December 27, 2016
Don't know what to do with your extra Christmas bonus yet?
Filipinos can now prepare and save up for retirement by investing in a Personal Equity Retirement Account (PERA), the country's first-ever voluntary retirement account with tax incentives.
The Bangko Sentral ng Pilipinas (BSP) has recently launched PERA, eight years after Republic Act 9505 or the PERA Act of 2008 was signed into law.
"Marami sa ating mga Pilipino ang hindi nakaugaliang mag-ipon o mag-invest. It's best to start saving early on, and the PERA law gives Filipinos an incentive to do so. Kaya sa mga may natanggap na extra na bonus ngayong Pasko, pumunta na sa bangko at mag-apply ng PERA," said Senator Sonny Angara, who was then still a congressman when he authored the law.
The counterpart measure was pushed in the Senate by his father, former senator Ed Angara.
The PERA law aims to promote savings mobilization and capital market development to contribute to fiscal sustainability through the provision of long-term financing.
A national survey on financial inclusion conducted by the BSP showed that only 10.8 percent of Filipinos save for retirement or old age.
"We're happy that the BSP finally launched this investment tool that will help and encourage Filipinos save up for their sunset years or for emergency medical situations," Angara said.
The PERA law allows individuals to open up to five PERA accounts through accredited PERA administrators, which can be a bank or a financial company, and invest up to P100,000 annually.
Overseas Filipino workers (OFWs) can invest up to P200,000 annually or double the limit.
"It's open to all working Filipinos--in the government, private sector, self-employed and professionals, and even our kababayan abroad. PERA supplements the social pension Filipinos can get from SSS or GSIS. It especially targets OFWs, who may not be contributing to either of these funds, so they can live comfortably when they retire," the senator explained.
Individuals who invest in PERA are entitled to a 5-percent income tax credit. For example, if an individual made a P100,000 investment in his PERA account in one year, he or she gets to deduct P5,000 from his or her annual income tax liability.
All income earned from PERA investment products--which include unit investment trust funds, share of stock of mutual funds, insurance pension products, government securities, and other financial products--upon reaching retirement or death are tax-exempt.
Payments will be made when the individual reaches the age of 55. This can be either in lump sum, a pension for a definite period, or for a lifetime.
Early withdrawals will be subject to a penalty, except in cases when the individual is totally disabled due to an accident or hospitalization.
The BSP and the Bureau of Internal Revenue have so far accredited Banco de Oro and Bank of the Philippine Islands as PERA institutional administrators.
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