BSP relaxes rule on PERA administrators’ required security

The Bangko Sentral ng Pilipinas (BSP) said it has reduced the 0.5 percent security for all administrators of the Personal Equity and Retirement Account (PERA) to a zero rate, effectively removing this requirement.

PERA is the government’s voluntary retirement savings program.

In a circular (BSP Circular No. 1168) issued on Thursday, Feb. 23, BSP Governor Felipe M. Medalla said they have amended PERA rules by reducing the rate for the security relating to the “faithful performance of PERA administrators’ duties” from 0.5 percent of the book value of the total PERA assets administered to zero percent. The circular took effect on Jan. 1, 2023.

Meanwhile, the BSP increased the amount for the maximum annual PERA contribution, particularly for overseas Filipinos. The circular posted which was approved on Feb. 21, did not specify the revised amount of PERA contributions. At the moment, overseas Filipinos can participate in the PERA by as much as P200,000 annual investment.

The circular said that with regards to contributions, PERA administrators will “secure proof of income when a contribution is made and ensure that the maximum allowable aggregate contribution per calendar year as prescribed under the Revised PERA Rules has not been exceeded.”

Besides the security, PERA administrators are required to maintain certain capital, surplus and undivided profits as administrators.

A Filipino or any regular tax-paying individual can contribute up to P100,000 while overseas Filipinos have a higher cap of P200,000 annually. By the time the contributor reaches 55 years old and have invested in PERA for at least five years, they can redeem the PERA investment tax-free.

PERA also offers a five percent tax credit on the contribution that can be used to pay for national income tax liabilities and a tax-free distribution on qualified withdrawal of PERA investments.

As of end-2022, there are 5,100 PERA contributors, up 16 percent from 4,382 in 2021.

PERA contributions also increased by 30 percent in 2022 to P329.55 million from P253.35 million in 2021.

Of the total, about P223.71 million are investments by 3,600 employed individuals. Meanwhile, 785 self-employed individuals contributed P45.25 million while 721 overseas Filipino workers invested P60.58 million.

The BSP has said that PERA is a “superior retirement savings option” because of the tax benefits and tax exemptions on earnings from PERA investments.

In September 2020, the BSP launched the digital PERA to encourage more investments, especially overseas Filipinos.

The BSP implemented PERA in 2016 under Republic Act No. 9505. As a voluntary retirement savings program, it supplements state-based pension plans and employer-sponsored retirement plans such as the Social Security System and the Government Service Insurance System.