Hong Kong Treasury Bureau: Unleashing the Silver Economy Potential to Build a More Stable Future for Hong Kong's Elderly

On August 1st, the Secretary for Financial Services and the Treasury of Hong Kong, James Lau, delivered a speech at the 10th Golden Age Exhibition and Summit. According to statistics from the Hong Kong government's Census and Statistics Department, the proportion of elderly individuals aged 65 and above is projected to increase from 20.5% in 2021 to 36% in 2046. In response to this demographic shift, the Hong Kong government is committed to promoting financial and protection measures for the elderly, assisting them in effectively managing their wealth and financial tools to enhance financial security in retirement. The government aims to help elderly individuals manage their financial resources effectively and ensure they can enjoy a stable life and sufficient economic security in retirement through comprehensive policies and measures. James Lau introduced that the core pillar of retirement protection in Hong Kong relies on Trillions of Mandatory Provident Fund (MPF). As of the end of last year, there were approximately 1.5 million Trillions of MPF accounts held by individuals aged 60 and above, with total assets reaching 180 billion Hong Kong dollars, accounting for 14% of the total assets of the MPF system. To enhance the investment efficiency and flexibility of the Trillions of MPF, the Hong Kong government and the Mandatory Provident Fund Schemes Authority (MPFA) have been expanding investment choices and optimizing returns. In response to citizens' concerns about fees and investment options, various Trillions of MPF plans have introduced default investment strategies, enabling global diversified investments, automatic adjustment of risk levels, and setting fee caps to provide citizens with more convenient and user-friendly long-term retirement savings solutions. Another significant development under the Trillions of MPF system is the MPF eChannel platform. Launched in June last year, MPF eChannel is one of the most groundbreaking reforms since the establishment of the Trillions of MPF system in 2000. By standardizing, streamlining, and automating administrative processes, MPF eChannel significantly enhances the operational efficiency of the Trillions of MPF system, reduces administrative costs, and allows citizens to manage their Trillions of MPF accounts in a one-stop manner, making it more convenient. This not only brings immediate and tangible benefits to retirement savings but also lowers the entry barriers for service providers, attracting more enterprises to participate, promoting market competition, and industry development. MPF eChannel leverages financial technology to address long-standing issues in the Trillions of MPF system, further consolidating its role as a pillar of retirement protection for citizens, bringing greater peace of mind to the elderly. MPF eChannel also helps optimize the pension financial industry chain, injects new energy into the aging economy, creates more business opportunities, and drives Hong Kong to become a regional leader in pension finance. Regarding the "HKMC Retirement Trio," James Lau introduced that the Hong Kong Mortgage Corporation Limited launched the "HKMC Retirement Trio" in mid-2021, including the Elderly Mortgage Scheme, Life Policy Reverse Mortgage Scheme, and Hong Kong Annuity Scheme, helping citizens transform their "bricks, policies, savings" accumulated through years of hard work into "grains," enabling them to effectively utilize their "Retirement Trio" to provide flexible and stable income sources for retirement life and fill the market gap. These three products aim to provide immediate, stable, and lifelong income, assisting the elderly in managing financial risks in retirement. The Elderly Mortgage Scheme allows property owners to release the value of their homes, enabling them to receive fixed monthly income while continuing to reside in their current homes without repayment. As of June this year, the scheme has approved over 8,400 applications, with an average monthly annuity of around 16,200 Hong Kong dollars per application and an average borrower age of 68 years old, with more than half of applicants choosing lifetime annuity payments. The Life Policy Reverse Mortgage Scheme allows borrowers to use life insurance policies as collateral, converting the death benefit value into immediate cash flow. The monthly annuity amount remains fixed, helping retirees make flexible use of their wealth. After the borrower passes away, the lending institution will repay the loan with the death benefit from the life insurance policy. If the death benefit exceeds the total loan amount owed, the excess balance will be returned to the borrower's heirs. If there is a shortfall, it will be covered by the insurance company. The Hong Kong Annuity Scheme provides retirees with a lifelong annuity, receiving a warm market response. From the establishment of the Hong Kong Annuity Corporation to June this year, the total amount of premiums applied for reached 23.9 billion Hong Kong dollars. In the first six months of this year, there were approximately 11,500 policies issued with a total premium of about 5.4 billion Hong Kong dollars, a four-fold increase compared to the same period last year, reflecting a strong demand for annuity products in the market.