PERA Investment: Pros, Cons, And Going Digital

One of the inevitable truths we need to face is that we will get older. As each year comes by, you will notice changes in your movement, memory, and skills. This is why it is important to prepare for your later years, also known as retirement.

Have you started with your Retirement Fund? If not, then it’s not too late. There are several options that allow you to grow your money such as long-term Time Deposit, mutual fund, UITF, or even stocks.

If you prefer something safer with minimal risks, then consider PERA Investment.

What is PERA Investment?

Similar to US’ Individual Retirement Account, PERA’s aim is simple: to provide a voluntary retirement program for Filipinos.

PERA is a long-term and tax-free retirement program to encourage Filipinos to start saving for retirement. Your contribution of up to P200,000 every year will be invested in the following:

  • Unit Investment Trust Fund
  • Mutual Fund
  • Stocks from PSE-listed companies
  • Government securities
  • Insurance pension products
  • Annuity contracts
  • Other investment products authorized for PERA purposes

Keep in mind that PERA will not replace SSS pension, rather will supplement the money you can get come retirement age.

How Much Can You Earn?

Earnings vary depending on where the money was invested. Since PERA contributions are invested in various investment channels, the returns are different.

For instance, UITF and mutual fund will give a higher return compared to time deposit. However, this is a safer option compared to stocks. When money is invested in stocks, the return is higher than UITF and mutual fund, although the risk involved is higher.

In other words, the higher the risk, the higher the return.

Why Should You Open A PERA Account?

  • Income Tax Credit – Account holder is entitled to five percent Tax Credit of total PERA contributions.
  • Tax-Free Investment Income – This means the investment is exempted from capital gains tax, final withholding tax, and regular income tax.
  • Estate Tax Exemption – Upon death and when assets will be transferred to the heirs, an estate tax of six percent of net estate, which means all liabilities were deducted, will be imposed. PERA Investment is exempted from that and in fact, the money will be transferred directly to the heirs.
  • Control PERA Investment Products – When you invest in PERA, you have the control on where you want to put your money, depending on your risk profile. There are variety of choices to choose from so make sure you check and study what product is more suitable for you.

When Can You Withdraw Your PERA Investment?

To withdraw, you need to remember the 55 and 5 Rule. This means you will be allowed to get your investment by the time you reach 55 years of age AND you contributed for the last 5 years.

You can either get it in lump sum or choose monthly pension for a certain period or within your lifetime.

Still, there is an exception. In case the investor or account holder is sick for more than 30 days, becomes permanently disabled, or has passed away, the investment can be withdrawn.

What Are The Drawbacks Of PERA Investment?

There are several. Just like any other investment options, PERA comes with risks, too. This form of investment is not exempted from price fluctuation, crash in the stock market, or lowered interest rates. This is why it is important to check every investment option first before you decide where to invest.

Another risk would be penalty for early withdrawals. Although there are early exemptions like serious illness, permanent disability, or death, you have to wait until you satisfy the 55 and 5 rule to enjoy your benefits.

What happens if you withdraw earlier? Then you won’t be able to enjoy the benefits, specifically the tax benefits.

Lastly would be the costs. Every time you make a contribution, you will pay one percent administrator’s fee plus trust and custodian fees of 0.5 percent to 1.5 percent.

To reduce the instances of paying these fees, it is best to contribute in lump sum instead of doing this every month.

PERA Goes Digital

BDO, BPI, Landbank, and Metrobank are the only banks authorized to offer PERA. This means you need to go directly to the bank to be able to apply.

Thankfully, Digital PERA was launched by the Bangko Sentral ng Pilipinas last September 2020 to entice more Filipinos to apply and prepare for their retirement.

Here’s how you can apply:

  1. Create an account though Seedbox Philippines. You can access the website here.
  2. Complete your profile by filling out all necessary information.
  3. Prepare required documents including government-issued ID and TIN.
  4. Answer the Risk Profiler. This is an assessment to determine what kind of investor are you. You will be categorized accordingly – Conservative, Moderate, and Aggressive.
  5. After determining your risk profile, choose the PERA Fund that you want to avail of. Several PERA products will be shown to you based on your risk profile.
  6. Start funding your PERA account. You can do this through various payment channels through BDO, BPI, or Metrobank.

Here comes the best part: you can start for as low as P1,000.

What are you waiting for? Give PERA a chance and start investing for your future. You’ll never know what will happen so it’s best to be prepared.

What is SSS Unemployment Benefit?

Millions of Filipinos, including OFWs, were heavily affected caused by the Covid-19 pandemic. Instead of having a quiet life overseas that allows you to send sufficient amount of money to your family back home, you have no choice but to go back and look for ways on how to earn.

The government, through DOLE, were able to provide P10,000 financial assistance to repatriated OFWs. According to the DOLE website, the agency received more than 617,000 applications and were able to approve 280,253 requests so far (1). Although the government aims to accommodate all applications, there will always be a limitation on budget.

Then, there’s SSS Unemployment Benefits.

What is SSS Unemployment Benefit?

