Income and tax savings from a qualifying deferred annuity policy.
Annual tax saving
—
Total premiums
—
Accumulated value
—
Est. monthly income
—
Your breakdown
Updates live as you type| Measure | Value |
|---|
What a QDAP is meant to do
A Qualifying Deferred Annuity Policy is the Hong Kong government's attempt to nudge people into building their own retirement income, and it dangles a tax deduction to make the case. You pay premiums for a set number of years, the policy then accumulates over a deferral period, and finally it pays you a monthly income for years afterwards. In return, the premiums you pay are deductible against salaries tax. The product is regulated so that only policies meeting criteria set with the Insurance Authority qualify, which is why the "qualifying" label matters. This tool projects three things that decide whether a QDAP is worth it for you: the annual tax saving, the accumulated value when payouts begin, and a rough monthly income once they do.
The deduction, and the cap it shares
The tax saving is the most concrete benefit, and it is easy to overstate. Premiums are deductible only up to a cap, which as modelled here is $60,000 a year, and that cap is shared with MPF tax-deductible voluntary contributions. So if you are already putting money into TVC, you do not get a fresh $60,000 of QDAP room on top; the two compete for the same allowance. The saving itself is the deductible premium multiplied by your marginal salaries-tax rate. At the top 17 percent band, a full $60,000 deduction saves $10,200 a year. At a lower band it saves proportionally less, which is why the tool asks for your marginal rate. Confirm the $60,000 cap and the marginal bands with the Inland Revenue Department and the MPFA, since these are the calculator's 2025/26 assumptions.
Five years of premiums, a decade to accumulate
Use the defaults: a $60,000 annual premium paid for 5 years, a 10-year deferral, a 3.5 percent illustrated return, and a top 17 percent marginal band. The annual tax saving is $60,000 capped, taxed back at 17 percent, which is $10,200 a year while you are paying premiums. Total premiums come to $300,000. Accumulating those premiums at 3.5 percent until payouts begin gives a projected value of roughly $382,136. Spread, as the tool assumes, over a 20-year payout horizon, that is about $1,592 a month. The deferral years are doing quiet work: the money paid in early compounds for longer than the money paid in late.
Reading an illustration with a clear eye
The accumulated value and monthly income here use a single illustrated return applied evenly, which is a simplification. A real QDAP illustration splits the projected income into a guaranteed portion and a non-guaranteed portion, and only the guaranteed part is contractually certain. The practical tip is to focus on the guaranteed figures when you compare policies, because the non-guaranteed element depends on the insurer's investment performance and dividend decisions. The 20-year payout horizon this tool assumes is a planning convenience; actual annuity terms vary. An edge case to note is that the income you eventually receive can itself have a taxable element in some structures, so the deduction now is not always a clean swap for tax-free income later. Verify the tax treatment of payouts with the IRD before assuming the whole income arrives untaxed.
Annuity questions worth asking
If I already max out TVC, is there any QDAP deduction left?
Not within the shared cap. QDAP premiums and MPF tax-deductible voluntary contributions draw on the same $60,000 annual allowance the calculator uses, so once TVC fills it, additional QDAP premiums earn no further deduction. You can still buy the annuity for its retirement-income value, but the tax incentive is exhausted. Split the $60,000 between the two in whatever mix suits your goals.
Does a lower marginal rate make a QDAP pointless?
It weakens the tax case but not the savings case. At a 2 percent band the same $60,000 premium saves only $1,200 in tax rather than $10,200, so the deduction is a minor sweetener. The decision then rests on whether the annuity's guaranteed retirement income suits you, not on the tax break. Use the marginal-band selector to see your own saving before deciding.