PERA: Personal Equity Retirement Account

As a voluntary retirement account, PERA provides an organizing framework to help Filipinos 18 years old and above prepare for their eventual retirement. The PERA law, crafted in 2008 as Republic Act 9505, provides tax benefits while instilling the saving discipline of making annual contributions to their own account.
 
Unlike existing national or corporate pension schemes, PERA does not require a deduction from one’s salary to accumulate funds. Instead, PERA relies on an individual’s decision to invest up to Php100,000 annually to prepare for retirement. The PERA law allows individuals to open up to five PERA accounts and these can be invested in specific PERA-accredited product lines. Overseas Filipino Workers are provided the additional benefit of being able to invest up to Php200,000 annually which is twice the normal limit.
 
Why PERA? Because it enjoys the following incentives:
  • 5% income tax credit on the actual PERA contribution. This tax credit can be used to pay your income liabilities; (5/8/17 As per BPI inquiry, 5% credit is based on yearly contribution. Example: 2016 - amount contributed is P100,000; 2017 - none. Tax credit for Y2016 is P5,000 while in Y2017 is P0 since no contribution is made. No carryover is allowed.)
  • Tax exemption from the 20% final withholding tax from interest on bank deposits, deposit substitutes and trust funds, 10% final withholding tax on dividends; capital gains tax on disposition of shares of stock and regular income tax on PERA products;
  • PERA assets shall not be considered your assets for purpose of insolvency and estate taxes.
What investment products are available for PERA? The products are:
  • UITF
  • Equity mutual funds
  • Annuity contracts
  • Insurance pension product
  • Pre-need pension plan
  • Share of stock or other security listed and traded in the local exchange
  • Exchange-traded bond
  • Government securities
  • Any other category of investment product or outlet which the concerned regulatory authority may allow for PERA purposes
These investment products must be duly approved/considered eligible by the concerned regulatory authority in order to be entitled to the above-mentioned tax incentives.
 
What are the fees and charges involved? The fees and charges are administration fees, custodial fees and management fees. (5/18/17 As per BPI Inquiry, admin fee is 1% of amount contributed, yearly custodial fee of P200, transactional fee of P50 every top-up regardless of amount)
 
When Am I allowed to withdraw my PERA contributions? Contributions can be withdrawn and be exempted from income or estate taxes if:
  • Upon reaching the age of 55 and having made qualified contributions for at least 5 years. This may be made either lump sum or monthly pension;
  • Upon death, irrespective of age or contributions made.
Note: One can withdraw his/her contributions without complying with the 55 and 5 rule. However, it will be subjected to penalties and all taxes waived shall be repaid to the BIR. Some exceptions are:
  • Immediate transfer of proceeds to another PERA investment product and/or administrator within 2 working days from withdrawal;
  • Accident or illness-related hospitalization in excess of 30 days;
  • Permanent total disability.
For more information, you can download http://www.bsp.gov.ph/downloads/primers/PERA%20FAQs.pdf
 
Source: BSP's Primer

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