Sen. Edgardo Angara yesterday reiterated the need to establish long-term savings plan for Filipinos given skyrocketing food and oil prices in the country and the difficult economic environment.
Angara, chairman of the Senate committee on banks, financial institutions and currencies, said that Filipinos’ limited resources must be placed in viable investment vehicles not only to spur personal financial growth but to help achieve a well-developed capital market.
Angara said the Pre-Need Code of 2007 and the measure creating a Personal Equity Retirement Account (PERA) for government and private sector workers will provide the needed investment vehicles for the country.
Under Angara’s bill, pre-need companies must have a minimum paid-up capital of P100 million to provide a solid capital base and lessen the risk of instability in the future.
For planholders who have difficulties in paying their installments, a pre-need company shall provide a grace period of at least 60 days to settle unpaid dues.
If the planholder is still unable to pay within this period, he or she is given two years to reinstate the plan.
Furthermore, under Angara’s bill, the minimum contribution of a pre-need company to the trust fund is 45 percent of the amount collected for life plans, and 51 percent for all other types. The trust fund may be invested in fixed income instruments such as government securities, savings or time deposits, commercial papers or direct loans, mutual funds, equity investments in stocks and real estate.
The PERA bill, meanwhile, seeks to supplement the existing government-sponsored pension scheme by setting up a privately funded retirement fund.
It will encourage long-term saving and reduce Filipinos’ heavy reliance on the already overwhelmed publicly-funded retirement scheme.
The target market is the overseas Filipino workers and small business owners as they are not covered by the government’s current pension programs.
“If we tie this up with PERA, which will be passed by next week, this will become a provident fund that will encourage savings and mobilize and strengthen capital market that will eventually result to a reduced interest costs,” Angara said.