Filipinos now have another option to prepare for retirement aside from SSS, GSIS, private insurance -investment plans. We can now invest, save, open a PERA account to prepare for our future.
This is a provident personal savings plan established by the Philippine Government under Republic Act 9505, or the PERA LAW of 2008. It took several years for this law to reach implementation stage.
What does PERA means?
PERA is short for Personal Equity and Retirement Account. This is being pushed by the Bangko Sentral ng Pilipinas to encourage Filipinos prepare for retirement through voluntary investments and savings instead of merely relying on social security benefits.
If you want to open a PERA account you can go to either Banco de Oro (BDO) or Bank of the Philippine Islands (BPI). As of January 2017, these are the two institutions that has been accredited by the Bangko Sentral ng Pilipinas (BSP) as “PERA Institutional Administrator”.
So choose between opening PERA account in BDO or BPI. **On Landbank’s website it says they are now also offering PERA investment.
In the future, other banking institutions like Metrobank, Security Bank, Unionbank, PNB, etc may be added to the PERA Administrators list by the Philippine Central Bank.
Can OFWs invest in PERA even though they are currently outside the country as they are working abroad? YES, they can. Check this for Requirements for OFWs to open a PERA account personally or through spouse or child.
What specific PERA investment product you can choose? The PERA program only allows specific investment products as approved by BSP that can be offered to contributor-investors like us. These products are Unit Investment Trust Fund (UITF), Money Market Funds, Peso Bond Funds, real properties, and more options.
To see the complete list, go to an PERA Administrator bank, ask to look at the available products under this special savings-retirement scheme and select the most fitting to your investment profile and objective.
How much can you invest in PERA? You can invest as much as P100,000 every year. OFWs can invest up to a maximum of P200,000 annually. Different banks have set different minimum opening amount.
*You have to be at least 18 years old and with Tax Identification Number or TIN to open a PERA investment.
How many PERA accounts can you open? You can only open up to 5 PERA accounts, all your accounts must be under one administrator. Example, you already open 1 PERA account in BDO and you want to open a second account – you must go to BDO again. You cannot open the second one in BPI.
*We will update this section should there be changes on this rule.
Why is PERA attractive and beneficial? The iSensey Team believe it is a good investment and savings for retirement account because of the tax-exemption PERA investment accounts get.
- Income earned from PERA investment are exempt from the final withholding tax, capital gains tax, regular income tax, etc.
- Qualified Contributors shall be entitled to a tax credit in the amount of five percent (5%) of the aggregate Qualified PERA contributions made in one calendar year.
- More tax break benefits (ask your chosen Administrator for all the details).
What is exempted from tax when you open a PERA investment account? Per the Revenue Memorandum Circular 131-2016 issued by the BIR, the tax-exempt will be “..the income earned from the investments and re-investments of PERA assets in the listed PERA investment products ..”
What is significant about this tax-exemption on PERA investment account? This is significant in the sense that if you have cash and you place it in a bank savings account, the interest you earned from your bank savings is subject to 20% withholding tax. VERSUS the interest or income earned by the fund you put in PERA is NOT subject to the 20% withholding tax.
When can you withdraw your PERA investment? To get optimal earnings, you withdraw your PERA investment when you reach the age of 55 and have made at least 5 qualified contributions. This is what is called the “55 and 5” rule. If you observe the 55 and 5 rule, there are no penalties, and you will enjoy all the offered earning opportunities.
More info on PERA money withdrawal:
- The contributor have reached the age of 55 and have made at least 5 years of qualified contribution. If you fulfill this condition, you can withdraw the funds in your PERA account via lump sum or monthly pension.
- Upon the contributor’s death, irrespective of age, or the contributions already made.
However, if you will withdraw early which is also called pre-termination of your investment account, this is subject to penalty. The tax-exemption status of the income earned from your PERA investment will be revoked accordingly, and you will repay the Philippine government for the tax-exemption already enjoyed in the previous year(s).
What are the exemptions to the pre-termination penalty? A PERA contributor is not subject to pre-termination penalty IF either of the following are met:
- You want to transfer or change your PERA designated investment to another one (which is also PERA listed investment product) so you withdraw your PERA money. The proceeds from your early withdrawal are then transferred to another PERA listed investment product within 2 working days.
- You met an accident or suffered illness-related hospitalization in excess of 30 days.
- Permanent total disability.
Are there any fees incurred if you will open a PERA account? Yes, there are minimal charges since this is an investment account. The fees includes Administration and Custodial Fees. If you opted to have an Investment Manager for your PERA account, there will also be an ‘investment management fee’.
How much is the fee? As of today we can’t find the exact amount for the administration and custodial fees for PERA per administrator bank. Once we do find the needed info, we will update this iSensey post.
There are still more details not covered on this post thus we recommend that for complete info, kindly go to a BDO or BPI branch to talk with their PERA experts officers. They will be able to answer your queries about account opening for PERA, the type of investment products you can consider, they will also help you evaluate your investment risk profile, and more.
You can also reach out direct to the Financial Consumer Protection Department of the BSP. They know the PERA Law best as well as the Implementing Rules and Regulation of Republic Act 9505. You can visit them at this office address:
5th Floor Multi-Storey Building, BSP Complex, A. Mabini St., Malate, 1004 Manila
Or call them via telephone number (02) 708-7087. You can also reach the Financial Consumer Protection Department via email address firstname.lastname@example.org
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