The Money Market Association of the Philippines (MART) conducted its first mini-forum entitled “May PERA Ka Ba?” on July 14 at the Yuchengco Tower of RCBC Plaza. The forum was about the Personal Equity and Retirement Account (PERA), a bill fully enacted into law on August 22 of the previous year. The guest speaker was Ms. Angie Marie Pacis, VP of RCBC Trust Group, and in attendance were MART members representing their respective banks, investment houses, insurance companies and brokerage firms, all local and multinational alike.

The main thrust of the discussion on PERA focused on three aspects: 1) a general description of PERA and its objectives, 2) the specific provisions of the law, and 3) issues yet unresolved pertinent to the law.

In a nutshell, PERA is a voluntary retirement account established by and for the exclusive use and benefit of the contributor; this contribution is for the purpose of being invested solely in qualified PERA investment products in thePhilippines. The law aims to promote the culture of saving among Filipinos, particularly targeting OFWs who are members of neither the Government Services Insurance System (GSIS) nor the Social Security System (SSS). By giving Filipinos an alternative tax-free personal retirement account, the PERA law is expected to increase the overall savings rate of the economy, thus providing for the creation of economic capital available for investment. The law is also expected to encourage remittances from abroad.

The specifics of the law states that PERA allows an individual contributor to make a total maximum annual contribution of P100,000, or its equivalent in convertible foreign currency. Thus, a couple can contribute a maximum of P200,000 annually. Since OFWs are a very promising source of savings and capital, they are allowed to make contributions of up to P200,000 a year.

Contributing to a PERA entitles the contributor to several tax incentives and benefits. First, the contributor gets an income-tax credit equal to five percent (5%) of the total PERA contribution; second, the income arising from the maximum allowable contribution is tax-exempt; and third, the eventual distribution of the PERA to the contributor is also tax-exempt.

The assets of a PERA may not be assigned, alienated, pledged, encumbered, attached, garnished, seized or levied upon.  Further, PERA assets shall not be considered assets of the contributor for purposes of insolvency and estate taxes.

The contributor shall make all investment decisions pertaining to his PERA, or he may opt to appoint an investment manager to make investment decisions for him without prior consultation. The law also stipulates that a contributor can establish a maximum of five PERA at any time; however, the contributor is bound to assign only one administrator for all of these accounts. A contributor may contribute more than the maximum amount of P100,000 per year, but any excess to this ceiling is no longer entitled to a tax credit of five percent.

A private employer may contribute to its employees’ PERA accounts as long as it complies with the mandatory SSS contributions and retirement pay under the Labor Code of the Philippines, and the contributed amount may be deducted by the employer from its own gross income tax. Distribution or withdrawals may be made when the contributor reaches the age of 55, provided he has made contributions to the PERA for at least five years.

The law specifically states that PERA investment product must be non-speculative, readily marketable and with a good track record of regular income to its investors. PERA investment products include any unit investment trust fund (UITF), mutual fund, annuity contract, insurance or pension products, pre-need products, deposit product, shares of company equities, government and corporate bonds, or any other investment product or outlet approved by the regulatory authority concerned. This approval is a requisite to being granted tax-exempt privileges by the Bureau of Internal Revenue (BIR).

The last part of the discussion was devoted for questions and answers from both the audience and the speaker. Issues raised were primarily clarifications and suggestions for focused discussion on some provisions of the law. Among the most relevant issues raised were 1) the possibility of only one institution simultaneously being a contributor’s administrator, investment manager and product provider; 2) the readiness of MART members for such a retail business as PERA; and 3) the specific implementing rules and regulations of the BIR regarding the tax exemption provisions of the PERA law. MART expects to hold follow-up forums on PERA, and it likewise expects to hold seminars on other matters relevant to its members within the year.

The speaker, Ms. Angel Marie Pacis, graduated Bachelor of Science in Business Economics, cum laude, in the University of the Philippines Diliman School of Economics. She also holds a Master in Business Administration degree from the same university. She finished with distinction the one year trust course offered by the Trust Institute Foundation of the Philippines. She is currently the VP – Section Head of the Investment Services Department of the Rizal Commercial Banking Corporation – Trust Group.