The Bangko Sentral ng Pilipinas (BSP) announced recently that Personal Equity and Retirement Account (PERA) contributions have reached P329.55 million at end of last year or a 30 per cent increase from the P253.35 million that was recorded in 2021.
The total number of PERA contributors, on the other hand, increased by 16 per cent from 4,382 in 2021 to 5,100 in 2022.
In a media advisory, the BSP said that about 3,600 employed individuals contributed P223.71 million to the fund as of the end of 2022, followed by 721 Overseas Filipino Workers (OFWs) and 785 self-employed individuals who invested P60.58 million and P45.25 million, respectively.
A voluntary retirement savings program
The BSP launched PERA in 2016 under Republic Act No. 9505 or “An Act Establishing a Provident Personal Savings Plan, known as the Personal Equity and Retirement Account (PERA),” whose main objective is to promote 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.
By the end of December 2017 or one year later, the PERA funds were recorded at P37.15 million with 583 contributors.
PERA is a voluntary retirement savings program that supplements state-based pension plans and employer-sponsored retirement plans.
Under the rules, a contributor may make an aggregate maximum contribution of one hundred thousand pesos (P100,000.00) or its equivalent in any convertible foreign currency at the prevailing rate at the time of the actual contribution, to his/her PERA account per year.
If the contributor is married, each of the spouses shall be entitled to make a maximum contribution of one hundred thousand pesos (P100,000.00) or its equivalent in any convertible foreign currency per year to his/her respective PERA.
But if the contributor is an overseas Filipino, he or she shall be allowed to make maximum contributions double the allowable maximum amount. A contributor also has the option to contribute more than the maximum amount prescribed herein provided that the excess shall no longer be entitled to a tax credit of five per cent (5%).
A superior retirement savings option
It is considered a superior retirement savings option mainly due to the tax benefits it offers to individual contributors, such as tax exemptions on earnings from PERA investments; a five per cent tax credit on the PERA contribution that can be used to pay for national income tax liabilities; and a tax-free distribution on qualified withdrawal of PERA investments.
A potential contributor only needs a Tax Identification Number (TIN) to invest in the PERA.
By the time the contributor reaches the age of 55 years old and an investment period of at least five years, he or she can redeem the PERA investment free of taxes.
The BSP started the end-to-end digitalization of the PERA environment in September 2020.
As an online marketplace, the digital PERA facilitates greater convenience and efficiency by enabling Filipinos to open PERA accounts, choose among different accredited PERA products, and settle PERA transactions electronically using their mobile phones or other digital devices.