While some people tend to depend on their children when they retire, it would be a much better idea if you prepare for your retirement while you still can (and able) and not think of your children as your “retirement plan”.
Aside from your SSS or GSIS contributions, you can also invest your money in a PERA account in preparation for your retirement.
In this article, we will share with you some facts about PERA, how it works and how you can invest in it.
What is PERA?
Short for Personal Equity and Retirement Account, PERA is a voluntary retirement account which is invested in eligible PERA Investment Products such as UITFs, Mutual Funds, Stocks, Exchange-Traded Bonds, Government Securities, Annuity Contracts, Insurance Pension Products, Pre-need pension plans, and others products that are allowed by the concerned Regulatory Authority.
PERA was signed into law on August 22, 2008, under Republic Act No. 9505 and it aims to supplement Filipinos’ future pension from SSS or GSIS or from their employers.
Who can open a PERA Account?
Filipinos who have TIN or Tax Identification Number and who have the capacity to contract can open a PERA Account and be a Contributor.
The Contributor is the individual who opened a PERA Account.
If you are a married Overseas Filipino or OF and you cannot directly open a PERA account, your legitimate spouse or child who is based in the Philippines may represent you in opening a PERA.
How does PERA work?
Step 1 – You, as a CONTRIBUTOR, will select a PERA Administrator and your Custodian.
- PERA Administrator – manages your PERA
- Custodian – holds the cash and securities of PERA and Product Provider to supply your PERA Investment products
Step 2 – The PERA Administrator will set up your PERA and coordinate with your Custodian and PERA Product Provider to carry out your investment instructions.
Step 3 – The PERA Administrator will oversee and maintain your PERA until its final distribution.
Once you opened your PERA Account, you, as the Contributor, can now make contributions to your account on a regular basis or at your option for investment purposes.
If you’re employed, your employer may also contribute to your PERA account but only up to the extent of the amount that you allowed.
BDO PERA Investment Products
BDO or Banco de Oro is a PERA Administrator and it also offers PERA Investment Products through their BDO PERA UITFs or Unit Investment Trust Funds.
You may choose the type of PERA investment based on your risk profile. Here are the suggested funds for different risk profiles:
- BDO PERA Short Term Fund – for investors with conservative risk profile
- BDO PERA Bond Index Fund – for investors with moderate risk profile
- BDO PERA Equity Index Fund – for investors with aggressive risk profile
How much is the Investment for PERA?
The maximum contribution for PERA per year is:
- P100,000 for Filipinos here in the Philippines
- P200,000 for Filipinos Abroad
Why should you invest in PERA?
1. If you invest in PERA, the income earned by your PERA Investment Products will be tax-free or tax-exempt PROVIDED:
- you withdraw your PERA investment after you reach at least 55 years old
- you made at least 5 yearly contributions
Upon retirement, you have the option to avail of this retirement benefit in lump-sum or through regular pensions. It can also be a combination of both options.
In case of permanent disability or extended sickness (lasting more than 30 days), you are allowed to withdraw a PART or your ENTIRE PERA fund without penalties.
2. Your Annual PERA Contributions are entitled to a 5% tax credit PROVIDED:
- you withdraw your PERA investment after you reach at least 55 years old
- you made at least 5 yearly contributions
3. In case of Contributor’s death, your PERA distributions will be FREE from Estate Tax.
4. If your Annual PERA Contributions are made by your Employer on your behalf (as a Contributor), here are the benefits:
- Your PERA Contributions will be considered as a valid expense and it will be allowed as deduction from the employer’s gross income
- Your PERA Contributions will be exempted from the employee’s withholding tax on compensation or fringe benefits.
For more information about PERA and BDO PERA Products, please click here.
As they say, people who fail to plan, plan to fail. Therefore, as early as now, plan your future so that you can enjoy your retirement years without depending on others.
Click here to read: PERA as a Backup Plan for Your Retirement
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