[Finance Wiz @Daniel] How a Qualifying Deferred Annuity Policy (QDAP) can help you achieve your ideal retirement – discover four key benefits & tax saving tips!
Finance2025-03-21
5 Mins Read
In recent years, the term ‘Active Retirement’ has become increasingly popular, as more people view leaving the workforce as an opportunity to boldly pursue their dreams and interests. Chasing aspirations is no longer exclusive to the young. However, turning dreams into reality requires solid financial support. According to a survey by the Hong Kong Investment Funds Association (HKIFA)1, working individuals estimate that they would need an average of HKD 7.6 million to maintain their pre-retirement standard of living after retirement. This highlights the importance of early retirement planning.
There are many financial planning tools available on the market, and a Qualifying Deferred Annuity Policy (QDAP) may be an ideal option. Not only can it provide a steady income stream for retirement, but also it can qualify for tax deductions2 if you meet the eligibility criteria. Today, let me guide you through retirement planning and explore how a QDAP can help you achieve your goals.
What does your ideal retirement look like?
The cost of retirement varies depending on the lifestyle you wish to lead. Some people dream of frequent trips ‘back to their hometown’ or even embarking on a nomadic lifestyle around the world. Others prefer a simple and peaceful retirement, spending more time with family. Some may choose to continue giving back to society through voluntary and charity work.
Since everyone’s ideal retirement is different, it is important to envision your future lifestyle, including travel, hobbies, and overall quality of life. Here are some key retirement expenses to consider:
- General retirement expenses: Basic costs include food, housing, healthcare, and daily living expenses. Additionally, you should set aside funds for travel, leisure, and other hobbies to maintain a fulfilling lifestyle.
- Voluntary & charity work expenses: If you plan to engage in voluntary or charity work after retirement, you will need to budget for related costs such as travel and training, in addition to your essential living expenses.
- Relocation & retirement abroad expenses: If you plan to retire overseas, your budget will need to cover relocation costs, housing purchases or rentals. It is also crucial to consider local healthcare and living costs in your chosen destination to ensure your savings can support a comfortable retirement lifestyle in your new place of residence.
Looking for protection while enjoying tax deductions?
Try our TaxBliss Calculator now and discover how 'IncomeBliss Deferred Annuity Plan' can provide you with both!
How to achieve your retirement savings goal?
Once you have determined the expenses required for your retirement, the next step is to implement a financial plan to gradually achieve your savings goal.
1. Take stock of your assets
You need to have a clear understanding of your current assets, including cash, savings, investments, and property. At the same time, consider potential sources of income in retirement, such as pensions, rental income, and government subsidies. Taking stock of your assets will help you assess your current financial situation and provide a basis for your financial planning.
2. Develop a strategy
Based on your retirement goals and current asset situation, create a practical financial strategy that focuses on both increasing income and controlling expenses. On the income side, this should include savings and investment plans aimed at steadily growing wealth. On the expense control side, consider qualifying tax-deductible products to ease immediate financial pressure while enhancing protection for healthcare and retirement.
3. Start early
Time is your ally when it comes to financial planning. Starting to save and invest early allows you to fully take advantage of compound interest, helping your retirement savings grow over the long term. Even if you contribute a small amount each month, long-term accumulation will build a significant amount of wealth.
Incorporating a QDAP into your financial planning
Enjoy tax deductions and a stable retirement income with four key benefits
When planning for retirement, a QDAP can be a suitable and stable financial tool. Designed specifically for retirement planning, this product allows policy holders to pay premiums regularly during the premium payment term. After reaching a specified age, they will begin receiving a fixed annuity income during the designated annuity period, ensuring the policy holders continuous financial support after retirement. Additionally, the premium paid for a QDAP policy can be used for tax deduction2, helping taxpayer to ease your current financial burden while securing their long-term retirement future.
Below, we explore the four key advantages of a QDAP in detail.
Four key advantages of a QDAP
1. Stable retirement income
A QDAP provides a stable source of retirement income. After retirement, individuals no longer receive a regular salary, but the QDAP can ensure a continued stream of income, helping to maintain a good quality of life.
