PH styled Super now available

Implementing rules for PERA, a financial product similar to Australia’s superannuation is now available in the Philippines. Please read this article in BusinessWorld 2 November 2011.

PERA Act to be finally implemented

FILIPINOS seeking an alternative means to save up for their golden years will finally have the Personal Equity and Retirement Account (PERA) option to turn to after final tax rules were issued by the Bureau of Internal Revenue (BIR) yesterday.

The private sector hailed the development, especially since the PERA law or Republic Act 9505 has yet to be implemented despite being signed three years ago. The tax rules were the last thing needed to put the law into effect; its implementing rules and regulations were issued in 2009 by the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas.

“This is a welcome development. This will encourage many people to become more savings-conscious and start preparing for their retirement by allotting a portion of their earnings in PERA-qualified investment products,” Tammy H. Lipana, chairperson of the Philippine Chamber of Commerce and Industry tax committee, said in a text message.

The PERA investment scheme aims to encourage people to save up for retirement by granting them tax exemptions. PERA products have been described as an alternative to the Social Security System (SSS) and the Government Service Insurance System (GSIS).

Revenue Regulations 17-2011, published by the BIR yesterday, state that a resident Filipino can contribute a maximum of P100,000 per year to a PERA account, while overseas Filipino workers (OFWs) are allowed up to P200,000. An individual can hold a total of five PERA accounts.

The contributions, which will be received and administered by accredited financial institutions, can be invested in various products such as trust funds, mutual funds, insurance, pre-need plans, government securities and listed equities.

The contributions are exempted from a host of taxes such as the final withholding tax on interest, capital gains tax on the sale of bonds and shares, 10% tax on cash and property dividends and regular income tax.

PERA holders are also entitled to an annual tax credit equivalent to 5% of all their contributions for the year. Resident Filipinos can charge this tax credit against their income tax liability. OFWs, exempted from income taxes, can charge this against any other national internal revenue tax liability.

The PERA assets will be released once the account holder reaches the age of 55, as long as he or she has made contributions for at least five years. The release can be made either as a lump sum or as a pension. The assets will also be completely released upon the death of the PERA contributor, regardless of age.

The PERA scheme is expected to attract an estimated eight million Filipinos, especially OFWs and self-employed individuals who are not required to register with the SSS or GSIS.

Employers who already contribute to their employees’ SSS and GSIS accounts can also choose to contribute to their PERA accounts. However, the investment decisions and the tax breaks will belong to the employee, the issuance clarified. Moreover, employers’ PERA contributions cannot replace the mandatory SSS remittances and retirement benefits required by the Labor Code.

With the PERA scheme expected to be up and running next year, Ms. Lipana urged Filipinos to take advantage of the investment opportunity.

“This will be very helpful to individuals who are self-employed and not covered by a company-sponsored retirement plan. For employees, it could result to additional benefits if their employers will contribute to PERA,” she explained.

The PERA scheme will also help deepen the country’s capital markets since it opens up people to more sophisticated investment products. PERA account holders will get to choose what to invest in and this could encourage them to try out other financial instruments, Ms. Lipana pointed out.

Capital markets will also enjoy greater activity with since equities, stocks and various funds are part of the investable products, she added.

Financial institutions that want to administer PERA accounts or offer PERA investment products can begin the accreditation process with the concerned regulatory authorities beginning January 1, 2012, when the tax rules become effective, BIR Commissioner Kim S. Jacinto-Henares said.

There is much interest among asset managers and trust institutions in the PERA scheme, according to Theresa Marcial-Javier, senior vice-president and group head of BPI Asset Management, the wealth management arm of the Bank of the Philippine Islands.

“PERA provides tax exemption benefits for investors which makes it different from other investment products,” she said in a text message yesterday.

To make the scheme available to Filipinos at the soonest possible time, there must be a smooth and speedy accreditation process, Ms. Javier said.

“The important thing is for the private sector and the regulators to work together fast enough to arrive at a simple process that allows easy access to the PERA product without compromising investor protection,” she said.

Article location : Act to be finally implemented&id=41000

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: