The Bangko Sentral ng Pilipinas (BSP) has increased the maximum annual contribution for the Personal Equity and Retirement Account (PERA) in efforts to encourage more Filipinos to prepare for retirement. The maximum yearly limits for locally employed and self-employed individuals have been doubled from P100,000 to P200,000, while overseas Filipino workers (OFWs) can now contribute up to P400,000, up from P200,000.
According to BSP Governor Felipe Medalla, the increase in limits provides Filipinos with more opportunities to ensure their financial security and supports the government’s goals of capital market development and generating long-term project funds.
The increase in allowable yearly PERA contributions took effect at the start of 2023, as approved by the Department of Finance (DOF), pursuant to Republic Act 9505 or the PERA Act of 2008. The BSP also eliminated the basic security deposit for the faithful performance of a PERA administrator’s duties, which was previously set at 0.5 percent of the book value of PERA assets, to lower the cost of administering PERA assets and encourage more financial institutions to participate in the PERA ecosystem.
PERA is a voluntary retirement savings program that supplements state-based pension plans from the Social Security System (SSS) and the Government Service Insurance System (GSIS), as well as employer-sponsored retirement plans. Introduced by the BSP in 2016 with support from the financial industry, PERA offers various benefits, including a five-percent tax credit on contributions for the year that can be used to pay national income tax liabilities, and qualified PERA withdrawals are not subject to taxes.
In 2022, PERA contributions reached P329.55 million, a 30-percent increase from the previous year. Of the total, 3,600 employed individuals contributed P223.71 million, followed by 721 OFWs with P60.58 million, and 785 self-employed individuals with P45.25 million. The launch of Digital PERA in September 2020 helped increase the number of contributors to 5,100 from 4,382, and enabled Filipinos to open an account, invest in different PERA products, and access their PERA investments using mobile devices.
The BSP aims to shift 50 percent of total retail transactions to electronic channels and increase the number of Filipino adults to 70 percent by 2023 under the Digital Payments Transformation Roadmap. With the pandemic serving as a catalyst, digital payments’ share to total retail transactions increased to 30.3 percent by 2021 from 20.1 percent in 2020, while the number of banked Filipino adults almost doubled to 56 percent in 2021 from 29 percent in 2019.
In summary, the BSP’s move to double the annual contribution limit for PERA is a significant step towards encouraging Filipinos to secure their financial future through retirement planning. As more individuals become aware of the benefits of the PERA program, it’s important to work with trusted professionals like Zalamea to set up and design retirement plans that suit the unique needs of private companies. Zalamea can assist in incorporating PERA as a supplemental program for employees, so don’t hesitate to contact us to learn more about how we can help you prepare for retirement.
Original article here: https://www.philstar.com/business/2023/03/07/2249748/bsp-raises-ceiling-pera-contributions