QDAP Essentials

Customers applying for the BOC Life's Qualifying Deferred Annuity Policies* are not required to undergo any medical examination, which is convenient and time saving.

BOC Life's Qualifying Deferred Annuity Policies* offer policy currencies of HKD, USD and RMB for your selection. Customer can choose the policy currency most suitable to his/her own needs upon application. For details of exchange rate risk, please refer to the section Risk Disclosure of RMB and USD Insurance in the product brochures.

With the aim of meeting various customer needs in retirement protection, BOC Group Life Assurance Company Limited (“BOC Life”) launched BOC Life Deferred Annuity (Fixed Term) and BOC Life Deferred Annuity (Lifetime) in 2019. They are Qualifying Deferred Annuity Policies certified by the Insurance Authority and have been well-received in the market. BOC Life's Qualifying Deferred Annuity Policies* aim to provide guaranteed monthly annuity income, assisting customers to enjoy desired retirement life. Moreover, BOC Life Deferred Annuity (Lifetime) provides Non-guaranteed Monthly Annuity Income (Monthly Dividends) (if any) and Terminal Dividend (if any), so as to allow the Policy Owners an opportunity to earn potentially higher returns.

Taking BOC Life Deferred Annuity (Fixed Term) for example, a Policy Owner will receive a guaranteed monthly annuity income for 10 years after just 5 years of premium payments, as well as the opportunity to enjoy tax deductions on the premiums paid.

Additionally, BOC Life Deferred Annuity (Fixed Term) (Apply via mobile banking) was launched in 2020. Customer can apply for BOC Life Deferred Annuity (Fixed Term) (Apply via mobile banking) through BOCHK mobile banking. With its simple application process, planning for future becomes quick and easy.

As for BOC Life Deferred Annuity (Lifetime), it is the first Qualifying Deferred Annuity Policy in the market to provide lifelong annuity income to annuitants. By paying premiums for just 5 years or 10 years, the Policy Owner will receive a Guaranteed Monthly Annuity Income from the first Monthiversary after the Policy Anniversary on or immediately following the Insured's age of 60 during his/her lifetime. Furthermore, the minimum issue age is as low as 18 years old.

For more product details, please visit https://www.boclife.com.hk/en/category/annuity.html

Customer can enroll in SmartViva Flexi VHIS and/or BOC Life Standard VHIS which provide comprehensive medical protection and are also Certified VHIS-compliant Plans for tax deduction applications.

For more product details, please visit https://www.boclife.com.hk/en/category/health-protection.html

The assets supporting the policies under BOC Life Deferred Annuity (Fixed Term) and BOC Life Deferred Annuity (Fixed Term) (Apply via mobile banking) mainly consist of fixed income instruments or interest-bearing securities (including but not limited to government and corporate bonds, etc.).

• BOC Life primarily invests in investment-grade bonds, together with a small portion of high-yield bonds and emerging-market bonds to further improve yield.
• Under normal circumstances, the major markets invested by BOC Life are North America, the Chinese mainland, Hong Kong China and other Asian developed countries.

With the aim of achieving our long term investment target, BOC Life, at our sole discretion, reserves the right to adjust the aforementioned asset allocation when there are material changes in market outlook and condition, or engage in other financial arrangements including but not limited to reinsurance arrangement. BOC Life aims at investing in assets denominated in policy's currency. If the currency by which the assets are denominated is not the same as policy currency, BOC Life may use derivatives to manage the impact of currency risk. The Interest Rate for Accumulation is determined based on market conditions and expected investment return of BOC Life. In light of the above factors, Interest Rate for Accumulation is not guaranteed and may be higher or lower than the values illustrated in the benefit illustration provided at point of sale. Please refer to the relevant product brochures for details.

BOC Life invests globally in various types of assets, in order to achieve the advantages of diversification in investment portfolio. The assets supporting the policies under BOC Life Deferred Annuity (Lifetime) mainly consist of the following:

Fixed income instruments or interest-bearing securities include but not limited to government and corporate bonds, etc.

• BOC Life primarily invests in investment-grade bonds, together with a small portion of high-yield bonds and emerging-market bonds to further improve yield.
• Under normal circumstances, the major markets invested by BOC Life are North America, the Chinese mainland, Hong Kong and other Asian developed countries.

