The Bangko Sentral ng Pilipinas finally launched the Personal Equity and Retirement Account (PERA) system after the prodding of the House Committee on Economic Affairs chaired by Third District Rep. Arthur Yap.

PERA system is an implementation of RA 9505 or the Personal Equity and Retirement Account (PERA) of 2008 authored by former Sen. Edgardo Angara.

The law had slept for eight years until Yap’s committee tackled the overdue implementation of the law during committee meetings and urged agencies concerned to immediately implement PERA Law.

After the launching of the PERA system on December 16, Yap expressed relief that after eight years, the PERA that is envisioned to help sustain the country’s growth momentum and alleviate poverty, will finally be implemented starting 2017.

As chair of the House Committee on Economic Affairs, Yap joined Angara and other legislators who attended the ceremonial switch on of the PERA system on Friday.

 Top officials from the BSP, Department of Finance, Securities and Exchange Commission, Bureau of Internal Revenue, and Insurance Commission led the ceremony.

The PERA establishes a retirement system where contributions are made by both employers and employees.

During the House Committee on Economic Affairs meeting lasting November 16, BDP Governor Johnny Noel Ravalo briefed the members of the committee on the salient points of PERA and the barriers to its implementation.

According to Ravalo, these contributions are managed and invested by an “administrator” chosen by the employee.

Ravalo also said “BSP and BIR accredited Banco de Oro and BPI as PERA institutional administrators, in addition to the 61 professionals who passed the individual PERA accreditation examination”.

PERA, as a retirement investment tool, offers opportunities to any person may to have a maximum of five PERA accounts cumulatively worth up to P200,000.

Contributors are entitled to income tax credit every year worth five percent of his or her annual contributions. PERA will come on top of existing contributions to pension funds Social Security System and Government Service Insurance System.

However, there is a limited number of administrators qualified and accredited by the BIR. Moreover, there is a need for BIR to confirm the tax exempt status of the PERA investment products.

Nevertheless, these issues are being addressed and the PERA law is set to be implemented by January 2017.

MORE DETAILS OF THE LAW

RA 9505 defines administrator as “an entity accredited by BIR, after pre-qualification by the concerned Regulatory Authority. The Administrator shall be responsible for overseeing the PERA, whose core functions shall include, but not limited to: reporting on contributions made to the account, computing the values of investments, educating the Contributor, enforcing PERA contributions and withdrawal limits, collecting appropriate taxes and penalties for the government, securing BIR Income Tax Credit Certificates for the Contributor, consolidating reports on all investments, income, expenses and withdrawals on the account and ensuring that PERA contributions are invested in accordance with the prudential guidelines set by the Regulatory Authorities”.

Under the law, “a contributor may create and maintain a maximum of five PERA, at any one time: Provided, that the contributor shall designate and maintain only one Administrator for all his PERA. The Contributor shall make all investment decisions pertaining to his PERA. However, he has the option of appointing an Investment Manager, either in writing or in electronic form, to make investment decisions on his behalf without prior consultation”.

Section 5 of the law provides that a contributor may make an aggregate maximum contribution of P100,000 and if the contributor is married, each of the spouses shall be entitled to make a maximum contribution of P100,000 to his or her respective PERA.

 “That if the Contributor is an overseas Filipino, he shall be allowed to make maximum contributions double the allowable maximum amount.

A Contributor has the option to contribute more than the maximum amount prescribed herein: Provided, That the excess shall no longer be entitled to a tax credit of five percent,” according to the law.

PERA Law also provides that “a private employer may contribute to its employee’s PERA to the extent of the amount allowable to the Contributor: Provided, however, That the employer complies with the mandatory Social Security System (SSS) contribution and retirement pay under the Labor Code of the Philippines. Such contribution shall be allowed as a deduction from the employer’s gross income. The Contributor, however, retains the prerogative to make investment decisions pertaining to his PERA”.