Updated: September 24, 2020
Have you heard of PERA Law or the Personal Equity Retirement Account?
It’s a bill signed by President Gloria Macapagal-Arroyo on August 22, 2008, which aims to help Filipinos, especially OFWs, to save for retirement. This is similar to the Roth IRA and 401(k), which Americans enjoy.
The bill was passed into law in 2008. In July 2016, the go-signal has been issued through Revenue Memorandum Order 42-2016 that laid out reportorial requirements for Republic Act 9505 or the Personal Equity and Retirement Account Law.
And it was only in March 2017 that it became available for the public to invest in. And in September 2020, a digital platform was launched to invest in PERA and make it more accessible.
Updates on PERA is actually available at the bottom of this article, in case you want to read the journey it had through the years.
Anyway, for those who do not know anything about the PERA Law, below are some basic information and frequently asked questions about the Personal Equity and Retirement Account.
What is PERA?
PERA in the Philippines refers to the Personal Equity and Retirement Account. It is primarily a retirement investment plan.
Who can open a PERA investment?
Anyone with a Philippine Tax Identification Number (TIN) and a verifiable income can set up a PERA. This is a voluntary savings and investment plan open to all Filipinos, employed or self-employed, in the country or overseas, which you can open anytime.
Personally, my advise is of course, the sooner you do, the better.
How do you open an account?
You have to first choose an administrator who will oversee your account. An administrator is a company approved by the BSP, the Insurance Commission, and the Securities and Exchange Commission.
Examples are banks, mutual fund companies, insurance companies, and many others.
As of September 2020, BPI, BDO, ATRAM, SeedboxPH, and Landbank have been approved to be administrators. So if you want to open an account, you will just have to visit these institutions.
Once you have chosen an administrator, you will then choose a custodian who will receive the funds which you will contribute.
The custodian must be an entity different from the administrator. They are investment managers or trust entities that are also approved and accredited by the BSP. You also have the option to assign yourself as your own custodian.
From there, with the guidance of your administrator and custodian, you will choose which investment product that’s included in PERA you’d want to invest your money in.
These can be unit investment trust funds (UITF), annuity contracts, insurance pension products, exchange-traded bonds, shares of stocks traded locally, and many others.
As a simple example, opening a PERA can go like this: You’ve chosen to set up PERA in “Bank A” (administrator) and decided to assign “Investment Manager B” as your custodian.
After talking and receiving guidance from “Bank A” and “Investment Manager B” regarding your financial capabilities and investment goals, you can now decide where to invest.
In this case, for example, you choose “Mutual Fund C” (investment product).
Additional Info: List of PERA Administrators and PERA Investment Funds
How much can you contribute?
People living in the Philippines can contribute a maximum of P100,000 per year. Those living and working overseas have a P200,000 maximum limit.
This is per person, so if you’re married then both you and your spouse can contribute a maximum of P200,000 (P100,000 each). Plus, if you and your spouse are both OFWs, then your maximum limit is P400,000 (P200,000 each).
Can I diversify PERA investments?
You can only have one administrator but you can open up to five accounts – which can be invested in up to five different investment products to help you diversify.
What are the advantages? Why would I want to open and invest in PERA?
First, because you get 5% of your total PERA contribution as an income tax credit. However, there could be no refund of the said tax credit arising from the PERA contributions.
If the contributor is an OFW, then he or she shall be entitled to claim tax credit from any tax payable to the national government under the National Internal Revenue Code.
Second, because all the income earned in your PERA is exempted from tax.
And lastly, upon the age of 55, you will NOT be taxed when you withdraw your money.
What if I die before the age of 55?
Then your money goes to your heirs without going into probate (a legal process which delays the release of the money).
Are there any disadvantages to opening a PERA investment?
It’s important to note that there will be annual trust or management fees that will be deducted from your account, depending on where you invested it. And there’s possible processing fees whenever you contribute, depending on your administrator.
Furthermore, you need to remember that you will incur tax fees and penalties if you decide to terminate or withdraw money (full or partial) before the age of 55.
Other than these, I don’t see any other significant disadvantage.
What if I suddenly need the money before the age 55? Is there an exception for financial emergencies?
Yes, there are exceptions. You will be allowed to withdraw money without penalty ONLY for hospitalization of more than 30 days and/or if you suddenly incur a disability.
Moreover, your family can also withdraw your PERA contributions in case of your death.
Digital PERA FAQ Video
Latest News and Updates on PERA:
September 2020: The Bangko Sentral ng Pilipinas launches Digital PERA, which will allow people to invest in PERA online.
March 2017: Everyone can now invest in PERA. But direct application is limited to the main branches of banks. Inter-branch coordination is possible upon request.
December 2016: Finally, PERA gets a green light. BDO and BPI starts to accept contributions in select branches from a limited number of clients.
September 2016: BDO Unibank becomes the first institution to obtain accreditation as an administrator. Soon you can invest in PERA through them. More banks and institutions are expected to be accredited soon.
