example.

What are the conditions for a tax-deductible annuity?

Not all deferred annuities qualify as QDAP. According to Guideline 19 issued by the Insurance Authority, a QDAP must meet the following requirements:

Total premium of at least HKD 180,000, with a minimum contribution period of 5 years
Annuity payout period of at least 10 years
Annuity recipient must be aged 50 or above to receive payouts
Disclosure of the product’s Internal Rate of Return (IRR) is required
Clear distinction between guaranteed and non-guaranteed amounts of the annuity
Premiums for additional benefits (e.g., critical illness coverage, hospital cash) must be calculated separately from the QDAP premiums

Tax deduction, not refund: How much tax can you save with QDAP?

QDAP policyholders can enjoy tax benefits, with a maximum tax-deductible premium of HKD 60,000 per year. Based on the highest tax rate (17%), this translates to a maximum tax saving of HKD 10,200 annually, though this process does not involve a tax refund.

Tax-deductible annuity breakeven as early as 8 years; 45-year-old policyholder can achieve over 5% average guaranteed return (including tax deduction) over 15 years

For clients targeting medium-term savings, QDAP products with high returns and quick breakeven periods are particularly attractive. Additionally, the tax deduction effect, akin to a refund, further boosts the savings return. Therefore, we calculate the guaranteed IRR of products before and after tax deductions.

Currently, QDAP product brochures often use a 45-year-old male policyholder as an example, listing the product’s guaranteed IRR and expected IRR (excluding tax deductions). As the contribution periods, accumulation periods, and income periods of QDAP products vary, we selected plans with a 5-year contribution period, income periods from age 50 to 59, 50 to 64, or 55 to 64, and denominated in USD. We focused on the IRR at age 60 to evaluate the product’s effectiveness for medium-term savings.

Chart 1: Comparison of Qualifying Deferred Annuity Policies for savings purposes (Policyholder: 45-year-old male)

Assumption: Policyholder is a 45-year-old male, 5-year contribution period, income period from age 50 to 59, 50 to 64, or 55 to 64, currency in USD²

Insurance Company/ Qualifying Deferred Annuity Policy	Income Period	Guaranteed Breakeven Year	At Age 60 Guaranteed Internal Rate of Return GIRR (Excluding Tax Deduction)	At Age 60 Maximum Guaranteed Internal Rate of Return IRR^3,4 (Based on 17% Tax Bracket)
BOC Life 中銀人壽延期年金計劃 (固定年期)	50 to 59	8	2.9%	5.2%
Hang Seng Insurance 「易入息」延期年金計劃 (100%全保證)	55 to 69	8	2.0%	4.4%
China Taiping 太平賦裕延期年金計劃	50 to 64	12	1.5%	3.6%
FWD 盈∙歲悅延期年金計劃	50 to 59	9	0.6%	3.0%
Sun Life 豐碩延期年金計劃	50 to 64	10	1.4%	3.0%
YF Life 萬通延期年金	55 to 64	12	1.1%	2.7%
AXA 「賞豐盛」延期年金計劃	55 to 64	10	0.7%	2.2%
AIA AIA延期年金計劃	55 to 64	14	0.3%	1.9%
Notes: The above information is provided by 10Life, updated as of 4 August 2021, for reference only and does not constitute sales advice. Readers should not make insurance decisions based solely on this information. Assumption: The client is a 45-year-old male, with a 5-year contribution period, income period from age 50 to 59, 50 to 64, or 55 to 64, currency in USD. Given the potential 1-year gap between purchasing an annuity and claiming tax deductions, the above IRR calculations assume tax relief begins 1 year after premium payment. The marginal tax rates in Hong Kong are 2%, 6%, 10%, 14%, and 17%. This chart uses the highest tax rate of 17% for calculations. However, the actual tax savings depend on individual circumstances and may differ from the amounts stated in the examples. To standardise the comparison of QDAP products’ returns at age 60, if the income period has not ended, it is assumed that the client surrenders the policy at age 60, and the guaranteed IRR at age 60 is calculated based on all guaranteed income received. For QDAP products with an income period from 55 to 64, if the policyholder holds the policy until maturity instead of surrendering early at age 60, the IRR of the QDAP product may change. 10Life collects publicly available data from insurance companies through various channels and calculates the above information using data and mathematical computations. These figures are for reference only and do not consider your personal needs. They are not sales advice. Before purchasing insurance, users should consult a licensed insurance advisor to discuss suitable insurance plans.

For a 45-year-old policyholder seeking annuity income from age 50, the above products from BOC Life, China Taiping, FWD, and Hang Seng Insurance offer this option.

