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Personal Equity and Retirement Account (P.E.R.A.) in the Philippines

February 17, 2017

Today’s blog post has been a long time coming. I wanted to create a comprehensive post about Personal Equity and Retirement Account or PERA because I  know that it could benefit a lot of SavingsPinay readers.Personal Equity Retirement Fund Philippines

 

I first heard about PERA through Sir Fitz of Ready to be Rich. Reading his blog post is a good primer to know the facts about PERA. After 8 years, PERA is now implemented as a law and well-known banks such as BDO and BPI are now accepting contributions.

 

Here’s a post that will give you everything you need to know about Personal Equity and Retirement Account (P.E.R.A.) in the Philippines.

 

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What is PERA?

 

Personal Equity and Retirement Account (P.E.R.A.) in the Philippines is the most recent retirement system in the country today. It is a personal and voluntary retirement savings plan where contributions are made by both Filipino employers and respective employees. Just like  SSS or GSIS, you can take PERA as an additional retirement savings for Pinoy.

Who can apply for a PERA?

 

You can open a Personal Equity and Retirement Account (PERA) as long as you have a Tax Identification Number and source of income. Freelancers, self-employed and OFWs can also apply for PERA and contribute voluntarily.

Personal Equity and Retirement Account (PERA) Requirements and Application Process

 

Applying for a Personal Equity and Retirement Account (P.E.R.A.) in the Philippines is very easy. The first thing you need to do is choose an administrator. Administrator will act as your chosen entity to manage and invest your contributions.




 

Two of the well-known accredited administrators of PERA are BPI and BDO. The requirements and process will differ depending on your chosen administrator but just like any other investment account opening you will need to prepare the following:

 

1. Duly Accomplished Application Form – You can visit BPI or BDO website to download the account opening form.

  • Client Sustainability Assessment (CSA) – This is to identify your investment objectives and risk tolerance.
  • Risk Disclosure Statement – This contains provisions on the general risks associated with your PERA investment.

 

2. Valid government ID – You can refer to the List of Acceptable IDs online. Also bring supporting documents to prove your identity.

 

3. TIN ID – You can also use a copy of your Income Tax Return or any other valid document that can support your TIN.

 

4. Initial money you will invest.

 

How to Open a Personal Equity and Retirement Account (PERA) in the Philippines?

 

1.First, choose your administrator.

As mentioned earlier the current well-known accredited administrator for PERA are BPI and BDO. I will update this post once other banks or entities have opened to the public as well.

2. Next, prepare your requirements.

Enclose all your needed documents in an envelope and don’t forget to provide photo copies as well.

3. Lastly, visit the nearest BPI or BDO branch to you.

At the moment opening an account for PERA will need a personal appearance especially if you are a first-time investor. You will do the Client Sustainability Assessment (CSA) and read the Risk Disclosure Statement upon guidance of a BPI or BDO official.

Both banks have publicized the contact number of their delegated persons to inform the public about PERA. Know that since this is a very new investment avenue everything is still in beta-testing. Application may only be allowed on selected branches of the said two top banks.




PERA VS. SSS/GSIS as your Retirement Plan

 

In my post How Do You Picture Your Retirement Age? I have mentioned how SSS or GSIS pensions won’t suffice your retirement needs. The amount of pension you’ll get with your SSS or GSIS contributions is only 4,000 pesos at most. If your current age is 23 (like me) that 4,000 pesos a month won’t let you survive the boost of inflation rate and the cost of living say you will retire at 55.

 

A Personal Equity and Retirement Account (PERA) on the other hand is an “investment”. Your contributions will be invested just like having a UITF or Mutual Fund account. By the time you reach your retirement age (55) the money earned through the said investments will be given to you as a retirement benefit free of tax. You get to avail your retirement benefit in lump-sum, through regular pensions or a combination of both.

 

PERA under Republic Act 9505 is the government’s way in promoting savings to the Filipino people. You can use your Personal Equity and Retirement Account as an additional fund to use when you retire. As you contribute to your PERA account you are entitled to receive retirement benefits above your pension plans.




Benefits of PERA

TAX Credit

You have a 5% tax credit on your annual PERA contributions every year. You can use this tax credit against your tax liabilities. Say for example your income tax turned out to be 120,000 pesos, but your total annual contribution to your PERA account is 100,000 pesos, you have 5,000 pesos credit to use. You income tax will be 115,000 pesos only instead.

