As financial literacy in the Philippines continues to evolve, particularly in wealth preservation and wealth creation, one eponymous investment vehicle has increasingly gained popularity over the years: PERA, or the Personal Equity and Retirement Account.
Everybody wants pera or money, especially in retirement. But can having a PERA fund actually help you achieve your retirement goals? How can you start investing?
We explain everything below.
The Personal Equity and Retirement Account (PERA) is a voluntary retirement savings program established under the PERA Act of 2008. This allows eligible Filipinos with a valid Tax Identification Number (TIN) to save and invest voluntarily for retirement through a tax-advantaged account.
The goal is to encourage retirement readiness, with the full benefits waiting until Filipinos are of retirement age. It also promotes and develops overall savings and investment behavior, guiding Filipinos to build wealth over time.
PERA’s key advantage is its tax incentives, which include tax exemptions on your investment returns and a tax credit.
Under the PERA Law, a depositor could receive an annual 5% tax credit on total qualified contributions of up to PHP 200,000 for local employees and PHP 400,000 for Overseas Filipino Workers.
Investment income earned through PERA is generally tax-exempt, allowing contributors to maximize the benefits of long-term compounding interest. In contrast, in a regular investment account, interest income may be taxed, depending on the investment tool, usually at 20% for interest-earning assets. This reduces overall returns and slows the growth of capital over time, particularly if these investments are intended for the long term.
For depositors who have reached 55 and maintained PERA contributions for at least 5 years, qualified withdrawals are tax-free, allowing retirees to benefit from their earnings before retirement.
Although PERA is a voluntary savings and retirement fund opened and managed primarily by an individual, allowing greater flexibility and financial freedom in managing investment portfolios, private employers are urged to participate in the PERA program.
To incentivize employers, companies could partner with PERA-accredited administrators to handle employee enrollments. This enables automatic payroll deductions and an employer’s contribution to the employee’s PERA fund.
Private employers who contributed at least as much as the employees’ contributions may claim tax deductions equal to 150% of the employers’ share, that is, a 100% tax deduction under the PERA Law and an additional 50% under the Capital Markets Efficiency Promotion Act.
Having a PERA account gives you access to various investment products that match your risk appetite. Eligible products include government securities, bonds, mutual funds, unit investment trust funds (UITFs), and equities.
Exposure to various investment products early on builds investment literacy and maturity as your portfolio develops. This paves the way for potential investments (within or outside PERA) toward financial goals that may not necessarily be retirement.
The best time to open a PERA and start investing is now. Regardless of market conditions, starting an investment fund early gives your investments more time to grow. Besides, building a secure financial future is a long road.
While you may have full access and control over your funds, PERA is intended as a long-term investment and early withdrawals are discouraged.
It is worth reiterating that keeping your funds intact through retirement would allow you to maximize returns and take advantage of the tax benefits, helping contribute to a more financially secure retirement.
The process is simple. PERA accounts are opened through PERA-accredited administrators. You may find the list from the Bangko Sentral ng Pilipinas: https://www.bsp.gov.ph/Pages/InclusiveFinance/PERA_Participants.aspx
Although Metrobank is not a PERA-accredited administrator, you may invest in a Metrobank PERA investment product that is available through ATRAM, a PERA-accredited institution. Visit the Metrobank website to learn more about Metrobank PERA and how it can help you work toward your long-term financial goals.
Related articles: PERA: Investments for retirement without taxes; Metrobank PERA Money Market Fund; Metrobank PERA Bond Fund; Metrobank PERA Equity Fund
MARIAN MONETTE FLORENDO-OBIAS is a Research Officer of the Macro Research Department, Markets Advisory Division, Financial Markets Sector, at Metrobank. She is a Certified Treasury Professional and holds an undergraduate degree in Mathematics from Ateneo de Naga University and an MA Economics degree from UP Diliman. She loves traveling and watching mystery movies in her spare time.
