Do you know you can also invest in a personal retirement account? Established in 2008 under Republic Act 9505, Personal Equity and Retirement Account (PERA) is a voluntary and personal retirement account established by and for the exclusive use and benefit of the Contributor for the purpose of being invested solely in PERA investment products.
It aims to promote capital market development and savings mobilization. The government also recognizes the potential contribution of PERA to long-term fiscal sustainability through the, provision of long-term financing and reduction of social pension benefits.
1) Who are qualified to open an account?
An individual who (1) has the capacity to contract and; (2) possesses a Tax Identification Number (TIN) are qualified to open a PERA and be a CONTRIBUTOR.
2) What are the requirements in establishing a PERA?
- The Contributor’s PERA must not exceed five (5) at any one time
- The maximum total contributor’s PERA should not exceed
- Php 100,000 per year for (local)
- Php 200,000 per year for (overseas Filipino)
- There should only be one (1) Administrator for all the Contributor’s PERA
- Each PERA shall be confined to one category of investment product
- Submission of proof of income earnings for the year or to be earned for the year when the PERA contribution was made
3) What are the benefits of PERA?
On his/her PERA contributions / investments:
- Tax exemption privileges from the earnings of all PERA investments
- 5% tax credit from his/her contributions
- In case the employer of the Contributor contributes to his PERA, the qualified employer’s contribution to its employee-contributor’s PERA shall not form part of the of the employee-contributor’s taxable gross income. Hence, that qualified contribution from the employer is exempted from the withholding income tax of the employee-contributor whether on compensation or on fringe benefits.
- Upon reaching the age of 55 and with a minimum of five (5) annual contributions, the contributor has the option to avail of his retirement benefits free of tax or may choose to avail it later.
- The contributor” may choose to avail of his retirement benefit in lump-sum, through regular pensions or a combination thereof.
4) Can a contributor withdraw his PERA before reaching 55 years old or before finishing the 5-year contribution?
Yes, the contributor can withdraw his PERA but it will be subject to early withdrawal penalties. Early withdrawal penalties would mean the remittance of all tax incentives enjoyed by the Contributor from the date the benefit accrues to the Contributor. This includes the tax credit of 5%, taxes on investment income and income tax for the employer’s contribution.