PERA seen to bring RP savings rate at par with Asian neighbors

A measure creating a Personal Equity Retirement  Account (PERA) for the government and private sector  workers will bring the country’s savings rate at par  with that of its neighbors in the region, Sen.  Edgardo Angara said yesterday.    

Angara, author of the bill and chairman of the Senate  Committee on Banks, Financial Institutions and  Currencies, said the savings rate in the Philippines  is at 19 to 23 percent of gross domestic product (GDP) which  is still below the savings rate in other countries  which range from 30 to 40 percent of GDP.    

He expects the retirement account to be in place  before the end of the year as it has already been  approved on Tuesday by the Senate and the House of  Representatives in a joint bicameral conference.   

The PERA measure, which seeks to supplement the  existing government-sponsored pension scheme by  setting up a privately funded retirement fund, is now  awaiting the signature of President Arroyo.    

Angara said the target of the retirement account is  overseas Filipino workers because most of them are not  members of the Government Service Insurance System  (GSIS) or the Social Security System (SSS).    

Under the PERA bill, an individual contributor may  make a total maximum annual contribution of P100,000  or P200,000 for both spouses.    

Contributions are required to be invested in a  qualified PERA investment product, which may be a unit  investment trust fund, mutual fund, insurance or  pension products, deposit product, pre-need pension  plan, shares of stock, exchange-traded bonds or any  other investment product or outlet.    

It aims to encourage long-term saving and reduce  Filipinos’ heavy reliance on the already overwhelmed  publicly-funded retirement scheme.     

The contribution shall 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 shall also be tax exempt.   

 Angara said when the measure is approved into law, the  Bangko Sentral ng Pilipinas and the Department of Finance (DOF)  will be tasked to formulate the implementing rules and  regulations.