What are the Retirement Three Treasures? Building a Self-Funded Pension with a 4th Pillar

Stepping into retirement, one of the biggest anxieties for Hong Kongers is outliving their wealth—a scenario locally described as "living long without a pension." To help retirees convert accumulated assets into reliable cash flow, the Hong Kong Mortgage Corporation introduced a specialized financial suite. But what are the Retirement Three Treasures, and is there a missing 4th pillar needed to build a truly bulletproof retirement?

Here is StashAway’s breakdown of the HKMC Retirement Three Treasures, how to structure a self-funded pension, and why our flexible portfolios might be the ultimate asset to complete your retirement ecosystem.

What are the HKMC Retirement Three Treasures?

The HKMC Retirement Three Treasures are three specialized financial products launched by the Hong Kong Mortgage Corporation (HKMC):

• HKMC Annuity Plan
• Reverse Mortgage Programme
• Policy Reverse Mortgage Programme

Designed to convert illiquid assets into predictable monthly payouts, these programmes help retirees simulate a guaranteed lifetime pension after stepping down from full-time work.

HKMC Annuity Plan: Turn Lump-Sum Capital into Continuous Payouts

An annuity converts upfront capital into institutional investments that distribute continuous monthly income. Managed by HKMC Annuity Limited (a wholly government-owned entity), the HKMC Annuity Plan allows participants to trade a lump sum for lifetime monthly distributions. While yield potential is modest, payouts are guaranteed—making it an ideal tool for conservative retirees seeking to secure baseline living costs.

Example: A 65-year-old male investing HKD 1 million receives approximately HKD 5,800 per month for life. Regardless of lifespan, the payout remains constant, effectively hedging against longevity risk.

Reverse Mortgage Programme: Unlocking Property Wealth for Cash Flow

The Reverse Mortgage Programme is primarily targeted at senior citizens who own self-occupied properties. Participants can mortgage their property to apply for a reverse loan from a bank, which then pays the owner a monthly amount—effectively converting the property into a steady stream of income while allowing them to continue living there. After the borrower passes away, the bank can sell the property to repay the loan. If the sale proceeds are insufficient to cover the loan balance, the shortfall is guaranteed by the HKMC, and no claim will be made against the borrower's estate.

Policy Reverse Mortgage Programme: Converting Life Insurance Policies into Cash Flow

Similar to a reverse mortgage, this scheme targets holders of high cash-value life insurance policies. Applicants aged 55 or older can assign their policy as collateral to the HKMC to draw regular monthly distributions without needing to surrender their coverage outright.

Building a Self-Funded Pension with the HKMC Retirement Three Treasures

Self-Funded Pension historically referred to the lifelong pensions granted to Hong Kong civil servants. Today, creating a self-funded pension means engineering your own recurring payout model to ensure financial independence throughout your golden years.

The HKMC Retirement Three Treasures offer three main pathways—turning cash, real estate, and life insurance policies into regular income streams. Here is how they compare:

How to Structure an Effective Self-Funded Pension Strategy

Building a resilient self-funded pension shouldn't mean relying on a single financial product. Instead, consider your overall asset allocation. Most Hong Kong retirees combine multiple tools—blending the HKMC Retirement Three Treasures, comprehensive medical insurance, and flexible growth portfolios to construct a balanced cash flow strategy.

1. Calculate Essential Expenses and Target Income

A solid retirement plan must comfortably cover baseline living costs:

• Draft a monthly budget: Include essential costs (food, utilities, transportation, rent/management fees) alongside medical, travel, and leisure expenses.
• Add a safety buffer: Reserve an additional 10% to 20% to account for inflation or unexpected expenses.
• Establish your monthly goal: If your monthly budget is HKD 25,000, ensure your combined streams (annuities + reverse mortgages + portfolio yields) reliably meet that threshold.

2. Implement a Tiered Cash Flow Pyramid

Structure your retirement wealth from the ground up to balance security with growth:

Tier 1: Liquid Cash (Emergency Fund)

• Bank deposits, short-term fixed deposits, or money market funds.
• Keep 6 to 12 months of living expenses accessible for emergency expenses.

Tier 2: Guaranteed Base Income: 

• The HKMC Retirement Three Treasures form the foundation of your guaranteed lifetime pension, securing non-negotiable monthly expenses.

Tier 3: Long-Term Growth Investments: 

• ETFs, global bonds, and inflation-hedging assets that protect long-term purchasing power.

3. Account for Healthcare and Longevity Risks

According to Hong Kong Health Bureau statistics, healthcare expenses for seniors are 4.3 times higher than those for non-seniors2. A single critical illness can severely deplete retirement capital. Securing private health insurance ensures medical bills won't erode your baseline self-funded pension.

The 4th Pillar of Your Self-Funded Pension: StashAway Portfolios

While the HKMC Retirement Three Treasures provide essential baseline stability, they lack capital growth potential. In an environment of persistent inflation and rising life expectancy, relying entirely on fixed distributions risks eroding purchasing power over time.That is why StashAway introduces the "4th Treasure": an inflation-hedging, flexible, and growth-oriented investment engine.

StashAway’s General Investing portfolios utilize data-driven asset allocation and continuous rebalancing. This enables retirees to pursue long-term capital growth with controlled risk, filling the liquidity and inflation gaps left by traditional guaranteed options.

Limitations of the HKMC Retirement Three Treasures

While the Retirement Three Treasures offer safety, relying solely on them exposes retirees to three main limitations:

• Susceptibility to Inflation: Fixed annuity payouts do not automatically adjust upward with consumer price increases, diminishing real purchasing power over time.
• Capital Lock-In: Annuity and reverse mortgage commitments restrict capital access, limiting financial agility if urgent liquidity is required.
• Capped Return Potential: Reverse mortgages and policy loans monetize existing equity rather than creating wealth. If you outlive your drawdown period, funds may eventually run low.

How StashAway Portfolios Complete the 4th Pillar

Powered by ERAA® (Economic Regime-based Asset Allocation), StashAway dynamically manages exposure across equities, bonds, and gold based on macro conditions. According to StashAway’s Q3 2025 returns, YTD portfolio performance across risk levels ranged between 7.3% and 18.7%, consistently outperforming static stock-and-bond benchmarks.

Key features of StashAway General Investing portfolios include:

• Customized Risk Exposure: Select a StashAway Risk Index (SRI) tailored precisely to your comfort level.
• Global Diversification: Direct allocation across US, European, and Asian equities, global fixed income, and real assets like gold.
• Automated Rebalancing: Algorithmic adjustments keep portfolio risk aligned with your parameters across market cycles.
• Full Liquidity: Zero minimum investment, no lock-in periods, and zero withdrawal fees.

StashAway "3 + 1" Pension Ecosystem

建議以退休三寶 + StashAway風險自選投資組合，「3 + 1」組合自製長糧，無憂享受退休生活：

1. 年金作穩定基礎收入長糧金字塔的底部，確保每月基本開支，穩定但回報有限。

2. 逆按揭／保單逆按揭作資產現金化在需要額外資金或長期護理時，提供保障性現金流。

3. StashAway 投資組合作為長期增值層透過全球資產配置，在通脹中保持實際購買力。

Source：

1. 香港金融管理局，「終身年金計劃」https://www.hkma.gov.hk/chi/news-and-media/insight/2017/05/20170509/

2. 新聞公報，「醫務衞生局發表二○二三／二四年度《本地醫療衞生總開支帳目》（附圖）」https://www.info.gov.hk/gia/general/202510/16/P2025101500853.htm