When it comes to retirement fund, you would often think of a savings account or your contributions in SSS. You may also rely on your insurance or investment plans, although it may take some time before you get the proceeds. In that case, you might want to consider opening PERA.
You might ask, what is PERA and how does it differ from other retirement funds? Read on to find out.
What is PERA?
PERA stands for Personal Equity and Retirement Account.
Sometime in 2008, Republic Act 9505 or PERA Act of 2008 was passed to promote savings mobilization and capital market development in the Philippines. It is also a voluntary retirement savings plan, which you can have in addition to your SSS or GSIS. More importantly, this will benefit, you and other OFWs who are unable to contribute to SSS or GSIS but still need to establish a retirement fund.
You can open to up to five (5) PERA accounts, but it must be under one administrator.
Who and How to Open PERA
Anyone with Tax Identification Number or TIN and stable income can open PERA. Even OFWs who are still abroad can open savings or investment account with through your legal spouse or child.
Requirements include:
- Overseas Employment Certificate issued by POEA
- Any official document reflecting your income
- If your spouse will open an account in your behalf, submit a Marriage Certificate, Sworn Certificate attesting spouse to transact on your behalf, and supporting documents showing your OFW status.
- If your child will open an account in your behalf, submit Birth Certificate, Sworn Certificate attesting your child will open an account in your behalf, and supporting documents proving your OFW status.
The Cost of Investment
Every year, you are allowed to put up to P200,000 every year. For non-OFWs, a maximum of P100,000 is allowed. Nonetheless, make sure to ask the bank where you plan to open an account regarding the minimum amount in opening an account.
The purpose of this facility is for long-term use. To maximize the benefits of this account, it is best to withdraw your money by the time you reach 55 years old and meeting the required number of contributions (it’s five).
Why OFWs Should Have PERA
You might be wondering: why apply for PERA when you already have a sufficient savings account? Here are reasons why you should have one:
- Tax credit, wherein your contributions are entitled to five percent (5%) every year
- Your money grows tax-free since the account is exempt from income tax, withholding tax, capital gains tax, and 10 percent cash received from corporations.
- Any withdrawals made by the time you turned 55 and onwards cannot be taxed as long as you made consecutive contributions for at least five years.
- PERA is not part of your assets, which means it cannot be taken by creditors or dissolved in case you declare bankruptcy.
- The employer can contribute on the fund as long as the amount is within the annual limit.
Don’t get too excited. Despite the benefits, applying for this type of facility is intended for your retirement plan. This means you cannot withdraw early, otherwise, you will pay a penalty fee. On the other hand, in case you withdraw due to cover the expenses of an accident, illness-related hospitalization of at least 30 days, or total permanent disability, no penalty fee will be charged.
At present, only BPI and BDO were accredited by the Bangko Sentral ng Pilipinas as PERA Institutional Administrator.