TAX Exempt on Your Earnings

As mentioned the best advantage of investing in a Personal Equity and Retirement Account is that your contributions is being invested to a dedicated investment vehicle with high potential of growing. Now unlike normal UITF or Mutual Fund account, the money earned through your investments a.k.a. your PERA assets is exempted from taxes. Whatever amount you earn as you reach your retirement age will be yours tax free!

  • No final withholding tax on interest
  • No capital gains tax on sale, exchange, retirement or maturity of bonds.
  • No 10% tax on cash and/or dividends.
  • No regular income tax

PERA also acts as your estate tool

In case of death your PERA assets will be paid out to your beneficiaries without estate tax and question at all. It will be paid out without much hassle than a regular investment.

Frequently Asked Questions about PERA

How Much can I contribute to my PERA?

You can have an annual contribution of up to 100,000 pesos and 200,000 pesos for Overseas Filipino Workers. You can still contribute more than the annual maximum amount but the excess shall no longer be exempted from tax.

How Many Personal Equity and Retirement Account (PERA) can I open?

You can open and maintain up to five (5) PERA as long as within the same Administrator.




Can an Employer contribute to an employee’s PERA?

Yes, an employer can help contribute to an employee’s Personal Equity and Retirement Account as long as the total contributions made will not exceed the annual 100,000pesos limit (local) and 200,000pesos limit (OFW). Employers may also contribute in behalf of the employee and will receive the benefit of:

  • Total contributions made by the employer to complete an employee’s maximum allowable PERA contribution can be applied as a deduction to his gross income and will be exempted from withholding tax.

Can I withdraw my PERA contributions before I reach 55?

To encourage every Juan to prepare for their retirement years, early withdrawal of your PERA assets will be penalized.

Your 5% tax credit will be waived.

You will pay a flat rate of twenty percent (20%) tax based on the total income earned by your PERA account from the time of opening to the time of early withdrawal.

However there are exemptions from these penalties for the following cases:

Immediate transfer of proceeds to another PERA investment product and/or another Administrator within 2 working days from withdrawal;

Accident or illness related hospitalization in excess of 30 days; and

Permanent total disability.

I am an OFW, can I open a Personal Equity and Retirement Account, too?

Yes. Aside from the requirements mentioned above you need to prepare additional document such as Overseas Employment Certificate issued by Philippine Overseas Employment Administration (POEA) and official document/certificate showing how much you will earn or has earned in a foreign country in during the PERA contribution. Additional requirements is needed in case your spouse or child will open the account in your behalf.

How much money do I need to prepare as initial investment?

As per checking all PERA investment products both BPI and BDO only requires 1,000 pesos initial investment to open and activate. You can top up your investment as low as 1,000pesos as well.




Important Things To Remember

  • You can start investing in PERA today! BPI and BDO have already released their own PERA investment product as an accredited administrator. At the moment you can only apply on head offices of the said banks but you can visit any near branch to ask about PERA today.

 

  • Opening a Personal Equity and Retirement Account is voluntary. This is not and never in lieu of your SSS/GSIS where you are deducted every payday.

 

  • PERA follows the 55 and 5 Rule. Your retirement benefits will be given at the age of 55 and having made a qualified contributions for at least 5 years through lump sum or monthly pension.

 

Learn more about BPI and BDO PERA Investment here: https://www.bpiassetmanagement.com/pages/pera-personal-equity–retirement-account/

https://www.bdo.com.ph/trust-and-investments/pera-faq

Final Notes From SavingsPinay

I have been prolonging all my investment goals waiting for this Personal Equity and Retirement Account to materialize. It may took 8 years in the making but it all proved to be worth it. For millennials like me who have been thinking where to invest this 2017 this could be the answer.

 

I will hold a QandA in my Facebook Group SavingsPinay for those who’d like to know more about this please make sure to join. Know that this will not be the last post I’ll be making about PERA. There will be future posts I’ll write for you.

 

Comment below your questions about P.E.R.A

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Clariza Glino

Izza of SavingsPinay promotes financial literacy for the young and young at heart by providing insights and tips on budgeting, saving, investing and online entrepreneurship. Aside from this blog she also writes at www.izzaglino.com, a beauty and lifestyle blog for frugal Pinays and manages, www.izzagevents.com, a wedding and event business since 2011. For inquiries, topic suggestions or future collaborations email her at izza@savingspinay.ph