Published 9 February 2026, The Daily Tribune
The State has long sought to establish a system that encourages and incentivizes Filipinos to save and invest for the long term, with a view of ensuring financial security in retirement. While it is true that the Philippines already has social insurance systems in place (i.e., GSIS contributions for government employees and SSS contributions for private sector employees), these are compulsory schemes created by statute, with benefits paid according to schedules or conditions fixed by law and relevant regulations.
Thus, in 2008, Republic Act No. 9505 (PERA Act) created the Personal Equity and Retirement Account (PERA), which is a voluntary retirement account established by and for the exclusive use and benefit of any person with a valid Philippine Tax Identification (TIN) number (the “Contributor”). The funds placed in a PERA (and the earnings thereof) are invested solely in PERA investment products, which include investment bust funds, mutual funds, entity contracts, insurance pension products, pre-need pension plans, shares of stock and other securities listed and traded in a local exchange, or exchange-traded bonds.
The PERA Act has several key features and incentives that encourages participation, such as:
- Tax credits on PERA Contributions
PERA contributions earn an income tax credit of up to five percent (5%) of the annual allowable contribution limit of Php 200,000.00 (IRR, Rule 7).1 This allows for a direct peso-for-peso reduction of income tax payable for the year. - Tax-free Growth of Contributions
Any earnings made by investments in a Contributor’s PERA (i.e., interest, dividends, and capital gains) are totally exempt from tax, unlike most sources of passive investment income which are subject to a final withholding tax rate of twenty percent (20%). (Secs. 9 and 10). - Distributions Upon Retirement and Penalties on Early Withdrawal
The funds deposited into PERA (and any earnings thereof) are accessible only upon reaching the age of fifty-five (55) years old and conditioned on whether or not contributions were made for at least five (5) years. (Sec. 12) Any withdrawals made before this time will be subject to penalties in amount equivalent to the tax incentives enjoyed by the Contributor throughout the entire period of the PERA. (IRR, Rule 15)
While seemingly restrictive at first, this structure actually maximizes the long-term benefits of compounding interest and promotes financial security later in life. In this regard, PERA is set it apart from other savings programs such as the PAG-IBIG MP2 Savings, which has a maturity date of only five (5) years. - Inclusivity and accessibility to OFWs
OFWs are allowed double the maximum amount of annual contribution, allowing them to invest up to Php 400,000.00 per year. (IRR, Rule 7) This higher limit incentivizes OFWs to invest their savings in Philippine-based investment vehicles and facilitates a smoother financial integration upon their eventual return to the country.
With the digitalization of PERA, OFWs can now open PERA accounts, fund their accounts through online banking platforms, and monitor their accounts remotely. - Employer contributions allowed as deductible expense
Employers are permitted to contribute to its employees’ PERA accounts to the extent allowable annually (i.e., Php 200,000.00 or Php 400,000.00 for OFWs) provided that the SSS and retirement contributions mandated by the Labor Code are also complied with. These contributions are allowable deductions to an employer’s gross income. (Sec. 6)
While the PERA Act was enacted in 2008 and initial modernization efforts began around 2020, it was not until late 2025 that updated regulations were issued that fully operationalized and implemented PERA through digital platforms. The launch of these digital platforms has provided Contributors with the ability to easily review available investment products, assess market conditions, access and fund their accounts electronically, and monitor the progress of their investments in real time.
These innovations have reduced barriers to entry for many Filipino citizens, particularly given the widespread integration of the internet in our daily lives. As of writing, there is still only one digital stock brokerage-dealer that has been approved by the BSP to act as a PERA Administrator. It is hoped that the introduction of a unified digital platform will pave the way for the development of additional and even more accessible channels through which Filipinos can save through the PERA system and invest toward their future retirement.
1The allowable maximum annual contribution was raised from Php 100,000.00 to Php 200,000.00 in 2023.
For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.