In the past, some QDAP products had a guaranteed breakeven period of just 5 years, allowing policyholders to treat them as a "tax avoidance tool." Surrendering the policy immediately after completing contributions resulted in no loss, and factoring in tax deductions as returns could yield a return rate of 5.9% (see note 2). Of course, this contradicted the purpose of tax deductions encouraging medium- to long-term savings. Therefore, the shortest guaranteed breakeven period for QDAP now is 8 years, as seen in products from BOC Life and Hang Seng Insurance. If a policy is surrendered at the guaranteed breakeven year (8 years), relying solely on tax deductions, the return rate is only 3.1% (see note 3).

In reality, policyholders should not focus excessively on the breakeven year. Instead, retaining the QDAP for the full policy term can better achieve retirement savings goals. Therefore, the guaranteed return of a product is more noteworthy. The chart above shows that BOC Life QDAP offers a guaranteed IRR of 2.9% at age 60 (excluding tax deductions). When factoring in tax deductions, the guaranteed IRR for BOC Life QDAP increases to 5.2% (see note 2), far exceeding the return from surrendering at the breakeven year.

The above cases focus on returns at or before age 60. If the income period has not ended, it is assumed that the client surrenders the policy at age 60, and the guaranteed IRR at age 60 is calculated based on all guaranteed income received.

As an additional note, this article mainly analyses the guaranteed returns of QDAP. As a participating policy, QDAP also offers expected (i.e., non-guaranteed) returns, with detailed information available in the 10Life Product Decoder. Non-guaranteed returns are influenced by economic conditions, the insurer’s profitability, and dividend policies. Meanwhile, 10Life actuaries categorise QDAP into three types to help individuals better understand the positioning of various Qualifying Deferred Annuity Policies:

QDAP (Savings): Focuses on medium-term savings returns (annuity income starts well before the typical retirement age).
QDAP (Retirement): Emphasises medium- to long-term retirement planning after retirement (annuity income starts at the typical retirement age, with options for 10- or 20-year income periods).
QDAP (Longevity): Focuses on hedging longevity risk (annuity income starts at the typical retirement age, with a longer payout period, or even lifelong in some cases).

Lastly, 10Life reminds everyone that before purchasing a QDAP, it is essential to understand the purpose of the insurance and your affordability, as well as the potential risks of QDAP, such as losses from early surrender, liquidity risks, and changes in personal financial or employment circumstances. For readers interested in learning more about comparing QDAP products, you can refer to our earlier article, which references the 5-step approach proposed by the Insurance Authority to compare tax-deductible annuity products with practical examples. If you have any questions, you can consult licensed advisors through the 10Life Product Decoder.

Notes:

As the tax benefit does not involve a refund, strictly speaking, QDAP is more accurately termed a "tax-deductible annuity."
Assumption: The policyholder contributes HKD 60,000 annually for 5 years and is subject to the highest tax rate of 17%.
For calculating the IRR at the guaranteed breakeven year, in addition to considering the structure of the annuity product, we also assume:
a) The policyholder contributes HKD 60,000 annually for 5 years and is subject to the highest tax rate of 17%.
b) Given the potential 1-year gap between purchasing an annuity and claiming tax deductions, tax relief begins 1 year after premium payment.
The above information is provided by 10Life, updated as of 4 August 2021, for reference only and does not constitute sales advice.

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.

Last updated: 9 Apr 2026

10Life Editorial Team

Our team of professional content researchers focussing on insurance

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10Life Editorial Team

Our team of professional content researchers focussing on insurance

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10Life Product Comparison and 10Life Insurance Ratings are developed by 10Life Financial Limited, an authorised insurance broker company licensed with the Insurance Authority under License Number FB1526. 10Life Product Comparison and 10Life Insurance Ratings are developed for generic customer segments using mathematical calculations based on product information, facts and data, and are not influenced by any partnerships with or fees received from insurance companies. Any information on 10Life Platform ("10Life Information"), including but not limited to Product Comparison, Product Ratings, Blog Articles are intended for general education purpose and reference only. None of the 10Life Information is intended, nor should they be considered or relied upon, as regulated advice, insurance, financial, investment or professional advice, recommendation, approval, endorsement, invitation or solicitation in respect of any insurance, financial or investment products. 10Life Information does not take into account your individual needs. Reading 10Life Information should not be considered as conducting a suitability assessment, and is not sufficient to form the basis of any decisions to purchase any insurance products. You should rely on information authorised by insurance companies, carry out your own research and/or seek independent advice from licensed intermediaries before purchasing any insurance products or making any insurance decisions. While reasonable effort is used when collecting, validating and updating 10Life Information from various channels, none of 10Life Group and its subsidiaries, affiliates, agents, directors, officers and employees will be responsible for any liability, claim or loss arising from or associated with you using 10Life Information. No warranty, representation or guarantee is given by 10Life Group and its subsidiaries on the accuracy, completeness and timeliness of the information. If you have any questions on 10Life Product Comparison and 10Life Insurance Ratings, please email us at enquiries@10life.com

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[Tax Deduction Annuity Comparison 2021] Flexible Mid-Term Savings Tool QDAP! Tax Deduction Effect Drives Guaranteed Annual Returns Over 5%!

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