A measure creating a Personal Equity Retirement Account (PERA) for the government and private sector workers will bring the country’s savings rate at par with that of its neighbors in the region, Sen. Edgardo Angara said yesterday.
Angara, author of the bill and chairman of the Senate Committee on Banks, Financial Institutions and Currencies, said the savings rate in the Philippines is at 19 to 23 percent of gross domestic product (GDP) which is still below the savings rate in other countries which range from 30 to 40 percent of GDP.
He expects the retirement account to be in place before the end of the year as it has already been approved on Tuesday by the Senate and the House of Representatives in a joint bicameral conference.
The PERA measure, which seeks to supplement the existing government-sponsored pension scheme by setting up a privately funded retirement fund, is now awaiting the signature of President Arroyo.
Angara said the target of the retirement account is overseas Filipino workers because most of them are not members of the Government Service Insurance System (GSIS) or the Social Security System (SSS).
Under the PERA bill, an individual contributor may make a total maximum annual contribution of P100,000 or P200,000 for both spouses.
Contributions are required to be invested in a qualified PERA investment product, which may be a unit investment trust fund, mutual fund, insurance or pension products, deposit product, pre-need pension plan, shares of stock, exchange-traded bonds or any other investment product or outlet.
It aims to encourage long-term saving and reduce Filipinos’ heavy reliance on the already overwhelmed publicly-funded retirement scheme.
The contribution shall be given an income tax credit equivalent to five percent of the total PERA contribution. Income from the contribution as well as the eventual distribution of the PERA to the contributor shall also be tax exempt.
Angara said when the measure is approved into law, the Bangko Sentral ng Pilipinas and the Department of Finance (DOF) will be tasked to formulate the implementing rules and regulations.