The Mortgage Corporation today outlined a life annuity scheme that will provide participants with lifetime payouts after they pay a lump-sum premium capped at $1 million.
Annuitants should be aged 65 or above and the minimum premium is $50,000.
Based on internal rates of return in the range of 3% to 4%, the monthly fixed payout for a male annuitant at the age of 65 will be between $500 and $580 per $100,000 premium paid, corresponding to annuity rates of 6% to 7%.
Women annuitants, due to longer life expectancy, can receive $450 to $530 per month per $100,000 premium paid, corresponding to annuity rates of 5.4% to 6.4%.
Mortgage Corporation Deputy Chairman & Executive Director Norman Chan said the product, if implemented, will be attractive as it offers guaranteed life payments for the elderly.
"Once the monthly payout is fixed for the whole life, regardless of the change in longevity pattern or in the investment environment, that’s a very steady stream of income for elderly people to help them to have better financial planning during their retirement life."
The scheme, guaranteeing each annuitant instalments of monthly annuity payment equivalent to 105% of the premium paid, allows beneficiaries to receive the remaining unpaid monthly instalments or a lump-sum amount if the annuitant dies before getting 105% of the premium paid.
There will also be a surrender option for those in need of lump-sum cash for contingency reasons to get a lump-sum back before they receive 105% of the monthly payout.
Mortgage Corporation Chairman, Financial Secretary Paul Chan welcomed the scheme, saying it will help the elderly turn cash into lifelong streams of fixed income so they can better enjoy their retirement.
The corporation's board has approved in principle the life annuity scheme which is scheduled for launch next year.