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IIQE Paper 3 study materials
IIQE Paper 3 study resources

IIQE Paper 3: Investment-linked and Retirement Products

IIQE Paper 3 · Work through your exam, one topic at a time.

All guide sections

Investment-linked and Retirement Products

What this domain tests

This domain tests the mechanics of investment-linked assurance schemes (ILAS) and the retirement products Hong Kong intermediaries commonly sell: MPF, ORSO, qualifying deferred annuity policies (QDAP) and annuities. You must separate insurance features from investment risk and tax incentives.

ILAS mechanics

An ILAS is a long-term insurance policy whose value is units in underlying funds. Premiums are allocated after charges; units are priced at bid or offer price. Charges typically include premium charge, policy fee, fund management fee, switching fee and early surrender charge. The policyholder bears market risk. The insurer must provide a Product Key Facts Statement and offering document, and the scheme is authorized by the SFC; authorization is not a recommendation. A 21-day cooling-off period applies.

Retirement products

  • MPF: mandatory contributions, preserved benefits, choice of constituent funds, vesting rules.
  • ORSO: occupational retirement scheme, often employer-selected.
  • TVC: voluntary tax-deductible contributions to MPF.
  • QDAP: deferred annuity with accumulation and payout phases; tax deduction for premiums.
  • Annuities: immediate or deferred; life, joint-life or guaranteed period.

The tax deduction ceiling is HKD 60,000 per year combined for QDAP premiums and MPF TVC.

Worked example

A taxpayer at the 15% standard rate pays HKD 60,000 of QDAP premiums in a year. Deduction = HKD 60,000; tax saved = 60,000 × 15% = HKD 9,000. If only HKD 40,000 is paid, the deduction is HKD 40,000 and tax saved is HKD 6,000. The deduction reduces taxable income; it is not a refund of the premium, and the policy still has surrender, credit and longevity risks.

Traps

  • Calling an ILAS a capital-guaranteed deposit.
  • Treating SFC authorization as official endorsement.
  • Ignoring early surrender charges, which can exceed the account value.
  • Assuming QDAP premiums are tax-exempt rather than deductible.
  • Confusing MPF preserved benefits with immediately withdrawable cash.
  • Forgetting that annuity payouts may be fixed or escalating and may have a guaranteed period.