QDAP Savings
5 Star Products

To encourage tax payers to plan and save for retirement, the government introduced the Qualifying Deferred Annuity Policy (“QDAP”) in 2019. If a deferred annuity product satisfies the Insurance Authority (“IA”)’s criteria on premium, payment period, annuity income period and disclosures, the insurance company may register the product as a QDAP.

The policyholder of QDAP can enjoy tax deductions on the premium. Both the product break-even year and the rate of return can be enhanced if tax savings are considered, particularly for policyholders with high marginal tax rates.

10Life has collected data on different QDAP products in the market. Based on the assumptions that the policyholder is a male at age 45, paying premium for 5 years (or nearest), 10Life actuaries have compared the guaranteed return, projected return and early surrender coverage, and also calculated the impact of tax deductions to the product return. 10Life rates products according to the market benchmark, with the best in class awarded as “5 Star Product”.

award
USD - QDAP (Savings)
In alphabetical order by company name
Category
award
USD - QDAP (Savings)
Category
In alphabetical order by company name
FWD
RetireFun Deferred Annuity Plan
Generali
LionHarvest Pro Deferred Annuity
Hang Seng Insurance
eIncomePro Deferred Annuity Plan (100% Guaranteed)
Sun Life
Foresight Deferred Annuity
Well Link Life
Well Enjoy Deferred Annuity Plan (Supreme)
YF Life
MY Deferred Annuity
How we rate QDAP products
As QDAP Savings is for savings, 10Life scores the products based on the product returns and early surrender coverage, with higher weight on guaranteed over projected return, as the latter consists of non-guaranteed amounts. By comparing the Present Value (PV) of the total premium to be paid and the total income receivable, we can compare the cash flow of different products and calculate the product scores.
Guaranteed Return (60%)
Projected Return (20%)
Early Surrender (20%)
What are the Insurance Authority (IA)’s criteria on QDAP?
  • Minimum total premium of HK$180,000 and minimum premium payment period of 5 years
  • Minimum annuity period of 10 years
  • Annuity income to start at the age of 50 or above
  • Disclosure of minimum to maximum Internal Rate of Return (IRR) of the product
  • Clear presentation of the guaranteed and non-guaranteed annuity payment
  • Clear separation of premium of all riders (e.g. critical illness, hospitalisation cash, etc.) from the QDAP premium

You may find the full details from GL19: Guideline on Qualifying Deferred Annuity Policy issued by IA.
How much is the tax saving?
Premium paid for QDAP is tax deductible up to a limit of HK$60,000 per year. The actual tax amount saved would depend on your marginal tax rate. For example, based on the prevailing highest tax rate of 17%, you may save up to $10,200 tax payable per year from buying QDAP.
What should I consider when choosing QDAP?
When choosing QDAP, policyholders can compare products in the five steps proposed by the Insurance Authority*:
  • Understand the policy structure
  • Assess your personal needs
  • Compare internal rates of return
  • Look at the fulfillment ratio
  • Pay attention to the surrender value
10Life also published an article (in Chinese only) earlier to illustrate how to apply the QDAP comparison method above. You can click here to browse the article.
*For further details, please visit the Insurance Authority website.
Would the Inland Revenue Department (IRD) recover my tax deductions if I surrender my QDAP early?
Under current arrangements, early surrender of policy would not make the tax deductions recoverable by the IRD. However, if you cancel the policy during the cooling-off period and have your paid premium refunded, you would need to pay back any tax deductions made. For further details regarding tax deductions, please visit the IRD website.
What are guaranteed and projected internal rates of return? What is the difference between the two?

QDAP will accumulate the policyholder’s savings and convert into a stable income in the future. 10Life compares the returns of annuity products using Internal Rate of Return (IRR). Simply put, IRR can be understood as the annualised rate of return on investment.

According to the Insurance Authority, all QDAP product brochures must use a 45-year-old non-smoking male policyholder as an example to disclose the product IRRs. In addition, consumers can refer to the product brochure to understand the IRRs of the product under different payment periods, annuity start age and income periods.

IRRs can be guaranteed or projected. The guaranteed IRR is the return contractually guaranteed by the insurance company to the policyholder, while the projected IRR includes guaranteed and non-guaranteed returns. Non-guaranteed returns are affected by multiple factors such as the insurance company’s investment performance, profit sharing policy and the general economic environment, hence it is difficult to predict.

What is the shortest breakeven year of QDAP?
QDAP is a long-term insurance product. Consumers need to understand their ability to continue paying premium. As deferred annuities do not provide high liquidity especially in the early stage of the policy, policyholders should have other liquid funds to meet sudden needs. If the policyholder surrenders the policy early, the amount received may not cover the premium paid. The shortest guaranteed breakeven year of QDAP products currently in the market is 8 years.
What is fulfillment ratio?
The Insurance Authority requires insurance companies to disclose fulfillment ratios of products with non-guaranteed payouts. A fulfillment ratio of 100% means the insurance company has achieved its projected non-guaranteed payout. However, as QDAP products were first launched in 2019, it would take awhile till the first fulfillment ratios can be published.
Is the 10Life scoring methodology reliable?
10Life’s scoring methodology is open and transparent. It considers factors important to consumers. You can refer to the scoring methodology to understand the assumptions and considerations behind the scoring. The ratings and scores are for reference only, and do not constitute sales recommendations. Before purchasing products, you should understand your personal needs and analyse whether QDAP is suitable for you.
Disclaimer
  1. The information on 10Life is intended for general education purpose and reference only, and does not constitute any insurance, financial, investment or other professional purchase advice or solicitation to buy insurance, financial or investment products. 10Life Product Ratings and Scores are mathematical calculations based on public product information and assumptions for generic customer segments. The Product Ratings and Scores DO NOT reflect YOUR personal needs. 10Life hereby excludes any liability arising from using the information and will not make warranty or guarantee on the accuracy, completeness and timeliness of the information or for any claims and / or losses caused thereby. You should seek independent professional advice and review the insurance product information carefully before purchasing any insurance products. The information shown in the communications placed on 10Life does not constitute an offer or solicitation for the purchase or sale of any banking or insurance products or services.
  2. 10Life Insurance Product Ratings are based on facts and data, and are not be influenced by any partnerships with insurance companies.
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