Lawmakers in the jurisdiction have changed rules increasing tax deductions for retirement savings, aiming to head off a pensions savings crunch.

Hong Kong’s lawmakers unanimously passed an amended law on Wednesday that allows up to HK$60,000 ($$7,650) in tax deductions, according to the South China Morning Post.

The change comes into effect on 1 April and taxpayers can claim the deduction on their tax returns in the new financial year, it said.

James Lau, the Secretary for Financial Services and the Treasury, reportedly said that the government plans to review the tax incentive cap and will also look into the possibility of expanding the scheme to cover more pension products after looking at the initial response.

Top pension providers say that Hong Kong’s proposed tax break of $$7,650 will encourage additional retirement savings.

The scheme will allow employees to move their additional contributions in deferred annuity products from insurance companies - or to the voluntary Mandatory Provident Fund - so that they can claim tax deductions of up to HK$60,000 a year on their income. This could increase to HK$120,000 if they buy pension products that cover their spouses who do not pay tax, the report added.