Compare QDAP (Hedge Longevity Risk)

No. Only products certified by the Insurance Authority as Qualifying Deferred Annuity Policies (QDAP) are eligible for tax deductions. The policy must meet a series of conditions, including:

• A contribution period of at least 5 years,
• An annuity payout period of no less than 10 years,
• Annuity payments can only begin when the policyholder is aged 50 or above, etc. 

QDAP Payout periods vary from 10 years to lifetime. Choose based on your retirement goals, expected lifespan, assets, and risk tolerance:

• For earlier stable income (e.g., retire at 50): Select plans starting payouts sooner, lasting 10–20 years.
• For lifelong protection against longevity risk (outliving savings): Opt for longer periods or lifetime annuities.

Later payout start ages mean longer accumulation and typically higher monthly amounts. Prioritize your expected retirement age, medical and lifestyle needs. Compare guaranteed monthly payouts and IRR across options, don't focus only on non-guaranteed returns. Align the payout design with your overall retirement plan, not just early recovery or early withdrawals. 

• Long-term fund lock-in: Premium payment periods typically last 5–10 years, and annuity payouts usually begin only at age 50 or older. Withdrawing early, especially in the first few years, can result in substantial loss of cash value and limited liquidity.
• Returns may fall short of expectations: Some QDAP products offer low guaranteed returns (with some internal rates of return, or IRR, around just 1%). Non-guaranteed components, such as bonuses or dividends, may not materialize, adding uncertainty, particularly for retirees.
• Better suited for high-income earners: If your income is modest and you fall into a lower tax bracket, the tax savings from QDAP contributions may be minimal, limiting the benefit.
• Early surrender losses: Initial premiums often cover insurer commissions and administrative costs, meaning early surrender values can be extremely low.

Before purchasing, ensure the product is approved by the Inland Revenue Department, carefully compare guaranteed IRR and total projected returns, assess whether your cash flow can comfortably support the premium commitments, and clarify payout age, method, and surrender terms. Never buy a policy solely to save on taxes, your retirement income needs should remain the central focus. 

When selecting a contribution period for a Qualifying Deferred Annuity Policy, consider your cash flow, tax benefits, and retirement goals. A 5-year plan requires higher annual premiums (minimum HK$36,000), making it suitable for those with ample liquidity who wish to fully utilize the annual HK$60,000 tax-deductible allowance quickly. A 10-year plan lowers annual payment pressure (minimum HK$18,000 annually) and is better suited for younger individuals pursuing long-term savings. 

Not necessarily. QDAP tax deductions are calculated on an individual basis, each taxpayer can claim up to HK$60,000 annually (shared with TVC contributions). If both spouses independently purchase qualifying deferred annuities and each reaches the deduction limit, filing taxes separately may allow them to fully utilize their respective allowances. Couples should evaluate their individual income levels and annuity contributions beforehand to determine the most tax-efficient filing method. 

The minimum age to purchase a qualifying deferred annuity is generally quite flexible, some products accept applicants as young as 18. However, annuity payouts can only commence at age 50 or older. 

A QDAP involves a premium payment period (typically 5 to 20 years), during which the policyholder makes regular contributions. Payouts begin only at a pre-specified future date (i.e. usually after age 50) and the key advantage is eligibility for tax deductions on contributions.

In contrast, an immediate annuity typically requires a single lump-sum premium, with payouts commencing right away (or shortly thereafter). It is primarily designed for retirees who want to convert savings into a steady income stream immediately. However, immediate annuities do not qualify for tax deductions. 

While both QDAPs and savings insurance are long-term insurance products, they differ significantly in purpose, structure, and tax treatment: 

You should first understand whether the policy structures including premium payment period, accumulation period and annuity income period suit your needs. Then you can compare the guaranteed and projected returns of different products, and be aware of the early surrender values. 

The Insurance Authority requires insurance companies to disclose the fulfillment ratio of participating insurance (including annuity) against the projected amount in the proposal illustrations. If the fulfillment ratio is 100%, it means that the insurer has achieved its projected non-guaranteed return. 

Up to HKD60,000 annual premium paid to a QDAP policy is eligible for a tax deduction. Based on a marginal tax rate of 17%, the maximum tax deduction is HKD10,200 per policy per year. The actual tax savings would depend on individual circumstances.