Personal Equity And Retirement Account: A Better Way To Save For Retirement

Personal Equity And Retirement Account: A Better Way To Save For Retirement

Preparing for retirement is probably one of the most challenging long term financial goals for everyone. Sure, we all have SSS or GSIS to count on for that, but realistically speaking, these programs won’t pay off enough to help you sustain a comfortable life once you retire. 

On the average, the basic pension amount to date is only  ₱8,300 – that’s way below the minimum wage in Metro Manila. And, it’s definitely not a pension that can give you the freedom to enjoy your retirement. 

While your SSS and GSISplay a major role in your retirement, simply relying on any of these two will not suffice. That’s why as early as now, put an alternative retirement plan in place, one that can work as hard as you for better financial rewards in the future. One such plan is the PERA or Personal Equity and Retirement Account.

What is PERA?

The Personal Equity and Retirement Account (PERA) is a retirement savings program launched by the BSP in December 2016. It was established to help Filipinos aged 18 years old and above to save for their retirement. 

It has a non-conventional approach towards retirement funds by reaping the benefits of tax benefits The income earned by a PERA savings account is tax-free. Withdrawing the money upon retirement also exempts it from taxes. On top of that, it has a better interest rate than banks – so your savings will potentially grow better. 

PERA is actually a law, aka the Republic Act 9505. It was crafted in 2008 with the purpose of giving tax benefits to Filipinos who are saving for their retirement. It wasn’t until 2016 that it was finally established due to the necessary framework that the government and market players (such as banks) needed to formalize before it can work.

In 2016, the BSP officially launched the PERA system that currently works with two of the country’s top banks, BPI and BDO.

Who can open a PERA account?

Any Filipino citizen is qualified to open a PERA account, as long as he or she has a Tax Identification Number (TIN).  It doesn’t matter if you’re an OFW or a regular employee, as long as you have a TIN, you should be able to open an account in either BDO or BPI. 

How much can you contribute to your PERA account?

While the minimum amount to get started is only as low as ₱1,000, there is a capped amount for depositing money annually. 

PERA account holders who are working within the country will be capped at ₱100,000 annually. Meanwhile, OFWs can contribute double that amount, ₱200,000.

What are the requirements to open a PERA account?

Since PERA accounts can be opened through two different banks, the requirements will vary slightly depending on the bank you choose.

BDO PERA account requirements:

  • Filipino citizen
  • 18 years old and above
  • Tax Identification Number (TIN)
  • Attend and complete the required BDO PERA Seminar
  • Existing BDO Current/Savings Account
  • Photocopy of 2 valid IDs, and
  • Copy of latest Income Tax Return (ITR) on hand as reference for the following:
    • Employer’s TIN
    • Employer’s Name

BPI PERA account requirements:

  • BPI savings or checking account to serve as a settlement account
  • Valid government ID
  • Tax Identification Number (TIN)
  • TIN ID or copy of the Income Tax Return or any document that can validate the TIN
  • ₱1,000 – Initial Amount of Investment and exclusive of fees

Additional requirements for OFWs who are overseas upon opening of a PERA account

  • Marriage certificate (spouse)
  • Birth certificate (child)
  • Sworn certification showing proof that spouse/child is opening a PERA account on behalf of the contributor
  • Overseas Employment Certificate
  • Official documents showing proof of income of OFW from the country he/she is working

How much can you earn from PERA?

Tax exemption aside, PERA can help boost your savings for retirement and it’s definitely a better option than pooling your money in the bank alone. Funds from your PERA account will go into different investment vehicles like stocks, mutual funds, UITF, government securities, and etc. 

In PERA, there are three parties involved in the whole process, that is:

  1. The investor – you. 
  2. PERA Administrator – The entities accredited by the BIR and pre-qualified by a regulatory authority. (The SEC, Insurance Commission, and the Bangko Sentral ng Pilipinas are examples)
  3. Banks – BDO and BPI

Benefits of PERA

  • Plenty of options for diversifying your investments 
  • You can open up to 5 PERA per administrator
  • You can spread out your funds based on your risk appetite
  • Tax benefits gained for the money you save in a PERA account is substantial and gives your retirement fund that additional boost you’ll need for future expenses
  • Contributor is entitled to 5% tax credit
  • Employer contributions are allowed and are tax-exempt 
  • Earnings on investment are free from tax
  • Withdrawals and distributions are tax-free (distributions to beneficiaries are free from estate tax as well)
  • PERA assets are protected from the contributor’s creditors

How to open a PERA account

There are currently two banks accredited for PERA: Banco de Oro (BDO) and Bank of the Philippine Islands (BPI). Thus, you’ll have to go through a separate process if you’re planning to open a PERA account for either one of them. However, the procedure to do so is the same on both banks. 

  1. Visit a branch of the bank of your choice: BDO or BPI
  2. Submit all the all required documents and fill up their form with all necessary information
  3. Your PERA account will immediately be activated on the spot 

Can you open multiple PERA investment accounts?

Yes. You can open up to 5 multiple PERA accounts (but only under one administrator).

Investment products from PERA you can choose from

One of the benefits of a PERA account is the ability to choose different assets to invest your money. You can diversify your portfolio in one account. Below are the following assets you can choose:

  1. Local stocks 
  2. Securities
  3. Unit investment trust fund (UITF) 
  4. Mutual funds
  5. Annuity contracts
  6. Insurance products
  7. Pre-need pension plan
  8. Exchange-traded bonds
  9. And more (check out the PERA Act of 2008 Implementing Rules and Regulations for a full list of investment options).

Offerings from each of the affiliated banks may vary but the gist of their offerings will be focused on the assets mentioned above. 

BDO PERA Short Term FundBPI PERA Money Market Fund
BDO PERA Bond Index FundBPI PERA Equity Fund
BDO PERA Equity Index FundBPI PERA Corporate Income Fund
BPI PERA Government Fund

For an in-depth look at the PERA products from both banks, kindly visit their official websites: 

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