BSP advances PERA growth via digitalization

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) wants to speed up the growth of the voluntary retirement account comprised of personal savings and investments launched almost two years ago to promote capital market development as well as the value of savings among Filipinos.

BSP officer-in-charge Chuchi Fonacier said various government agencies and industry players are speeding up the growth of the Personal Equity and Retirement Account (PERA) market to improve the financial well-being of every Filipino.

The PERA Law provides a formal framework to help Filipinos 18 years old and above prepare for their eventual retirement. It refers to a voluntary 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 in the Philippines.

“One way to leapfrog the growth of the PERA market in the Philippines is to go digital. On this note, the BSP recently received proposals to provide digital solutions across the PERA ecosystem,” Fonacier said in a speech.

Fonacier delivered the keynote address at the annual joint general joint membership meeting of the Money Market Association of the Philippines, The Financial Markets Association Inc. (ACI Philippines), the Investment House Association of the Philippines, the Trust Officers Association of the Philippines, the National Association of Securities Broker Salesmen Inc., and the Fund Managers Association of the Philippines.

She said some of the challenges of the program that need to be addressed include limited accessibility, volume of on-boarding requirements, fee structure, and tax regulatory concerns.

She said the BSP continues to conduct regular consultations with market participants, regulatory agencies, fintech solution providers and other stakeholders to draw up possible measures to address the challenges.

According to Fonacier, stakeholders intend to establish a shared online PERA platform or a “PERA marketplace” to connects all participants from administrators, to product providers, and to custodians).

Fonacier said contributors especially overseas Filipinos would have easier access to open a PERA account and invest in PERA products.

PERA accounts enjoy the incentives including a five percent income tax credit on the actual PERA contribution that could be used to pay income tax liabilities as well as tax exemption from the 20 percent final withholding tax from interest on bank deposits, deposit substitutes and trust funds, 10 percent final withholding tax on dividends, capital gains tax on disposition of shares of stock, and regular income tax on PERA products.

The maximum aggregate annual contribution is P100,000, except for overseas Filipinos who can contribute P200,000. The contributions are invested in unit of unit investment trust fund, shares of stock of mutual funds, annuity contract, insurance pension product, pre-need pension plan, share of stock or other security listed and traded in a local exchange, exchange-traded bond, and government securities.