Also known as Unemployment Insurance or Involuntary Separation Benefit, this program is a cash benefit granted to employees who were involuntarily separated from work. Involuntary separation from work includes retrenchment, downsizing, closure or cessation of operations, redundancy, or installation of labor-saving devices among others.

If qualified, the SSS member can get twice the half of average monthly salary credit or ASMC.

Employees who may be covered by this cash benefit are:

  • Employees employed in the Philippines
  • kasambahay or househelp
  • Overseas Filipino Workers, both land-based and sea-based

What are the qualifications:

  • Employee must not be above 60 years old at the time of involuntary separation
  • If the employee is an underground or surface mineworker, s/he must not be above 50 years old
  • If the employee is a racehorse jockey, s/he must not be more than 55 years old
  • Employee paid at least 36 monthly contribution, 12 of which must be within the 18-month period before the month of involuntary separation
  • Employee must not be dismissed due to serious misconduct, commission of a crime, gross and habitual neglect of duties, fraud, and other reasons that will justify the termination of employment
  • Employee did not receive any unemployment benefit for the last three years from the time the termination was severed.

How To Apply For SSS Unemployment Insurance

There are two ways on how you can apply: online application or personal appearance.

Here’s how you can apply online, which is the recommended option to minimize contact:

  1. Log-in to My.SSS account. You can access the website here.
  2. Click E-Services tab.
  3. Choose Apply for Unemployment Benefit Claim.
  4. Fill in the online form. Make sure to provide complete and truthful information.
  5. After carefully reading the certification, click Submit.
  6. Check your email. SSS will send an email requiring you to submit documents such as POLO Certification and Notice of Termination from employer or notarized Affidavit of Termination from Employment, whichever is applicable.

If you prefer personal appearance, then here’s how you can apply at SSS branch near you:

  1. Fill out DOLE Certification. You can get this from POLO where the employer is operating or DOLE Provincial or Field office nearest to you.
  2. Make sure you have the following requirements for submission – Notice of Termination from employer or Affidavit of Termination from Employment, UMID-ATM card, UBP bank card or bank statement showing your name, savings account number, bank branch, and address.
  3. Prepare any valid government-issued ID such as passport, SSS card, Seafarer’s ID and Record Book, UMID card, NBI Clearance, Postal ID, and Driver’s License among others. In case you don’t have any of these IDs mentioned, you can present the original and photocopy of two IDs or documents with picture and signature.
  4. Submit the mentioned documents to the SSS Unemployment Benefits officer-in-charge.

Things To Remember:

Keep in mind that the benefits will be deposited to your SSS UMID card or UMID-ATM card. It can also be deposited in the member’s UBP Quick Card Account. In case you don’t have this, you can apply for an initial UMID-ATM since this is where SSS will credit the unemployment benefits.

In the meantime, you can opt for non-bank cash pick-up or PESONet bank transfer.

Make sure to claim for this benefit within one year from involuntary separation. Otherwise, you will forfeit your claim for unemployment insurance.

How many times can you claim this benefit? Apparently, you can apply once every three years for unemployment insurance. Take advantage of this now since the amount could be helpful to sustain you and your family.

You can check out this brochure for more info about SSS Unemployment Insurance.



PAG-IBIG Offers Housing Loan Restructuring Program For Borrowers

Being an OFW is a sacrifice. You have to leave your family behind for at least two years to be able to give them a better and more secured life. This includes food on the table, bills being paid, education for your kids, and of course, a house you can call your own.

Buying your own house can be heavy on the budget, which is why many OFWs take advantage of PAG-IBIG’s Housing Loan Program. Compared to the housing loans offered by banks and other financial institutions, PAG-IBIG has lower interest rate for easier repayment scheme.

Unfortunately, Covid-19 happened. This prompted hundreds of thousands of Filipinos to go back home while there are still thousands more who cannot go back for variety of reasons. By going home, this means leaving your work that could greatly affect your cash flow. This could be a cause of concern especially if you have pending loans such as housing loan.

If you coursed your Housing Loan with PAG-IBIG, then there’s good news for you. PAG-IBIG is now offering a more affordable monthly amortization and payment relief through the Home Loan Restructuring Program.

Here’s what you need to know about it:

What is the Special Housing Loan Restructuring Program?

This program is offered by PAG-IBIG to all its Housing Loan borrowers who were greatly affected by the pandemic. Through the restructuring program, borrowers can enjoy:

  • Extended loan term
  • Lower monthly interest rate
  • Delayed payment for the principal loan amount, which can be paid towards the end of the loan term
  • Waiver of penalty charges imposed on unpaid monthly amortization
  • Payment relief, which means borrower can opt to start paying the loan anytime between December 2020 and March 2021

Through this program, borrowers will have a lower risk of losing the house.

In case you’re interested of buying a property from any PAG-IBIG Fund acquired asset, you can also apply under the Restructuring Fund.

