Setting aside money for the future can be a tough exercise, especially when we’re caught in present financial issues and challenges. It takes a certain level of discipline to allocate some of your hard-earned money to investments that will allow you to reap the benefits in the future. Some of these include mutual funds, unit investment trust funds (UITFs), and stocks. A new way to save has become accessible this month — investing in PERA, or Personal Equity and Retirement Account.
Retirement is a long, long way for many Filipinos. While we are young and able, ideally we should be able to set aside money so that we can enjoy them in our senior years. Most of us rely on government-mandated pension plans like the Social Security System (SSS) and Government Service Insurance System (GSIS) for private and government workers, respectively. The pension being made available in these options, however, is quite low.
Philippine Statistics Agency (PSA) data indicate an average of only PHP 5,123 for SSS pensioners and PHP 18,525 for GSIS. A senior citizen given today’s typical expenses clearly cannot survive on these alone! (Try out the SSS Retirement Benefit Calculator to see how much you will get when you retire.)
Thus comes PERA.
PERA came into existence due to Republic Act 9505. It was a 2008 law that provided for a new (but not mandatory) personal savings plan for Filipinos. However, it was not until 2016 when people were actually able to open accounts for themselves after several government bodies like the Bangko Sentral ng Pilipinas (BSP) and Bureau of Internal Revenue (BIR) hurdled several blockers to allow for PERA’s implementation.
Benefits of Investing in PERA
Investing in PERA has several advantages compared to other investment vehicles:
- Five percent (5%) tax credit
- Investing some of your money in PERA allows you to take advantage of tax credit, which you may use to offset your income tax liabilities!
- Tax-free for income derived from investments (and reinvestments) in PERA
- How neat is this? You always get taxed in one form or another when you invest in other types of investment products. Not with PERA.
- Your money in PERA will not be considered assets for the purpose of insolvency and estate taxes.
One thing to note though on above benefits: These are limited based on the actual PERA contribution you’ve made not exceeding the annual maximum contribution. For Filipinos based locally, this annual maximum is PHP 100,000, while for Filipinos based overseas can invest up to PHP 200,000 to gain the above benefits. Any amount in excess will be taxed, for instance.
Investing made easy with “Digital PERA”
PERA in the past proved to be quite limited, partly due to its relative obscurity and difficulties in opening an account and contributing to the fund. As of 29 July 2020, statistics showed that only 1,536 Filipinos have PERA, with a total contribution amounting to merely 137 million pesos! Of these, 69% were employees, 17% were Overseas Filipino Workers (OFWs), and 14% were self-employed Filipinos.
The BSP has been advocating cash-lite transactions for several years now. It is in this similar vein that they are also pushing for digital approaches in investing our money.
Last 8 September 2020, the BSP launched Digital PERA in an virtual event. Simply put, Filipinos will now be able to more easily create their PERA online! They partnered with many agencies to get this up and running. One way to now invest in PERA is by signing up for an account with Seedbox Philippines over at https://pera.seedbox.ph . Signing up is free, and may be done using your preferred browser on desktop or mobile!
The Digital PERA platform is not exclusive to any Philippine bank. You are not obligated to have an account open in a particular local bank. Why? This is because you can fund your PERA using InstaPay. This has been another BSP initiative that allows you to transfer money anytime in real-time across banks — or e-wallets! All it takes is accessing your funds from your bank’s online banking platform and transferring them to your PERA.
We are not going to be working and earning money for life. Because of this, we need to save up for our retirement years. Merely depending on some pension plans required by the government will not be sufficient, so we have to be wise about investing our money in other options, like PERA. With this recent launch of BSP’s “Digital PERA”, another easy way to invest is made available especially during this time of pandemic. Contributing to PERA online makes it a lot more convenient and accessible to more Filipinos both here and abroad.
PERA-PERA lang yan! Let’s start investing for our future, now!