A PROPOSAL to reform the current private pension system to make it portable and actuarially fair was approved on committee level by the House of Representatives.

The House Committee on Banks and Financial Intermediaries on Thursday approved the committee report on the proposed Capital Market Development Act of 2021 subject to style and amendments. The panel has been holding hearings on the measure since last month.

Economic managers earlier backed the measure, saying it will help develop capital markets by expanding the local investor base.

“I’d like to express my deepest gratitude to my esteemed colleagues for helping process this very important measure. I think we have thoroughly discussed it and consulted all possible stakeholders who have likewise actively engaged with us,” Quirino Province Rep. Junie E. Cua, the bill’s author and the committee’s chair, said during the hearing on Thursday.

If enacted, the proposed law will establish the Employee Pension and Retirement Income (EPRI) Account, which will be mandatory for all employees covered under the Labor Code of the Philippines. Workers will also get to decide on what investments they can make using their EPRI assets as long as these are legal and accredited.

Employers are required to contribute an initial 4% to the EPRI account while workers will allocate at least 0% to 1% to their own pensions, depending on how much they earn. The EPRI account will also have a portability feature, which will follow the employee/account holder regardless of change in employer.

The measure also mandates the inclusion of financial literacy in the basic education system.

On the other hand, the committee said further discussions need to be made on the pension contribution arrangements of micro and small enterprises.

But pending further talks on the matter, lawmakers agreed on the recommendation made by the Management Association of the Philippines (MAP) to base the contribution on the employee’s tenure with the micro establishment, which will give employers a reasonable period to afford paying for the contributions. The Department of Labor and Employment also agreed with the proposal.

“If you’re employed with the micro, when you retire, you have nothing at all…I was thinking from that if the progression, from the effectivity of this bill, if the employee has been with you (the micro business) for three years, then you have to cover that employee,” MAP Tax Committee Chair Benedicta Du-Baladad said in the hearing.

The committee’s vice chair, Manila Teachers Rep. Virgilio S. Lacson said during the same hearing that this proposal will “strike a balance for the businesses if they can afford to cover it and at the same time, the employees will receive the full benefit… Let’s give micro and small businesses a chance to grow.” — G.M. Cortez