Mandatory Annuity Proposal Met With Reservations

Unionist Bill Tang has expressed reservations over a suggestion by Labour Secretary Law Chi-kwong for people to transfer their mandatory provident fund savings into an annuity plan, saying this would not benefit grassroots workers.

Law raised the idea in an interview with Sing Tao Daily, saying the government should study whether to make it mandatory for retirees to move their MPF balances into an annuity plan.

But Tang told an RTHK programme on Wednesday that the “steady income” from an annuity plan would be far too low for grassroots people to make ends meet.

For someone with around HK$200,000 of MPF savings, if they put the entire sum into an annuity plan, the monthly return would be just a little over HK$1,000, Tang noted.

He said before the transparency of the annuity system is improved and before the interest rates become more attractive, the government should not make it mandatory.

Speaking on the same programme, Billy Mak, an associate professor from Baptist University’s department of finance and decision science, said the government could consider making bigger contributions to the MPF accounts of low income workers, and let them choose how to invest the money.

Lawmaker Paul Tse also said he supports the concept of annuities, but added they should remain voluntary.

At present, the Hong Kong Mortgage Corp is providing Hong Kong’s only public annuity in the form of an insurance product for residents aged 60 or above, for a premium of between HK$50,000 and HK$3 million.