July 2016: The go-signal was issued through Revenue Memorandum Order 42-2016 that laid out reportorial requirements for Republic Act 9505 or the Personal Equity and Retirement Account (PERA) Law.
February 2015: No news about PERA. Looks like the official launch will not be happening.
December 2014: BSP has finally announced a target launch date for PERA on January 2015, and people can start investing in it on February 2015 through banks. We’re hopeful that this schedule will be followed.
November 2014: In a statement, the Bangko Sentral ng Pilipinas (BSP) said the launch of the much-awaited PERA law will likely be held in January 2015 following the Monetary Board’s approval of the guidelines for the accreditation of administrators in the PERA market.
October 2013: The Philippine Stock Exchange, together with the Trust Officers Association of the Philippines, has been conducting seminars and awareness campaigns about PERA, in preparation for its full launch. The target date for implementation is still unknown.
November 2012: According to my contact in Business World, implementation of the Personal Equity and Retirement Account (PERA) law will be “further delayed” as the Bangko Sentral ng Pilipinas (BSP) is still ironing out operational issues.
February 2012: According to Ms. Theresa Marcial-Javier, president of the Trust Officers Association of the Philippines (TOAP): “We are just working out some administrative requirements but before the end of the first half of 2012, PERA will officially be made available.”
October 2011: The Draft Tax Rules have already been issued by the Bureau of Internal Revenue (BIR) and are now seeking the final private sector feedback before implementation.
May 2010: The PERA Implementing Rules and Regulations (IRR) was already released by the BSP last year. Currently, the Revenue Regulation (RR) from the BIR is still being drafted and awaiting release. Likewise, there is still no official list of approved administrators and custodians.
I will write more about PERA or the Personal Equity and Retirement Account once there is more information available.
Thanks Fits for this one! I’m also on a “stand-by” mode for PERA since 1st quarter of 2009. I hope the govt would make it available very soon.
May I ask how much the earning potential of PERA, hows the profits computed? I’m looking forward to invest on this too
@melanie
Yes, a lot of people I know are really excited for PERA and have already set aside money for it since last year.
@Cris
Earning potential depends on what product you will choose.
Your administrator and custodian will ideally give you an assessment test to determine if you should invest in conservative, moderate or aggressive products. They should also be able to explain to you how exactly you will earn from it.
But if you want an idea, you can research on the performance of UITFs and Bond Funds for the past years. I expect the products that will be available to PERA will have very similar performance and earning potential.
Lastly, it’s important to realize that PERA products will not make you rich. It will however, at the very least, ensure that you will have a comfortable and sustainable lifestyle when you retire at 55.
I actually inquired about PERA last year from my bank, and they still do not know anything about it… I’m glad you posted this. Hope you can post more info about it when it does take effect… I also set aside money for this.
Very informative post. I would study this PERA in the future. Thanks.
Hi! I’m happy to know that we have this bill which is very similar to HSA (health savings accounts) in the U.S. The only difference is PERA focuses more on retirement savings while HSA is a combination of a tax-favored savings plus a qualifying health insurance. It would be better if PERA also allows us to deposit tax-deductible funds into this account that we can use to cover medical costs and help save 40%-50% on our health insurance. This way, every Filipino can have health insurance plus retirement savings!
Wow, thank you so much for this!
I do hope PERA could be implemented soon. I honestly believe that SSS is not enough.
Thanks Fitz for the info. Have you started investing through this scheme or do you know someone who have opened a PERA account? I am asking this because I need some clarification regarding investment costs when one decides to invest his money through PERA. PERA is really a good opportunity for Filipinos to build a retirement fund due to the tax advantages (zero tax on income, 5% tax certificate). However, I find it too bureaucratic because one investor needs to deal with several agencies (Administrator & Custodian). Another issue linked to bureaucracy is cost. Investment cost will most likely increase since there will be additional layer of management. For example, if a person invest in mutual fund outside of PERA today, the cost would oly be the admin fee of around 2-4% being charged by the investment company, but when that person invest through PERA, admin cost would range 4-8% if the new player (the Administrator) will charge the same amount of admin fee. Please help shed light on this.
Hi, I heard about this PERA thing a few months ago and was very interested. It’s just sad that the implementation of this act is taking too long. Anyways, I’m looking forward for this to be offered to the public very soon.
Any updates on this now?
Hi, is this already implemented?
Hi Fitz,
Just want to ask if PERA is already available? Have you invested already? Please let me know. Thanks.
Hi Henry, unfortunately, PERA is still unavailable. Hopefully, it will be soon.
Can a juridical person apply as Contributor for PERA? I looked at the definition of “Contributor” and it states any person qualified to enter into a contract and has the TIN. The law is silent in including juridical persons having a TIN number. I am hoping if you can clarify me on this matter. Thank you.
[…] can be designed and accordingly adjusted to fit your financial capabilities. Products such as the Personal Equity and Retirement Account are even voluntary, which means you “spend” only what you can […]
I just want to point out a mistake in this post. You have confused tax credits with tax deductions. Tax credits are not deducted from the gross income but these are subtracted from the tax due itself. There’s a big difference!
