【Immediate Annuity Comparison】Preparing for retirement: which annuity pays best?

With Hong Kong’s population aging and life expectancy continuing to rise, the current average life expectancy for men in Hong Kong has reached 82.5 years, while for women it is even higher at 88.1 years¹. If a worker treats 60 as their ideal retirement age, retirement could easily last more than 20 years. However, some people, worried about financial pressure, may need to tighten their belts after retirement or even return to the workforce to cover everyday living expenses.

Rather than worrying about finances after retirement, it is better to start planning early for the second half of life, making comprehensive arrangements that protect future living standards, reduce the burden on family, and help realize an ideal retirement. Many people cash out their MPF on retirement and, together with years of savings, will then have a substantial sum of cash on hand. Some choose to put the funds into bank time deposits or invest in the property or stock markets; many also consider using immediate annuities to create a stable cash flow for later life and hedge longevity risk. This time we compare three distinctive immediate annuity products to help readers choose the immediate annuity that best suits them. 

Many people have a substantial sum of retirement savings when they retire, and how they use this money will directly affect their quality of life after retirement. One option, immediate annuities, can convert retirement savings into a stable cash flow right away, paid monthly or annually on a regular basis, and they usually offer a certain return, reducing the financial pressure caused by longevity.

Aside from immediate annuities, retirees can also consider options such as fixed deposits, stocks, or property investments, but each carries different risks or time costs: fixed deposit interest rates are affected by changes in the economic environment, and on maturity you need to consider renewing or transferring the funds, involving frequent "moving of funds," which is inconvenient; property investment requires handling tenant requests, maintenance and vacancy issues, a process that involves complicated procedures and is time-consuming; stock prices are highly volatile, and older people may need to check price movements frequently and bear market pressure. 

In contrast, immediate annuity products have a simple structure, can provide retirees with long-term stable cash flow that is not affected by market volatility, and require no time to manage. For those seeking simplified financial management and a stable retirement, immediate annuities are an effective choice. It is worth noting that the original purpose of immediate annuities is to convert a lump sum into long-term stable cash flow, not to provide policyholders with flexible access to large amounts of funds. 

Annuities, as a retirement financial planning tool, can provide a stable source of income, so we need to compare them carefully to choose a suitable product. There are not many immediate annuity products on the market; this time we will compare three “buy-and-pay-immediately” products: the Hong Kong Annuity Scheme launched by the Hong Kong Annuity Company (wholly owned by the government through the Exchange Fund), AXA’s Sheng Zai Life Immediate Annuity Plan (盛載人生即享年金計劃), and BOC Life’s Exceptional Immediate Annuity Plan (非凡即享年金計劃). Assuming a 60-year-old male policyholder, a single premium of HK$1,000,000 and a lifetime annuity payout.

According to Table 1, the three immediate annuity products each have their own features. The Hong Kong Annuity Scheme pays fully guaranteed annuities, with a first-year guaranteed annuity of up to HK$61,200. Even at entry ages of 75, 85, or 100, the product can provide the market’s highest "guaranteed" and "expected" annuity income; AXA can also provide fully guaranteed annuities, although the guaranteed payback period (including guaranteed surrender value) is as long as 25 years. However, the product is specially designed to include a non-guaranteed terminal bonus (only payable on surrender or upon the policyholder’s death); among the three products, Bank of China Life has the earliest guaranteed payback period (including guaranteed surrender value), at only 6 years, but it only pays fully guaranteed annuities in the first five years and combines guaranteed and non-guaranteed benefits from the sixth year onward.  

Using Hong Kong's average life expectancy of 85.3 years² as a basis, assuming the above policyholder reaches age 85 and receives annuity payments for a total of 25 years, the Hong Kong annuity clearly achieves a higher guaranteed return, reaching HK$1.53 million, receiving HK$61,200 per year, i.e., HK$5,100 per month. However, if the insured dies early and the accumulated annuity payments received are still less than the premiums paid, does the insured suffer a loss? In fact, beneficiaries will receive a guaranteed death benefit to ensure that the guaranteed death benefit plus the accumulated annuity payments exceed the premiums paid.

Among these three products, only AXA provides a projected death benefit. However, note that the "projected" figures are not guaranteed, and the actual amount may vary depending on the insurer's investment performance. 

As the population ages, retirees' demand for stable cash flow has increased, but they also want to maintain liquidity in case they face large medical bills or need emergency funds. Some annuity products offer flexible withdrawal arrangements; for example, the Hong Kong Annuity Plan's "Special Withdrawal Arrangement" allows the insured to withdraw up to 100% of the paid premium balance to pay medical expenses without a withdrawal fee, with a lifetime total withdrawal cap of HK$1,000,000. The paid premium balance refers to the remaining premium after deducting annuity amounts already received.

In addition, different products also provide extra protections designed for seniors' specific needs. For example, AXA offers a cognitive impairment benefit: if the insured is diagnosed with severe cognitive impairment before age 80, a care benefit equal to 100% of the guaranteed annuity is paid monthly for 10 years; Bank of China Life provides a life-stage reward, giving a one-off bonus equal to three months' guaranteed income when the insured experiences major life events such as marriage or the birth of a child or grandchild, up to two times. 

 Besides immediate annuities, a policy reverse-mortgage plan is also an option for retirees to obtain cash flow. A policy reverse-mortgage plan involves pledging an existing life insurance policy as collateral, borrowing from the insurer, and withdrawing cash in installments.

The main difference between the two is that an immediate annuity requires a lump-sum purchase and is a retirement financial planning tool that can provide the policyholder with a long-term, stable cash flow and effectively hedge longevity risk; a policy reverse-mortgage plan uses the value of an existing policy as collateral for borrowing — it is essentially a loan, does not provide lifelong protection, may deplete cash prematurely, and you should also be aware of interest accumulation and the impact on the original policy’s coverage.

In fact, which option to choose depends on individual circumstances, including existing asset allocation, liquidity needs and risk preferences. If you are interested in immediate annuities or need more detailed product consultation, feel free to contact 10Life insurance advisors via WhatsApp. 

Notes：
1.Centre for Health Protection – Male and female life expectancy at birth, 1971 to 2023  
2.AM730 feature: Living beyond 100, enjoying healthy aging 
3. Last updated: 18 August 2025

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.