Filipinos can now prepare for their retirement by voluntary investing in a newly launched tool, Personal Equity Retirement Account (PERA), which aims to promote capital market development and savings mobilization by establishing a legal and regulatory framework of retirement plans for persons.
Launched on Friday at the Bangko Sentral ng Pilipinas (BSP) Complex, PERA provides tax benefits and is expected to instill among investors the discipline of making annual contributions to their own account. PERA was created under Republic Act 9505.
RA 9505 or the PERA Act of 2008 promotes capital market development and savings mobilization by establishing a legal and regulatory framework of retirement plans for persons, comprised of voluntary personal savings and investments.
“The state recognizes the potential contribution of PERA to long-term fiscal sustainability through the, provision of long-term financing and reduction of social pension benefits,” according to the law.
Unlike existing national or corporate pension schemes, PERA does not require a deduction from one’s salary to accumulate funds. Instead, it relies on an individual’s decision to invest up to P100,000 annually.
Overseas Filipinos workers are provided the additional benefit of being able to invest twice the normal limit or up to P200,000 annually.
PERA also allows individuals to voluntarily open up to five accounts invested in specific PERA-accredited product lines.
A PERA account has the following incentives: 5 percent income tax credit on the actual PERA contribution; tax exemption from the 20 percent final withholding tax from interest on bank deposits substitutes and trust funds; 10 percent final withholding tax on dividends; capital gains tax on disposition of shares of stock; and regular income tax on PERA products.
PERA assets may not be considered as assets for the purpose of insolvency and estate taxes.
“Since we have a very young population and typically strong family ties, we tend to overlook preparing for own retirement. PERA addresses this by providing all the essential elements—from governance to products to financial literacy to incentives— so that we can properly get started,” BSP Governor Amando Tetangco Jr., said during the launch.
Open a PERA account may be done through accredited PERA administrators. PERA investment managers can advise investors.
The BSP and the Bureau of Internal Revenue have so far accredited Banco de Oro and Bank of the Philippine Islands as PERA institutional administrators, in addition to 61 professionals who have passed the individual PERA accreditation examination.