Published 25 September 2020, The Daily Tribune
The new normal presented prospects for an expedited transition to everything digital. In seizing this opportunity, the Bangko Sentral ng Pilipinas recently announced that it is revolutionizing the Personal Equity and Retirement Account (PERA) by launching Digital PERA.
PERA is a voluntary retirement account established by and for the exclusive use and benefit of the Contributor for the purpose of being invested solely in PERA investment products. It is different from the retirement benefits which employees receive from the SSS or GSIS. Essentially, PERA means forced savings that is withdrawable upon retirement.
In 2008, PERA was established pursuant to Republic Act No. 9505. However, it was only in 2016 that the law was actually implemented. Even then, it did not gain sufficient traction and received limited contributions. Thus, this year, BSP decided to revive the program to educate and encourage more Filipinos to save for their future. With all its promising features, PERA remained an under-utilized retirement fund-building vehicle.
Anyone who has a Philippine Tax Identification Number (TIN), whether employed or self-employed, is qualified to open a PERA investment. To open an account, a Contributor must first choose an administrator who shall oversee the account. In order to diversify, PERA allows a Contributor to invest in different investment products by opening up to five accounts.
The PERA Law particularly recognizes the plight of Overseas Filipino Workers. As we know, it is common for OFWs to remit all their hard-earned money to their families in the Philippines, leaving them with less than what they need while abroad. Because of this, OFWs are allowed a greater maximum contribution at P200,000 or double a local-based Filipino may contribute annually. Meanwhile, a married person may contribute up to P100,000 per year. Hence, a married couple can contribute P200,000.
The IRR of the law clarifies that a person who intends to contribute beyond these maximum amounts may do so. However, the amounts in excess of the P100,000 or 200,000 in case of OFWs, are no longer entitled to a tax credit. Likewise, the investment income made therefrom is no longer exempt from tax.
By offering PERA through a digital platform, Contributors can now browse different PERA investment products, access and monitor their accounts and settle their transactions through online banking. PERA products cover unit investment bust fund, mutual fund, entity contract, insurance pension products, pre-need pension plan, shares of stock and other securities listed and traded in a local exchange, exchange-traded bonds, among others.
The entities which may apply with the concerned regulatory authority for pre-qualification as administrator include banks, trust entities, investment company advisers, security brokers, investment houses including those with quasi-banking license, insurance companies, insurance brokers, and other entities as may be determined by the regulatory authority.
The administrator, who must be accredited by the Bureau of Internal Revenue, is tasked to report on the contributions made to the account, compute the values of investments, educate the Contributor, enforce PERA contributions and withdrawal limits, collect appropriate taxes and penalties for the government, and secure BIR Tax Credit Certificates for the Contributor. It also has the duty to consolidate report on all investments, income, expenses, and withdrawals on the account. Most importantly, the administrator must ensure that the contributions are invested properly and within the prudential guidelines set by the regulators.
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