Thanks Joel for pointing out the mistake, I have now made the necessary corrections.
Hi kuya Fitz, any update on PERA?
Hi Lianne… still no updates, sorry.
Hi! Any update on PERA?
hi Fitz,
I am researching about PERA and quite intrigue about it. it is nice to investment na hindi taxable though at age 55 pa. Do you have any new update sa PERA?
Ask ko pala, you mention that you will choose your administrator and custodian. Do you have any idea how much will the fee?
Thanks
@frugal expat
I tried to search in the past couple of days and it seems there’s still no significant update regarding PERA.
As for the admin or custodian fee, I also don’t have any idea how much it will be. The couple of bank managers (in BPI and BDO) whom I was able to talk to, both don’t even know what PERA means.
So I guess we don’t have a choice now but to just wait… for the next president perhaps? Haha.
Let’s just hope for the best that this will be implemented soon.
An update on this:
My bank manager just informed me today that she’s expecting details regarding the status of PERA very soon (as advised by their main office). I’ll surely write here any information that she’ll get. Thanks.
Can you have PERA account without a custodian? parang self-direct IRA sa US. Hope my updates na 🙂
Hi!
Any updates on PERA (e.g. admin fee, investment costs, etc)?
Thank you very much!
https://www.bpiassetmanagement.com/pages/pera-personal-equity–retirement-account-institutional/
http://business.inquirer.net/29451/the-pera-retirement-system-ready-for-take-off
I reside in Illinois, USA.
Can I open an account at the office of the Consult General in Chicago?
Tito
Any news on the implementation of PERA?
I think wala pa. Pero I found this on the PSE site.
http://pse.com.ph/resource/memos/2013/TPA_2013-0052.pdf
Atleast there’s a progress.
@Look Thanks.
hi fitz,
can u please up this blog and give us any updates…
Hi Dennis. Yes, I’ll definitely blog about updates on this one very soon.
[…] can check out my primer about the PERA Law here to learn […]
They featured PERA in ANC on the money a week or two ago. They’re targeting to launch it Q3 of 2014.
I read a few articles about the PERA law and I don’t understand the difference between the PERA and Mutual Funds. Asides from the tax benefits, the investment vehicle is similar to mutual funds, UITF, or VUL. I also noticed that you’ll get penalized in case you withdraw your funds before 55. Isn’t that a huge disadvantage compared to the investment vehicles I mentioned? Won’t the there be additional fees like what masinopinoy mentioned? Anyway do you have any updates on this? I am really interested in learning the difference between this and other investment vehicles.
Hi Fitz, any updates for this one? Thanks
It’s all green! Woo! http://www.bworldonline.com/content.php?section=Finance&title=monetary-board-approves-long-awaited-pera,-emv-shift-guidelines&id=98327
Is this PERA saving plan, those younger age group only are qualified to avail ? How about those individual who is already more than 55 yrs. old and still interested to invest on this kind of saving plan are they can’t avail anymore?
Is PERA now launched? Where can we invest?
Hi i just read your article and check the bpi website already have this and im planning to open once i got home this year. My question is.. Is it really safe?
Are these like government bonds wherein the interests are guaranteed? I’m just wondering if PERA is a better investment vehicle vs long-term stock investing (15 years or more) since I’ll be 55 after 15 years? 🙂
[…] first wrote about PERA back in 2010 and you can read there the updates it went through in the past 6 years. But for those who’s reading about PERA for the first […]
[…] PERA Facts: Personal Equity and Retirement Account Philippines […]
hi fritz what is 5% income tax credit in PERA?
Hello, Just inquired today at bdo bacoor branch, pera account is offered at he main branch only
Hi, Sir. How can I avail the 5% tax credit if I’m employed and subject to substituted filing? Is the 5% tax credit based on the total contributions or just the contribution for the taxable year? Thanks and more power! 🙂
Hi Sir. Paano po kaya ang magiging process if company ang mag aasikaso ng P.E.R.A ng mga selected employees na interesado na maging contributors? And company po ba ang mamimili ng product na kukunin or yung Admin or Custodian ang mag a.advice?
[…] Villafuerte: PERA Facts: Personal Equity and Retirement Account Philippines and How to Invest in PERA: Opening an Account […]
What is the minimum amount to invest in PERA?
Fitz, thank you vary much for regular updates as new information comes to light. Beautiful Bride & I have used the gift of downtime during the COVID-19 pandemic of 2020 to accomplish many new things and plan the reopening of our existing three business operations here in the Philippines. There were many things NOT completed before multiple lock-downs prevented us from making excursions far from home. One such project was opening and funding a PERA for my bride. I am very grateful to see that there is now a possibility of making this happen for her with the September 2020 update. I hope that includes opening a new account as well as making a contribution. I will divert my attention away from the current project and take a few minutes to investigate. Again, thank you for all you do to help others with their financial well being.
Can i have pera.account in seedbox and.bpi bank? Or only one?
[…] can be designed and accordingly adjusted to fit your financial capabilities. Products such as the Personal Equity and Retirement Account are even voluntary, which means you “spend” only what you can […]