A payout fixed today, collected in 20 years: what is it worth?
A sum assured, a fixed annuity or a guaranteed maturity value fixes a number, not a value. Here is what 2006-06 → 2026-06 of money supply and consumer prices did to a HK$1,000,000 payout in Hong Kong, and what each benchmark cannot tell you.
What does a fixed future payout actually promise?
It promises a number, not a value. A contract that pays HK$1,000,000 at some future date fixes those digits on the day you sign. What the digits will buy, or what share of the money stock they will represent, is decided over the years that follow. There are two standard benchmarks and they do not agree: a consumer price index compares the price of a defined basket, while a money-supply ratio compares the size of a monetary aggregate. Neither is a complete description of a household.
What happened in Hong Kong over this window?
Over 2006-06 → 2026-06, Hong Kong-dollar M2 rose 3.71 times. Over 2006-07 → 2026-07, the headline consumer price index rose 1.63 times. Applying each ratio to a HK$1,000,000 payout collected at the end of the window gives two different answers about the same money.
Value of a HK$1,000,000 payout in start-of-window terms. Consumer prices: HK$612,500. Money stock: HK$269,900.
What happened in Hong Kong over this window?
Share retained
Shared linear scale from zero. Selected entries from the table below. Its dates, units, definitions and limitations still apply.
| Benchmark | Change over the window | Payout in start-of-window terms | Share retained |
|---|---|---|---|
| Consumer prices | ×1.63 | HK$612,500 | 61.2% |
| Money stock (Hong Kong-dollar M2) | ×3.71 | HK$269,900 | 27.0% |
Neither row is the correct one. If the payout is meant to cover living costs and medical bills, the consumer-price row is the closer reference. If it is meant to hold its position against asset prices and the size of the money stock, the money-supply row is closer. Read the question first, then pick the row.
Who holds the money in the meantime?
In any long-dated fixed-sum contract the two sides hold different things. One side receives small amounts over decades and holds them as invested assets; the other side holds a claim whose digits were fixed at the start. That asymmetry is structural, and it is priced into what you pay: a lower assumed investment return means a higher premium for the same sum assured, and a higher one means a lower premium. It applies to insurance benefits, fixed annuities, guaranteed maturity values and any savings target expressed as a fixed nominal number.
Products that raise the sum assured over time exist. They cost more, because the currency risk moves from one side of the contract to the other rather than disappearing. That trade-off is the thing worth checking before signing, and it is a different question from whether the cover itself is worth buying.
Hong Kong runs a currency board linked to the US dollar, so the exchange rate does not absorb these differences the way a floating rate might. Over this window the money stock grew far faster than the consumer basket: 3.71 times against 1.63 times.
What this comparison does not tell you
It does not tell you that protection is a bad purchase. A protection contract moves money in time rather than compounding it: if the insured event happens next month, the fixed sum arrives undiscounted, and no savings plan produces that. The figures above describe only one case, the payout collected far in the future.
It also does not transfer to another window. Ratios depend on the months chosen, on the definition of each series and on what is actually published for this market. Use the same months on both sides, keep each series on its own definition, and do not treat a missing observation as zero.
Hong Kong-dollar M2 here is the end-month series adjusted to include foreign-currency swap deposits, on the definition used since April 1997; the CPI is the headline index linked and rebased by the BIS. The two series are read at the same month wherever the published calendar allows, and M2 ends 2026-06 while the CPI ends 2026-07.
Questions & answers
Does this mean insurance is a bad deal?
It is not a return comparison. A protection contract moves money in time: if the insured event happens shortly after you sign, the fixed sum arrives undiscounted. The figures here describe only the value of a sum collected far in the future.
Should I use consumer prices or money supply?
They answer different questions. Consumer prices are the closer reference for living costs and medical bills. A money-supply ratio is closer if the amount is meant to hold its share against asset prices. Neither describes an individual household exactly.
Can I apply these ratios to my own contract?
Only as an order of magnitude, and only for the window shown. The result depends on the start and end months, the series definition and the data published for this market. Put your own amount and dates into the calculator and read the source notes.