The companies said they will launch tax-deductible pension products after the government scheme is introduced on April 1 that will go a long way in addressing the shortfall in employees’ retirement savings.

Lawmakers on Wednesday will vote on a law change to allow the government to offer up to HK$60,000 in tax incentives per person per year to encourage additional savings for retirement.

Under the scheme, individuals can avail of the tax deduction if they buy and contribute to deferred annuity schemes in return for monthly payments after retirement, or they can also increase voluntary contributions to their Mandatory Provident Fund (MPF).

This is on top of the HK$18,000 tax break on the compulsory MPF contribution.

“I do not see any reason for lawmakers not to pass the law change to introduce the tax incentive scheme,” said lawmaker Kenneth Leung Kai-cheong, who represents the accountancy sector. “This is going to help improve pension savings in Hong Kong.”

In 2017, only HK$3.6 billion of the HK$68.99 billion MPF contributions were voluntary contributions, representing 5 per cent of the total. The total payment into annuity schemes in 2017 stood at HK$12.2 billion, according to government data.

A government study showed that the actual tax saving depends on an individual’s salary and voluntary MPF contributions, which can range from HK$180 to HK$10,200.

HSBC, Manulife, Prudential and AIA between them manage 65 per cent of the city’s pension assets.

HSBC Life, the local insurance arm of Hong Kong’s biggest lender, believes the tax incentives could be a game changer and go a long way in addressing the pension shortfall.

HSBC Life’s Moncreiffe said that the company has already submitted applications to the Insurance Authority and the Mandatory Provident Fund Schemes Authority, and will launch tax-deductible deferred annuity schemes and voluntary MPF contribution products once approval is given.

“Retirement will be a key theme for HSBC Life this year. As a leading player in the retirement space, we will continue to help customers meet their retirement needs by offering the right products and services,” Moncreiffe said.

Manulife, the city’s largest MPF provider with a 23 per cent market share of asset under management,has also applied to the regulator for approval of its tax-deductible deferred annuity products and plans to launch them as soon as it gets the nod.

“Through our comprehensive MPF platform, we can help our members to take advantage of the government’s proposed tax benefits,” a Manulife spokesman said.

Derek Yung, chief executive of Hong Kong at Prudential, said his company has also applied to launch the tax deductible pension products.

“We believe this initiative will raise further awareness among the public on the need to start retirement planning earlier and will encourage the acceptance of annuity products,” Yung said.

AIA, the largest life insurer in Hong Kong, has also applied to launch new products.

Pension saving in Hong Kong is seen to be among the bottom worldwide in terms of adequacy, according to a Mercer report last year.

An AIA survey released in January showed that Hongkongers would have to work until 70 to keep up with their retirement expenses. The study showed only 44 per cent of respondents start retirement saving at the age of 50, while 67 per cent had not made any MPF voluntary contributions.