TNAG-1520-FCO40-2081-Employment-in-Hong-Kong-1986 — Page 55

IDENTIAL

3

Desired level of benefits

5.

Inevitably,

views on what would constitute a reasonable level of benefit from a CPF are likely to differ. For the purposes of illustration, however. calculations have been made showing the number months final salary which would be necessary

of

to

purchase an annuity providing the contributor for the remainder of his life with an income equivalent :

(a) to 20% of his final salary;

(b)

to 35% of final salary; and

6.

(c) to 50% of final salary.

Premia for annuities vary according to the age and sex of the employee, the prevailing rate of interest and the type of annuity contemplated. Actuarial advice has been sought on the premium rates chargeable for both a ten years certain single premium annuity (which guarantees payment of the annuity for the lifetime of the holder or to his dependants for the balance of the ten years if the holder dies during this period) and for

a life without refund single premium annuity (under

which payments end on the death of the annuity holder), on the assumption that the real rate of return on investment is similar to the rates assumed for the CPF Model and that the annuity is payable from retirement. Given that a CPF would be aimed primarily at industrial workers, a retirement age of 65 has been assumed. However, for comparison, premia have also been calculated on the basis of retirement at 60, although it is expected that a rather smaller percentage of contributors to a Hong Kong CPF would earlier age.

Calculations

7.

retire at this

The results of calculations on the above basis are shown in the tables at Appendix A (life without refund single premium annunity) and Appendix B (ten years certain single premium annuity) attached.

8.

It will be apparent from this presentation that the desirability of a CPF scheme from the individual contributor's point of view (in terms of the level and period of contribution required) will depend very much upon the level of benefit which he hopes to secure, his preferred retirement age and the performance of fund. An example is set out in Appendix C.

the

COME MENTIAL