2. Tax deductions2
Under Hong Kong's tax regulations, the maximum tax deductible allowance for the premiums paid by the policyholder for the QDAP is HKD60,000 per tax year2,3. The deduction amount does not represent the actual tax savings amount; the QDAP premiums must be multiplied by the applicable tax rate to determine the final tax savings amount1. For example, with highest marginal tax rate of salaries tax of 17% , an individual can save up to HKD10,200 in tax2,3,4. If both you and your spouse purchase a QDAP, a family can save up to HKD20,400 in taxes, also assuming the highest marginal tax rate of salaries tax of 17% applied2,3,5. This can help reduce personal income tax pressure, enabling you to build retirement savings while addressing immediate financial needs.
3. Flexibility and freedom
A QDAP also offers high levels of flexibility and freedom, allowing you to customise your retirement plan according to your personal circumstances. For example, AXA's ‘IncomeBliss Deferred Annuity Plan’ offers options such as choosing a 5-year or 10-year premium payment terms, as well as a 10-year or 20-year annuity period6, helping you align your plan with your retirement timeline. You can choose the policy currency in either HKD or USD to plan for your future. You can also choose between cash payouts to the annuitant or leave your annuity payments with us to accumulate interest7. If you wish to change your annuity payment options, you can do so at any time by providing written notice, without any additional charges8.
4. Managing longevity risk
With increasing life expectancy and rising inflation, a QDAP is a great tool for encouraging people to make comprehensive and long-term financial plans to address the potential long-term living costs and uncertainties of retirement. It helps prepare both individuals and families for a secure future. AXA’s ‘IncomeBliss Deferred Annuity Plan’ also includes benefits such as dementia advance benefit9 and life protection, ensuring that if the annuitant passes away, the death benefit will be at least equal to the total premiums paid, providing greater security for the annuitant and their family.
Looking for protection while enjoying tax deductions?
Try our TaxBliss Calculator now and discover how 'IncomeBliss Deferred Annuity Plan' can provide you with both!
Tax deduction tips for QDAPs
When it comes to tax deductions for QDAPs, in addition to individual tax deduction tips, married couples should also consider the following points, as these can help you save even more on taxes!
- For the 2019/20 tax year and onwards, the maximum tax deductible allowance for tax deductible MPF voluntary contributions and qualifying deferred annuity premiums is HKD 60,0002,3.
- If married couple separate taxation and agree to share the deduction amount, you can apply for a deduction for the qualifying deferred annuity premiums your spouse has paid . Therefore, you should first utilise the deduction amount for those with higher incomes and higher tax rates to save more tax2.
- If one spouse has paid qualifying deferred annuity premiums exceeding the deduction amount and the other spouse has not fully utilised their deduction amount, you can choose to have your spouse claim the remaining deduction amount for you to maximise tax savings2.
- If you plan to claim a tax deduction after submitting your tax return, you can fill out IR831 form and submit it to the Inland Revenue Department within 6 years of the end of the relevant tax year2.
How to choose the right QDAP for you
1. Assess your financial situation
Start by evaluating your current financial situation, including your income, expenses, savings, and investments. This will help you determine how much income you will need after retirement to maintain your current standard of living.
2. Consider your retirement goals
Next, think about your retirement goals, such as your desired retirement age, lifestyle, and expected retirement expenses. This will help you figure out how much income your QDAP needs to provide to meet those objectives.
3. Compare different QDAPs
Take the time to carefully compare various QDAPs, looking at factors such as guaranteed and non-guaranteed returns, payment term, annuity periods, death benefit, and other policy options.
4. Pay attention to investment choices
A QDAP typically offers a range of investment options, such as stocks, bonds, and money market funds. Consider these choices carefully to ensure they align with your investment objectives and risk tolerance.
5. Consult a professional
If you're unfamiliar with QDAPs or unsure how to choose the right one, it’s advisable to seek the advice of a professional financial consultant. They can provide tailored recommendations based on your individual circumstances and goals.
Whenever considering any product, it is essential to first assess your personal needs and evaluate whether it will affect your current standard of living and financial plan. Only after careful consideration should you make a decision.
AXA IncomeBliss Deferred Annuity Plan features
- Self-funded pension: Start receiving monthly annuity payments as early as age 5010. Enjoy a stable monthly income for an annuity period of up to 20 years6.
