【Unlimited QE】 Guaranteed Returns for Qualifying Deferred Annuities Under Pressure – Act Fast to Lock in High Guaranteed Returns?

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To encourage citizens to save for retirement, the government has introduced the Qualifying Deferred Annuity Policy (QDAP), offering tax benefits to policyholders. Since its launch, QDAP, commonly referred to as a tax-deductible annuity, has gained significant popularity. The premiums paid can be used for tax deductions, saving up to HKD 10,200 in taxes (see Note 1), effectively acting as a government subsidy to enhance retirement returns. Additionally, QDAP has specific requirements for guaranteed returns to mitigate the risks of market fluctuations on policyholders’ retirement planning. However, the global outbreak of COVID-19 has triggered volatility in international stock markets. Governments worldwide, fearing economic recession, have urgently implemented rescue measures. The U.S. Federal Reserve has even introduced "unlimited QE" to lower borrowing costs, leading to a corresponding decrease in interest rates for Hong Kong banks. Consequently, the guaranteed returns of tax-deductible deferred annuity policies are also under pressure to be adjusted downwards.

Extremely Low U.S. Treasury Yields: Insurance Companies Likely to Cut QDAP Guaranteed Returns

The U.S. Federal Reserve’s unlimited quantitative easing and aggressive money printing to rescue the economy have caused interest rates to plummet sharply. The yield on 10-year U.S. Treasury bonds dropped from approximately 2.5% in April 2019 to about 0.7% in May this year. When insurance companies offer products with higher guaranteed returns, they simultaneously adopt more conservative investment strategies, with U.S. Treasury bonds serving as a key benchmark. Currently, U.S. Treasury yields are at extremely low levels. However, some QDAP products in the market still offer Guaranteed Internal Rates of Return (GIRR) significantly higher than U.S. Treasury yields. Such a large disparity implies a substantial reduction in insurance companies’ profit margins. For policyholders, the guaranteed returns of QDAP are contractually binding—insurance companies must deliver what they promise, with no room for deviation. Earlier media reports (see Note 2) have indicated that the GIRR of the latest generation of QDAP plans from companies like AXA Hong Kong and Macau and Hang Seng Insurance is lower than that of previous generations.

(Image excerpted from Ming Pao)

Most policyholders purchase QDAP just before the tax season to take advantage of tax-saving benefits as soon as possible. With the tax season now over, the enthusiasm for QDAP has cooled off momentarily. However, in the wake of COVID-19 and the activation of unlimited QE, the U.S. is accelerating its money printing efforts, and the world has changed. Given the continuously declining U.S. Treasury yields, how long can the QDAP guaranteed returns set before the global COVID-19 outbreak hold? Or will more insurance companies gradually lower the GIRR of QDAP to narrow the gap with U.S. Treasury yields? If readers are interested in QDAP products with higher guaranteed returns, they may not be able to wait until next year’s tax season to purchase. It is advisable to monitor the market trends of QDAP returns and make comparisons now. As a side note, the guaranteed return a policyholder receives is the GIRR stated in the policy at the time of purchase. Even if the product’s GIRR is adjusted later, the policyholder’s guaranteed return remains locked in at the rate agreed upon at signing.

Tax-Deductible Annuity: Fastest 15-Year Guaranteed Return at 3%

This time, with mid-term savings as the goal, we assume the policyholder is a 45-year-old male selecting a Qualifying Deferred Annuity Policy with a policy term (from the start of contributions to the end of the annuity income period) ranging from 15 to 25 years. We compare the Guaranteed Internal Rate of Return (IRR) of products at the time the policyholder reaches age 60. According to the basic requirements of QDAP, the minimum contribution period is 5 years, and the income period can start as early as age 50, lasting for 10 years. Therefore, the shortest policy term for QDAP is 15 years. To include more products, we have also incorporated policies with terms up to 25 years in the comparison below.

The table above shows that the Deferred Annuity Plan (Fixed Term) by BOC Life, Generali’s Tax-Deductible Deferred Annuity, and BEA Life’s “Smart悠” Deferred Annuity offer a guaranteed IRR ranging from 2.87% to 3.04% when the policyholder reaches age 60, clearly higher than other products in the market. The highest among them is BOC Life’s Deferred Annuity Plan (Fixed Term) at 3.04%, which requires an annual premium of USD 15,000. If the premium is below USD 15,000, policyholders can still achieve a guaranteed IRR of 2.95%. Additionally, the guaranteed IRR figures in the table do not account for the impact of tax deductions (see Note 1). When factoring in tax benefits, the guaranteed IRR of the aforementioned products could be further enhanced, depending on the policyholder’s tax bracket.

[Detailed Comparison of Savings Returns for Qualifying Deferred Annuity Policies]

In response to the COVID-19 pandemic, citizens have been diligently observing social distancing measures. The Insurance Authority has introduced temporary facilitative measures (see Note 3), effective until 30 June 2020, allowing insurance advisors to sell Qualifying Deferred Annuity Policies without the need for face-to-face meetings with clients. To ensure that the interests of policyholders and potential policyholders are protected, the Insurance Authority also requires clear disclosure of product information during the sales process and has extended the cooling-off period for policies to 30 days.

At the same time, the Insurance Authority has permitted virtual sales for certain Qualifying Deferred Annuity Policies. As of the publication deadline (15 May 2020), only BOC Life’s Deferred Annuity Plan (Fixed Term) and China Life’s Leisure Life Deferred Annuity offer online applications in the market. BOCHK clients can complete the entire application process through the BOCHK mobile app. Meanwhile, China Life’s application process is available only on their website, though the product’s annuity payout period is from age 60 to 108 and is not included in the product comparison in this article. Online applications for deferred annuities indeed provide convenience for busy working professionals. However, the sales process is regulated, and clients are required to read numerous terms and conditions, which may feel somewhat cumbersome. Nevertheless, thoroughly understanding the product is crucial. With a bit of patience, the process can be completed without much difficulty.

Lastly, 10Life would like to remind everyone that before purchasing a QDAP, it is important to understand the purpose of the policy and your financial capacity. Additionally, be aware of the potential risks associated with QDAP, such as losses from early surrender, liquidity risks, and changes in personal financial or employment circumstances.

Notes:

Purchasing a Qualifying Deferred Annuity Policy allows for tax benefits, with a deduction cap of HKD 60,000 per year on premiums. Based on the current highest tax rate (i.e., 17%), this translates to a maximum annual tax saving of HKD 10,200. For details, refer to the relevant website.
For details, see Ming Pao, 20 April 2020: “Returns on Annuity Savings Insurance Drop, Some by Nearly 1 Percentage Point; Analysts: Long-Term Policies May Be Affected”
The Insurance Authority has extended temporary facilitative measures and expanded their scope. For details, refer to the relevant website.

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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【Unlimited QE】 Guaranteed returns for qualifying deferred annuities under pressure. Act fast to lock in high guaranteed returns?

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