MANILA, Philippines — The maximum annual contribution to the voluntary retirement contributions has been doubled as part of the government’s efforts to encourage more Filipinos to prepare for retirement, according to the Bangko Sentral ng Pilipinas (BSP).
Financial regulators raised the annual limits of the Personal Equity and Retirement Account (PERA) to P200,000 from P100,000 for locally employed and self-employed individuals, as well as to P400,000 from P200,000 for overseas Filipinos workers (OFWs).
“The increase in the limits provides our kababayans with greater opportunities to ensure their financial security. It also supports the government’s broader thrusts of mobilizing individual savings for capital market development and generating funds for long-term projects,” BSP Governor Felipe Medalla said,
Aside from the BSP, other members of the PERA interagency board include the Insurance Commission, the Bureau of Internal Revenue, as well as the Securities and Exchange Commission.
Pursuant to Republic Act 9505 or the PERA Act of 2008, the higher allowable yearly PERA contributions took effect at the start of 2023 as approved by the Department of Finance (DOF).
Aside from increasing the contribution limits, the BSP also removed 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.
“This is expected to lower the cost of administering PERA assets, which may impact the contributors through lower charges on PERA. This is likewise seen to encourage more BSP-supervised financial institutions to participate in the PERA ecosystem,” the central bank said.
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.
The BSP introduced PERA in 2016 with support from the financial industry to encourage Filipinos to take full advantage of the benefits, including a five-percent tax credit on contributions for the year that can be used to pay national income tax liabilities. Moreover, qualified PERA withdrawals are not subject to taxes.
Latest data from the central bank showed that PERA contributions jumped by 30 percent to P329.55 million last year from P253.35 million in 2021 on the back of a 16-percent increase in the number contributors to 5,100 from 4,382.
About 3,600 employed individuals contributed P223.71 million to the fund as of end-2022, followed by 721 OFWs with P60.58 million, and 785 self-employed individuals with P45.25 million.
The number of contributors rose sharply when Digital PERA was launched in September 2020.
The Digital PERA is an online one-stop shop where investors can conveniently open an account, browse various PERA products, monitor their PERA accounts, and settle transactions via InstaPay and PESONet.
The digitalization of PERA has also enabled Filipinos here and abroad to conveniently open an account, invest in different PERA products, and access their PERA investments using mobile devices at any time.
Under the Digital Payments Transformation Roadmap, 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.
With the COVID-19 pandemic serving as catalyst, the share of digital payments 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.