PERA contributions increase at end-June
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PERSONAL Equity and Retirement Account (PERA) contributions climbed as of end-June as Filipinos were encouraged to invest more amid better economic conditions, the Bangko Sentral ng Pilipinas (BSP) said.
PERA contributions grew by 30% to P368 million in the first half from P283.2 million in the same period last year, a BSP report showed.
The number of PERA contributors also jumped by 15.9% to 5,402 in January to June from 4,660 in the comparable year-ago period.
“The strong growth can be attributed to improving economic conditions, which allowed PERA contributors to increase their allocation for their retirement savings,” the central bank said.
“In addition, the reduction in individual income taxes, which took effect in January 2023 as part of the Tax Reform for Acceleration and Inclusion (TRAIN law), helped spur consumer spending, investments, and savings,” it said.
Under the TRAIN law, taxpayers with annual incomes below P250,000 are exempt from paying personal income tax, while those earning above P250,000 but less than P8 million annually pay lower tax rates ranging from 15% to 30%.
Broken down, about 3,817 employed individuals contributed P253.3 million to the fund during the period. This was followed by overseas Filipino workers (754) and self-employed individuals (831) who invested P64.9 million and P49.8 million, respectively.
“The heightened interest in PERA among Filipinos can be ascribed to the BSP’s proactive efforts in raising public awareness and making PERA more accessible through online platforms,” the central bank said.
Launched in 2016, the PERA is a voluntary fund scheme meant to supplement retirement benefits from the Government Service Insurance System or the Social Security System, as well as private employers.
Starting this year, contributors aged 18 and above who are employed locally or self-employed are allowed make a maximum annual investment of P200,000 in their PERA accounts, up from P100,000 previously, while overseas Filipinos are allowed to invest up to P400,000 a year from P200,000 previously. Each individual can have a maximum of five PERA accounts.
The PERA law also offers various incentives to contributors, such as tax exemptions on earnings from PERA investments, a 5% income tax credit on contributions that can be used for paying income tax liabilities, and a tax-free distribution on qualified withdrawal of PERA investments.
When a contributor reaches 55 years old and an investment period of at least five years, he or she can redeem the PERA investment free of taxes.
“The importance of continuous financial education, especially on savings and investments, plays a pivotal role in further promoting PERA and maintaining its growth trajectory,” the BSP said.
The central bank has implemented other reforms to boost participation of Filipinos and financial institutions in the PERA ecosystem, including the removal of the basic security deposit of an outstanding PERA administrator.
“Other plans in the pipeline are (1) the expansion of the PERA ecosystem by allowing electronic money issuers to participate as administrators and (2) the development of comprehensive information materials to address common inquiries on the availment and utilization of tax credit certificates, thus promoting efficiency,” the BSP said.
In September 2020, the central bank launched the digital platform for PERA to make it more accessible, allowing Filipinos to open PERA accounts, choose different accredited products, and settle transactions online.
“The BSP is committed to collaborating with PERA stakeholders and partner agencies to extend the reach of potential contributors across different segments of the population,” the central bank said.
“Through these collective efforts and by raising awareness on the long-term benefits of retirement savings and associated incentives among Filipinos, the BSP is confident that PERA will sustain its growth momentum,” it added.
These incentives include exemption from final withholding tax, capital gains tax, regular income tax, and the eligibility of PERA investments to a 5% tax credit on contributions for the year. — Keisha B. Ta-asan