Bicam okays creation of PERA fund

MANILA, Philippines – The bicameral conference committee of Congress approved yesterday the bill creating a Personal Retirement Account (PERA) fund to ensure financial stability and added opportunities for retirees and overseas Filipino workers.

Sen. Edgardo Angara, chairman of the Senate committee on banks, financial institutions and currencies, said the bicameral committee report is expected to be ratified by the Senate and the House of Representatives in time for adjournment.

Angara and Sen. Manuel Roxas II, author of Senate Bill No. 1194, or the Senate version of the proposed measure, said PERA would serve as a supplementary private retirement plan for all public and private employees.

Lawmakers noted an estimated eight million Filipinos have no pension or retirement savings to look forward to.

The bill also targets OFWs who are not covered by the Social Security System and Government Service Insurance System.

Among the highlights of the consolidation of the Senate and House versions is the increase in the maximum annual contribution and harsher penalties for violators or mistrust.

“We doubled the maximum annual contribution to P100,000 (from the original Senate version of P50,000). This makes for a bigger pool of savings,” Angara said.

“We also made steeper penalties of imprisonment up to 12 years to avoid pyramiding scandals. These are hard earned savings of people and we cannot afford to lose them over some unwise investment or worse, criminal acts,” he said.

Under the PERA bill, an individual contributor may make a total maximum annual contribution of P100,000 to his PERA account. 

The contributor will 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 would be tax-exempt. This amount can be withdrawn when the contributor reaches the age of 55.

The contributor has the option to withdraw the full amount or through a lifetime pension.

Under the present system, coverage through social security is limited. Monthly pensions and benefits are too limited for retirees to properly enjoy and use them.

With this PERA plan, Roxas said more retirees would be given more options with their money compared to those available.

Roxas noted even the 1.4 million people covered through the GSIS and the 26 million SSS members had little control over their contributions.

He said the savings generated through the system by the contributor were further reduced through taxation.

Roxas said the government must now begin to educate employers, employees and financial institutions on the new type of account in order for its benefits to be maximized by the public.

“PERA is a new tool that is already being enjoyed in other countries and the time has come for Filipinos to avail of it as well. This will require an information campaign on how PERA can benefit each and every worker,” he said.

Angara added PERA would be one of the best ways to accumulate savings.