Features Of Special Housing Loan Restructuring Program

  • Unpaid amortizations will be carried over and made part of the restructured loan
  • Interest rate of 6.375 percent per annum for three years
  • Loan term of up to 30 years, as long as the principal borrower does not reach the age of 70 by the time the loan matures
  • No documentary requirements needed for submission
  • No processing fee
  • No downpayment
  • The program comes with Mortgage/Sales Redemption Insurance and Non-Life Insurance, which serves as a guarantee of payment in case something happens to the principal borrower. Take note that the borrower must pay an equivalent of one year premium within 30 days from the time the loan application is approved.
  • Can be applied to more than one PAG-IBIG Housing Loans

Who can apply?

The Special Housing Loan Restructuring Program is open to all PAG-IBIG Housing Loan borrowers with unpaid monthly amortizations of up to 12 months by August 2020. This means if you were not able to pay the monthly amortization for 13 months and above, then you cannot qualify for this service.

Also, borrowers with cancelled PAG-IBIG Housing Loan or the property was already foreclosed or a subject of litigation cannot apply for this program.

How To Apply

To apply for this program, you can visit the Virtual PAG-IBIG website, which you can also access here. For OFWs, you can access the website here. The online process will be safer, faster, easier, and more secured.

After filling out the necessary information, you will receive a Reference Number, which serves as proof that the agency received your loan application. Keep this since you can use this to check the status of your loan application.

If approved, you will receive a text or email message saying that your loan application is approved. Make sure that your email address and mobile message are active.

What happens if your application is denied?

Don’t worry. PAG-IBIG offers the following programs to help their borrowers settle unpaid amortizations, update their status, and reduce the risk of losing their home:

  • Regular Housing Loan Restructuring Program
  • Non-Performing Asset Resolution Program
  • Plan of Payment

Make sure to avail of this program to enjoy payment relief offered by the agency. As per website, PAG-IBIG will accept applications until December 15 only.

What Happens To Debt After Principal Borrower’s Death?

Death is inevitable. This means no matter what happens, regardless of the cause, we will all die eventually. This is why before that day comes, one must be able to prepare for it to avoid conflict among family members.

One of the most common questions asked is what will happen to debts in case the principal borrower dies. Upon death, does this mean the debt will be inherited by his or her heirs? Are the heirs obligated to pay off the principal’s loan?

Here’s what we know:

Debts Will Stay – Until Paid

According to Article 774 of the Civil Code of the Philippines,

“Succession is a mode of acquisition by virtue of which the property, rights, and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law.”

Consequently, Article 776 of the same law states that,

“the inheritance includes all the property rights and obligations of a person which are not extinguished by his death.”

What does this mean?

Death does not extinguish any debts or loan obligations. Unfortunately, it will remain until it is paid by the estate. Because of the rules on succession, both assets and liabilities will be passed on accordingly.

What happens to debts?

Don’t worry. When the principal borrower died, individuals or entities like banks and lending companies will NOT go after the heirs. This means the lender cannot harass any member of the family to pay off the loan obligation. The lender cannot also file a case against any family members to pay the debts.

Instead, any outstanding debt will be put against the estate, which includes assets the principal borrower owns and rightfully his up to the time of death. The lender must file a claim against the borrower’s estate that s/he owes them x amount in order to get paid.

According to Philippine laws, debts must be paid first before any assets can be distributed to the heirs. Don’t worry about the family home because the law, particularly the Family Code, Rules of Court, and Commonwealth Act No. 141 protects it against any claims as a result of unpaid debt.

What about debts with a co-maker or guarantor?

First, let’s define a co-maker. According to the BSP, co-maker is a person that promises to pay the principal borrower’s loan in case the latter is unable to do so. The amount depends on what is written in the loan contract.

There are possible scenarios:

  • If the loan contract explicitly states that the principal and co-maker are “jointly and solidarily liable” to the loan, then that means the co-maker is liable for the entire debt and the lender can go after him or her.
  • If there is a specific amount or percentage written in the loan contract, say the co-maker is liable only for 20 percent of the amount, then the co-maker can only be asked to pay up to 20 percent and the rest will be charged to the estate of the principal borrower.
  • If there is no specific provision in the loan contract, then the co-maker is only liable for half of the outstanding debt.

Regardless of the scenarios, the unpaid debts will be assumed by the co-maker, depending on what is written in the contract.

The rules are different for guarantors. Guarantor is defined as a person or organization that guarantees the loan using his or her own financial status. The guarantor’s assets will serve as a collateral and in case of death, s/he will pay off the loan first on behalf of the deceased borrower.

Thereafter, the guarantor can run after the principal borrower’s estate and demand reimbursement. S/he must make a claim as well to be able to collect from the estate.

What can you do as a principal borrower?

Surely, you don’t want to burden anyone with debt. Even if unpaid loans will not be directly charged to your living family members, it could still cause stress and anxiety on them. You don’t want them to go through court proceedings, right?

Here are tips to remember before you apply for a loan:

  • Borrow with a purpose. Don’t just borrow money for the sake of borrowing or buying material things.
  • Set aside monthly payments for the loan. This way, whatever happens, there is a dedicated fund that will pay off the debt.
  • Make timely payments. You won’t be able to incur additional expenses, too.
  • Prioritize loan payment, especially if you have additional funds.

At the end of the day, you don’t want to burden your family. Spend your money wisely and borrow responsibly.