Note: Caveat emptor. I’m not in anyway endorsing the banks and entities mentioned herein. Definitely, there are and will be other providers. Just so happened that they are the first few to come out and their websites were accessible in showing their newest PERA offerings.
Good news. Last week, major banks launched their PERA UITFs, namely that of BPI (PSE: BPI) and BDO (PSE: BDO). Haven’t gotten the chance to check other banks who might be offering as well, but wanted to let you know of the good news as soon as possible so we can all review, conduct due diligence and consider this investment. You may view our previous post on PERA here: Magkaka-PERA na Tayo!
To recap, PERA (Personal Equity and Retirement Account) is voluntary and as the name suggests, is meant for retirement, as such this is a very long term investment vehicle. Withdrawals are generally not allowed, except for specific circumstances allowed by the law. Other withdrawals will incur many penalties and some tax incentives may be removed as well. Therefore, be very careful in considering this investment option to make sure that you save up a good amount for retirement, without sacrificing your present cash flows.
In a nutshell, Juan who opts to open a PERA will contribute regularly (much like SSS/GSIS) and this money shall be pooled and invested in various vehicles (most common of which is UITF / Mutual Funds. Other investment options are stocks, insurance etc.
Juan who wants to open a PERA should have a TIN (Tax Identification Number) and in a fit state to enter into contracts. Not yet clear though in the FAQs we’ve gone through whether employed individuals will contribute via salary deduction (similar to SSS) or deposit money to administrators on their own. Most likely it is the former. We’ll find out soon enough.
The major entities involved in PERA are:
- Contributor: YOU, should you decide to invest and boost your SSS / GSIS retirement benefits (which honestly, really need a big boost)
- Administrator: Accredited by BSP, SEC or IC and BIR to administer and oversee the PERA of Contributor. (Should only be one Admin per person)
- Custodian: Accredited by BSP, separate unrelated entity to Administrator, which will take custody (safekeeping) of PERA assets (classified as Cash or Securities Custodian)
- Product Provider: Provides and sells accredited PERA investment products, where you money may be invested by the Administrator
- Investment Manager (Optional): Accredited entity, authorized by Contributor to make investment decisions on behalf of Contributor with regards to his/her PERA
As of this writing, BDO and BPI are already offering UITFs for PERA, most of which were released just last week up to yesterday. I’m sure other banks (and qualified entities) will soon follow suit to offer every Juan various PERA options.
- BDO PERA Short Term Fund
- BDO PERA Bond Index Fund
- BDO PERA Equity Index Fund
- BPI PERA Money Market Fund
- BDO PERA Equity Fund
- BPI PERA Government Bond Fund
- BPI PERA Corporate Income Fund
Note that under the PERA rules, only 5 PERA may be open at a time and there should only be one Administrator (so choose your Administrator wisely!). Again, I’m not in anyway endorsing abovementioned banks and entities, just so happened that their websites showed their PERA offerings. If you come across with other entities offering PERA investments, tell us in the comments below.
Aside from increasing Juan’s retirement account (the major benefit), as follows are additional benefits with having a PERA:
- Tax credits of 5% of annual PERA contributions (which means you can deduct this amount to the total tax you need to pay, which means lower tax payments for you)
- Tax exemption of investment income (withholding tax, capital gains, income tax)
- Your employer may choose to contribute for your PERA too on top of the amount they match for SSS. I interpret this as optional for employers, and if they do, their contributions are income tax deductible (deducted from your gross income before tax due is computed)
- Free of tax if contributor avails of retirement benefits upon reaching 55 years old and 5 annual contributions
- Allowed withdrawal in case of permanent disability or extended sickness, distribution to qualified dependents in case of death
Contact you preferred administrator now! Not so fast. Study the PERA further by reading the FAQs of administrators (click here for BDO FAQ and BPI FAQ). The FAQs also contain discussions for overseas Filipinos. Approach the branches of your preferred banks and inquire more. Here’s also the PERA article from BSP: PERA Act of 2008. Likewise, since only one (1) Administrator is allowed, you may want to wait for a bit longer to have more options in case future Administrators can offer other investment vehicles aside from UITFs.
Lots of items still to be clarified (aside from the salary deduction bit above). My sense here is that at least for the UITFs, Juan may buy and sell as he wishes (or is it the Admin / Investment Manager’s call?), but s/he may not pull out / withdraw the funds easily unlike that of usual UITFs. It will just stay there in the PERA and grow (hopefully) over time.
Consider this a long term engagement, to have a financially comfortable retirement, so be very careful with your next steps. Nonetheless, make sure you start yours as soon as you are financially and emotionally ready. Investments are a must have and this is a good investment vehicle to consider. Once we learn more about PERA (and other providers), will try to share them here and keep you posted.
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Images are from BDO and BPI Websites.