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'Paano ba magka-PERA?'

Aneth Ng-Lim

MANILA - Trying to appeal to a Filipino audience about the importance of saving, investing and preparing for retirement is never easy. As bait, banks, insurance companies and financial institutions have taken to ensuring their client events would offer a sumptuous dining spread, raffle items and take home gift bags.With COVID-19 and the ongoing community quarantine, those draws no longer work. Hosting a ZOOM call to attract customers to listen to a couple of speakers on the convenience of setting up saving and investment accounts, and planning their retirement fund is unlikely to get a lot of interest, compared to K-Drama watch parties and online concerts of celebrities.But maybe scare tactics could work, and for that we can thank Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno for giving us the ammunition during the launch of the digital PERA, or the Personal Equity and Retirement Account.<div>At least 6 million Filipinos have no retirement fund</div>In his speech, Diokno referred to the latest report of the Philippine Statistics Authority and disclosed that around 6 million or 80% of senior citizens today are not covered by any mandatory pension.“The Philippines has around 7.6 million Filipinos aged 60 years old and above. Of this group, only 20 percent are covered by either SSS or GSIS,” he said. For the 20% who are fortunate enough to be covered by state-sponsored retirement systems, their average monthly pension hardly ensures a comfortable retirement.Seniors receiving pension from the Social Security System (SSS) receive an average of P5,123, while those from the Government Service Insurance System (GSIS) are entitled to about P18,525.<div>Rest of Asia more prepared for retirement</div>“According to a recent survey, Filipinos tend not to prepare for their own retirement. Specifically, Filipinos only set aside 3.6 months’ worth of income for retirement––way below the regional average of 2.9 years,” disclosed Diokno. “In terms of expectation, Filipinos believe that savings equivalent to 2.1 years’ worth of personal income would be enough for retirement. This is the lowest expectation in Asia compared with the regional average of 12 years.”In the past, many studies have shown that Filipinos tend to look at their children as their “retirement savings”, expecting their support in their golden years. But this places a huge burden on the children who are likely to be raising their own family at that time their parents need their financial aid.<div>Gusto mo ba ng PERA?</div>How to make sure you can enjoy your retirement years without needing hand-out from family? PERA may be a good place to start.“The pandemic has changed the way we live, work, and communicate. But the crisis also presents an opportunity to rethink our priorities and to prepare for our next steps moving forward. We hope to encourage more Filipinos to plan and save for the future amid these challenging times. This aspiration can be made possible through digital PERA—a convenient and affordable program that aims to boost retirement savings,” Diokno said at his speech.PERA was designed as a voluntary retirement account with built-in tax incentives. Contributions within a calendar year, up to a maximum of P100,000 for local residents or P200,000 for overseas Filipinos, are exempt from taxes on investment income, and shall be entitled to a tax credit of 5% which may be used against defined income or national internal revenue tax liabilities.During the launch of the digital platform, BSP said they have created a one-stop shop digital experience for investor education, client on-boarding, settlement of transactions, and monitoring of PERA investments. “With this platform, Filipinos can now conveniently open or access their PERA account and invest 24/7, anywhere in the world using a mobile gadget. At the same time, the cost of online transaction is relatively cheaper. PERA contributors can send funds via InstaPay and other digital means,” said Diokno.<div>Mahirap ba magka-PERA?</div>Despite the digital fanfare from the recent launch, PERA is actually an old law, established under Republic Act No. 9505 and enacted in 2008. Due to taxation and regulatory issues, it took another 8 years for it to be launched.Nearly four years later, it has not gained any traction. “Since its implementation in December 2016, the PERA industry has not gained significant momentum. As of July 29, 2020, only 1,586 Filipinos had been investing in PERA, with total contributions of P137 million. Of the total contributors, 1,099 or 69 percent are locally employed, 273 or 17 percent are Overseas Filipino Workers, and 214 or 14 percent are self-employed,” reported Diokno.Will the digital boost finally give PERA a fairy tale ending?Let’s hope so as financial advisor Melvin Esteban recommends PERA as the best place to start for a first-time investor. Esteban did the math for a 25-year old investing P100,000 today and leaving that money for the next 40 years or until she turns 65.“If you invested P100,000 through PERA, and assuming a very modest 2% return, your money would have more than doubled at about P220,000. Without PERA, the tax on your interest income would be more than P20,000 for the same period,” explained Esteban.So if you can afford to invest P100,000 each year in your 20s, 30s, 40s, and 50s, that’s P20,000 saved annually if you choose PERA.Esteban hopes to see more PERA distributors too as right now, only a couple of local banks can supply the demand. “The more PERA products to choose from, the better for the Filipino investor.”In the end, Esteban said what will determine the success of any investment plan is the client’s discipline. “It’s your ability to sock away money every month, year after year that will spell the difference.”Diokno announced that “we are targeting to reach 5 million Filipinos in a period of 5 years. The target seems ambitious. But with more than 40 million locally employed Filipinos prior to the pandemic and around 2.2 million overseas Filipino workers, I am optimistic that this goal is easily attainable.”For the sake of the next generation of senior citizens, I am placing my PERA on BSP’s dream.

Trying to appeal to a Filipino audience about the importance of saving, investing and preparing for retirement is never easy. As bait, banks, insurance companies and financial institutions have taken to ensuring their client events would offer a sumptuous dining spread, raffle items and take home gift bags.

Trying to appeal to a Filipino audience about the importance of saving, investing and preparing for retirement is never easy. As bait, banks, insurance companies and financial institutions have taken to ensuring their client events would offer a sumptuous dining spread, raffle items and take home gift bags.