Growth assets include but not limited to listed equity, private equity, mutual funds, properties investment, etc. BOC Life invests in diversified growth assets, which aims to achieve a higher long term return over fixed income investments.

With the aim of achieving our long term investment target, BOC Life, at our sole discretion, reserves the right to adjust the aforementioned asset allocation when there are material changes in market outlook and condition, or engage in other financial arrangements including but not limited to reinsurance arrangement. BOC Life aims at investing in assets denominated in policy's currency. If the currency by which the assets are denominated is not the same as policy currency, BOC Life may use derivatives to manage the impact of currency risk.

For the latest Investment Strategy, please refer to BOC Life website www.boclife.com.hk.

Philosophy in Deciding Dividends:

Participating insurance plans provide Policy Owners an opportunity to receive a share of profits attributable to the participating life insurance business of BOC Life by means of dividends, with the potential prospect of long-term rates of return. To accomplish the purpose, we invest in a wide range of asset portfolios that are prudently chosen by BOC Life to balance the risk. In general, the asset portfolios mainly consist of fixed income securities and equity investments.

The actual amount of dividends is determined by the stipulated surplus sharing approach in BOC Life's policy, which is based on the past experience of BOC Life and the long-term expectation of the participating life insurance business in the future. Dividends amount mainly depends on the overall performance of the participating life insurance business of BOC Life, taking into account factors including investment returns, claim experience, persistency and operating expense. The actual amount of dividends payable is recommended by our Appointed Actuary according to the aforementioned company's policy and approved by the Board of Directors of BOC Life.

Dividends paid can be left with BOC Life and accumulate with interest. The interest rate (Dividends Accumulation Rate) is determined based on market conditions and expected investment return of BOC Life.

In light of the above factors, dividends and Dividend Accumulation Rate are not guaranteed and may be higher or lower than the values illustrated in the proposal summary provided at point of sale.

You may browse the following website, www.boclife.com.hk/ps, to understand BOC Life's philosophy in deciding dividends as well as dividend history for reference purposes. Please note that past performance of dividend is not an indicator for its future performance.

BOC Life's Qualifying Deferred Annuity Policies* aim to provide steady annuity income for the Policy Owner's future, so the payout option of Guaranteed Monthly Annuity Income would be set by default to cash out. However, the Policy Owner can change the cash out option of Guaranteed Monthly Annuity Income to accumulate the same in the policy for interest for free according to his/her needs, but the Interest Rate for Accumulation is not guaranteed.

Insurance companies collect levies from policy owners on behalf of the Insurance Authority according to relevant requirement. For your convenience, levy will be collected together with the premium via the same manner (including automatic premium loan (if applicable)) whenever BOC Life collects premium from you.

Please refer to the product brochure and the premium levy section of FAQs in BOC Life website for details.

A deferred annuity product must satisfy the criteria set out in the guideline issued by the Insurance Authority to qualify as a Qualifying Deferred Annuity Policy. The criteria include:

• A minimum total premium of HKD180,000 and minimum payment period of 5 years;
• A minimum annuity period of 10 years;
• Annuitization at the age of 50 or above; and
• Fulfilment of the following disclosure requirements:
  • A clear statement of the Internal Rate of Return (IRR) in the sales brochure and in the related communication with policy owners;
  • A clear presentation of the guaranteed and non-guaranteed annuity payment, if applicable; and
  • Clear separation of the premiums of riders such as critical illness and hospitalization cash from the premiums for the QDAP.

Source: Insurance Authority

Starting from 1 April 2019, retirement savings of taxpayers via qualifying deferred annuity premiums of Qualifying Deferred Annuity Policy (“QDAP”) and Tax-Deductible Voluntary Contributions (“TVC”) under Mandatory Provident Fund Schemes (“MPF”) schemes may enjoy tax deductions of up to a maximum aggregate limit of HKD60,000 per year.

Source: Investor and Financial Education Council

For details of the tax deduction arrangements, please contact the Inland Revenue Department through their hotline at 187 8088 or visit their website at www.ird.gov.hk.