- Ensure the future well-being of your family: Provide dementia advance protection9 benefit and life protection. .
- Tax deduction: Enjoy up to HKD60,000 in tax deductions2,3.
- Annual discount: Enjoy a 5% premium discount11 every policy year during the premium payment term, a total premium discount up to 50% of the first year’s annual premium12.
- Enhance control with policy currency options: Choose between US dollar and Hong Kong dollar policy currencies.
Retirement is not the end, but rather the beginning of a new chapter in life. Regardless of the lifestyle you choose for your retirement, it is crucial to start preparing for it early. A QDAP not only provides tax benefits today but also ensures a stable income for the future, securing a comfortable and prosperous second life.
Subject to terms and conditions. Please refer to the product brochure and promotional materials in the website link for details.
1. Source: Hong Kong Economic Times, 《 760萬才夠退休？港人預計儲蓄僅能用到78歲 低於平均壽命》 (Chinese only)
2. For details on tax deductions, please refer to the relevant product brochure and visit the website of Inland Revenue Department (IRD) of HKSAR or contact IRD for tax related enquiries.
3. HKD60,000 is the maximum tax deductions per taxpayer per year for qualifying annuity premiums and MPF tax deductible voluntary contributions.
4. Assuming the Hong Kong taxpayer has purchased a QDAP, and can claim the maximum tax deduction amount of 17%. It is also based on the information on allowance published by the Inland Revenue Department (“IRD”) as of the May 2024 and is subject to change from time to time. Only the QDAP premiums paid in relation to the QDAP payments can be tax deductible.
5. Assuming two Hong Kong taxpayers have purchased a QDAP, and can claim the maximum tax deduction amount of 17%. It is also based on the information on allowance published by the Inland Revenue Department (“IRD”) as of the May 2024 and is subject to change from time to time. Only the QDAP premiums paid in relation to the QDAP payments can be tax deductible.
6. After the accumulation period, customer can receive monthly annuity payments for a duration of up to 20 years. Please refer to the relevant product brochure for details.
7. The monthly annuity payment will be left with us to accumulate for interest. The interest rate is not guaranteed and shall be determined by the Company from time to time. Withdrawal from the balance of monthly annuity payment accumulated is free of charge.
8. You may request to change your annuity payment option by sending written notice (in such form and manner satisfactory to us) to the Company. The change of annuity payment option is free of charge. Any approved change to the annuity payment option will take effect from the next policy monthiversary.
9. Eligibility for the dementia advance benefit is subject to certain criteria and exceptions. The benefit payable under this dementia advance benefit is equivalent to the amount of death benefit payable under IncomeBliss as if the annuitant died on the date of first diagnosis of Severe Dementias. Once this dementia advance benefit becomes payable, the policy will automatically terminate. Please refer to the policy contract for further details.
10. Only applicable to policies with issue age of 18 - 40.
11. Only qualified annuity premiums paid under IncomeBliss Deferred Annuity Plan can be tax deductible. For the purpose of tax deduction, the premium discount offered by AXA will not be considered as qualified annuity premiums paid.
12. Applicable to policy with a premium payment term of 10 years and subject to terms and conditions. Please refer to product brochure and promotional leaflet for more details.
The above content is reviewed by Mr Daniel Lau - Head of Wealth Management Training of AXA Hong Kong and Macau.
Insurance plans vary in coverage and are subject to their respective terms and conditions. For detailed coverage of the plan, please refer to the relevant product brochure and policy contract.
No warranty or responsibility is assumed by AXA Hong Kong and our related or holding companies regarding non-infringement, security, accuracy, completeness, adequacy, reasonableness, fitness for a purpose or free from computer viruses in connection with the information and materials provided. AXA Hong Kong and our related companies and holding companies do not accept any liability for any loss, damage, cost or other expense, whether wholly or partially, directly or indirectly, arising from any error, inaccuracy or omission of the information and materials to the extent that such liability is not excluded by law.
IncomeBliss Deferred Annuity Plan is underwritten by AXA China Region Insurance Company (Bermuda) Limited (Incorporated in Bermuda with limited liability)(“AXA”).
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