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Gov’t raises PERA contribution ceiling


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FINANCIAL REGULATORS have doubled the maximum yearly contributions to the Personal Equity and Retirement Account (PERA) to encourage more Filipinos to prepare for retirement through the voluntary program.

In a statement on Monday, the Bangko Sentral ng Pilipinas (BSP) said the annual maximum contribution has been increased to P200,000 from P100,000 for locally employed and self-employed individuals. For overseas Filipino workers (OFW), the yearly contribution allowed was raised to P400,000 from P200,000.

“The increase in the limits provides our kababayans with greater opportunities to ensure their financial security,” BSP Governor Felipe M. Medalla said.  “It also supports the government’s broader thrusts of mobilizing individual savings for capital market development and generating funds for long-term projects.”

Upon the PERA Inter-Agency Board’s recommendation, Finance Secretary Benjamin E. Diokno approved the increase in allowable annual contributions effective immediately this year.

The BSP is the lead agency of the PERA Inter-Agency Board, with representatives from the Securities and Exchange Commission, Insurance Commission and the Bureau of Internal Revenue as members.

“Increasing the allowable PERA contribution is welcome news as it provides consumers with a higher-yielding savings vehicle while also encouraging savings behavior among Filipinos,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.

The PERA also allows consumers to diversify their savings, she added.

However, Ms. Velasquez said the government should also conduct more financial literacy or education campaigns to get more Filipinos to maximize the account.

Latest central bank data showed PERA contributions climbed by 30% to P329.55 million last year from P253.35 million in 2021.

The number of PERA contributors also jumped by 16% to 5,100 in 2022 from 4,382 in 2021. About 3,600 employed individuals contributed P223.71 million to the fund last year, while OFWs (721) and self-employed individuals (785) invested P60.58 million and P45.25 million, respectively.

Unlike advanced economies, the Philippines does not have extensive social safety nets such as retirement benefits and social security,” Ms. Velasquez said. This means Filipinos will have to save more for the “rainy days.”

“At a country level, the Philippines’ savings rate lags behind our ASEAN (Association of Southeast Asian Nations) neighbors and higher PERA contributions will help,” Ms. Velasquez added. “As a country, higher savings will also result in higher funds allowed for investments, spurring economic growth.”

Recently, the BSP removed the basic security deposit for the faithful performance of a PERA administrator’s duties, which was set at 0.5% of the book value of PERA assets.   

“This is expected to lower the cost of administering PERA assets, which may impact the contributors through lower charges on PERA. This is likewise seen to encourage more BSP-supervised financial institutions to participate in the PERA ecosystem,” the central bank said.   

According to the BSP, PERA administrators included ATRAM Trust Corp., BDO Unibank, Inc. and Bank of the Philippine Islands Asset Management and Trust Corp. as of July 2021.   

Launched in 2016, the PERA is a voluntary fund meant to supplement retirement benefits from the Government Service Insurance System or Social Security System, as well as private employers.

The PERA law also offers various tax incentives to contributors such as tax exemptions on earnings from PERA investments, a 5% income tax credit on contributions that could be used to paying income tax liabilities, and a tax-free distribution on qualified withdrawal of PERA investments. 

When a contributor reaches 55 years old and an investment period of at least five years, he or she can redeem the PERA investment free of taxes. 

The central bank also launched the digital platform for PERA in September 2020 to make it more accessible to contributors. — Keisha B. Ta-asan

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