Married taxpayers may claim deductions for Qualifying Deferred Annuity premiums paid by himself/herself or his/her spouse not living apart from him/her but the amount already claimed by his/her spouse must be excluded. If the couple both have income chargeable to tax, they can freely allocate the qualifying deferred annuity premiums for tax deductions in order to claim a maximum amount of deductions of $120,000, so long as the deductions claimed by each taxpayer do not exceed the individual limit (i.e. a maximum of $60,000 per individual).

For example, a husband and his wife both have income chargeable to tax. The husband bought a Qualifying Deferred Annuity Policy with annual premiums of $90,000 and his wife bought a Qualifying Deferred Annuity Policy with annual premiums of $30,000. This couple may flexibly allocate the tax deductions between themselves so long as the two policies covering the couple as joint annuitants, or either the husband or the wife as a sole annuitant, and the deductions claimed by each of them do not exceed the individual limit of $60,000. This means that the husband can claim deduction of $60,000 out of his premiums of $90,000. As the wife has not yet used up the deduction limit after claiming deduction of her premiums of $30,000, she can claim the remaining amount of $30,000 from her husband's premiums. In this case, the taxpaying couple can each claim deduction of $60,000, i.e. a total deduction of $120,000 for both.

However, if the spouse of a taxpayer does not have income chargeable to tax, no tax deduction for Qualifying Deferred Annuity premiums paid can be allowed to the spouse and the couple are not eligible to elect for joint assessment or personal assessment jointly. Under this circumstance, the maximum amount of deduction allowable to the taxpayer is his/her individual limit (i.e. $60,000, but not $120,000).

Source: Investor and Financial Education Council

For more relevant cases reference, please visit https://www.ifec.org.hk/web/en/moneyessentials/qdap-tvc/tax-savings.page

For details of the tax deduction arrangements, please contact the Inland Revenue Department through their hotline at 187 8088 or visit their website at www.ird.gov.hk.

In general, a person who has reached 18 years old or above is eligible to apply for the Qualifying Deferred Annuity Policy. Deferred annuity products are more suitable for the working population. It allows policyholders to accumulate retirement savings by instalments when they are young, and convert the savings into a steady stream of income when they retire to cover their daily expenses. Additionally, qualifying deferred annuity premiums are eligible for tax deductions.

For details of the tax deduction arrangements, please contact the Inland Revenue Department through their hotline at 187 8088 or visit their website at www.ird.gov.hk.

Source: Investor and Financial Education Council

The Internal Rate of Return is a way to calculate the return. “Internal” means only the relevant cash flows are calculated, including the premium, the annuity income and the time factor. External factors (e.g. inflation rate) are not considered.

Source: Investor and Financial Education Council

Deferred annuity products aim to provide steady annuity income for the Policy Owner's future. It is a long-term insurance plan with providing retirement protection and is for your long-term holding.

Additionally, replacing an existing policy with a new insurance policy may bring certain risks and adverse effects (such as financial loss, insurability implication and claims eligibility implication). You should carefully compare your existing insurance policy against the new insurance policy, and assess with your intermediary whether this action is in your best interests before you make a final decision.

Please refer to Insurance Authority brochure – “Life Insurance Policy Replacement” for more details: https://www.ia.org.hk/en/infocenter/files/Life_Insurance_Policy_e_Jun_2021.pdf

No. Insurance levy paid and the premium discount will not be regarded as qualifying annuity premiums paid for the purposes of claiming a tax deduction.

Here are some factors to consider before making a perfect retirement financial plan, so that you can take better control of your future finances and prepare for a better retirement.

Longevity and Medical expenses: With average life expectancy of 80 years or above, retirement can span over 20 years. Medical expenses tend to increase with age, so it's vital to ensure your retirement plan adequately covers long-term healthcare costs.

Flexibility in investment strategies: As retirement nears, reducing investment portfolio risk and focusing on post-retirement investments is advisable. Explore various investment options and strategies that align with your risk tolerance and long-term goals.

Inflation: Apart from projected living expenses and healthcare costs, it is also important to factor in inflation. Historical inflation rates in Hong Kong have averaged around 2-3%, which can be a significant impact on financial stability for your retirement life.

Planning for retirement is a positive and proactive step towards creating the life you desire. By considering the key factors mentioned above, start your retirement planning early for a delightful future.

Source: Investor and Financial Education Council