The Personal Equity and Retirement Account Act of 2008 (Republic Act 9505), more commonly known as the PERA Law, gives people the option of a voluntary fund that provides personal accounts for anyone with the capacity to contract and a Tax Identification Number, and having a stable income source also helps.
The PERA Law states that a contributor can open a maximum of 5 PERA accounts at any time under one PERA administrator.
PERA can be used to slowly but surely save up for your retirement fund, even if your employer has to provide retirement benefits for you.
Backup Plan for Retirement
Think of it as a backup plan for your retirement, which is always a good idea.
If there are funds remaining in your PERA account at the event of your death, they will be paid out tax-free to your beneficiaries automatically, making it great for estate planning.
It’s a boon for those who are thinking ahead for the long term.
Save on Taxes
Another thing that makes the PERA Law beneficial for those who are saving up for their future is letting them be able to take advantage of various tax benefits, so they need not fear for their savings being eaten up by taxes when they matter most.
Some of these tax benefits are being able to get 5% tax credit for contributions up to P100,000, tax-exempt investment income, and other tax incentives.
Investment Products
PERA comes with different investment products that people can choose from to suit their needs — Unit Investment Trust Funds (UITF), share of stock of mutual funds, annuity contracts, insurance pension products, pre-need pension plans, government securities, shares of stock or other securities listed and traded on the local stock exchange, exchange-traded bonds, or any other category of investment product or outlet that is non-speculative, readily marketable, and with a track record of regular income payments to investors.
PERA’s Drawback?
Perhaps the drawback here is that when the PERA Law was finally put into serious consideration by the Bureau of Internal Revenue, it meant additional deductions on monthly salaries to be put into retirement.
It is indeed the responsible thing to do, although it does make for some momentary inconvenience for those who may already be having difficulty with their personal budget.
There were also calls for amendment of the PERA Law for more equitable tax rates, which the PERA Law was also used as a spearhead for.
While Tax Code amendments were put out, the PERA Law also gave some extra reprieve for those who are saving up for their future.
When it was enacted back in August 2008, most people did think that it was a good idea, but it was not immediately implemented due to delays in issuing rules and regulations by institutional stakeholders that are necessary for its proper execution.
Why should you invest or consider PERA?
The PERA Law was enacted with the intention to encourage Filipinos to save more, especially since PERA provides tax incentives.
By having more people contribute to PERA, the more they will be able to put money away for their retirement, whether it is a long way away or just a few years from the present.
On the surface, it is indeed a good thing. However, there are some clarifications needed to be made regarding the tax credit for contributors.
According to the Revenue Memorandum Orders, application for Certificate of Aggregate Amount of Qualified PERA Contribution (CAAQPC) should be filed within 45 days from the end of the calendar year.
The CAAQPC is needed for processing and issuing the certificate of entitlement for availing 5% tax credit.
If you think about it carefully, you may find it questionable to have that certification as the basis for the tax credit, especially with that processing time frame.
Nonetheless, having it there as a viable option for ordinary Filipinos to help with securing their future still deserves a thumbs up.
While the economic situation may not be entirely favorable, at least there is something that can help people like you and me over the long run.
Click here to read: Pag-big and SSS Savings Program.
How secure it is to invest with PERA?