Better-off retirement with PERA

Most Filipinos remain unresponsive to retirement planning even when its importance has been highlighted, time and again, by experts. The lack or insufficient understanding of its benefits remains the primary reason, followed by personal choices, life situations and mindsets.


For the working class, in particular, the 2019/2020 Global Benefits Attitudes Survey conducted by Willis Towers Watson indicated that in terms of retirement readiness, more than 50% of surveyed employees bared they were not heading in the right direction when it comes to retirement savings. While they allocate a portion of their savings for retirement, they are still saving less than they ideally should.


Employees tend to rely on their employers’ plan for their retirement security, which include the payment of social security benefits and the mandatory retirement pay. These, however, might not be enough to sustain their lifestyle and support the needs of their family over time.


Boost to retirement savings


Marissa A. Romero, VP for Programmed Investments, Retail Accounts of BDO Unibank’s Trust and Investments Group said, “Employers can further help their employees augment their retirement savings by considering the Personal Equity and Retirement Account (PERA). Retirement life is meant to be enjoyed even after employees stop earning. And PERA is a means for the retirees to relish their desired lifestyle, as well as provide financial security to their dependents.”


PERA is a voluntary retirement savings plan that encourages individuals to save and invest for their retirement while enjoying tax incentives both from contributions and income from investments.


BDO, as an accredited PERA Administrator, can help employers set-up and establish PERA for their employees. The Bank will also guide the employee-contributors on financial wellness, how open the PERA in their name, and how they can invest and reinvest PERA contributions in qualified PERA investment products.


PERA’s features


An individual can open a PERA under one PERA Administrator but may invest his PERA contributions in up to five different types of investment products. 


The maximum annual amount each person can put in a PERA is Php100,000, and Php200,000 for overseas Filipinos.


PERA employee-contributors are entitled to a tax credit of five percent of their annual PERA contributions every year. The tax credit can be applied against the employees’ income tax liability.


For example, if an employee has an income tax due of Php150,000 for one taxable year and has contributed Php100,000 to his PERA, he can claim a Php5,000 tax credit (i.e., 5% of the Php100,000 contribution) and will only pay Php145,000 in income tax for that taxable year.


In case the employer contributes to the employee’s PERA, the share given by the employer will also not be subject to withholding tax on income on the part of the employee.


The money in PERA likewise grows tax-free, and is exempt from final withholding tax on interest from bank deposits/deposit substitutes, capital gains tax on the sale/maturity of bonds, the ten percent dividend tax, and regular income tax.



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