|Category: Investment Products and Services||Posted on: July 18, 2011 by: pseacademy_administrator||Comments: 0||Attachments: 0|
Q. What is a PERA?
A. A Personal Equity and Retirement Account, popularly known as PERA, is a long-term voluntary retirement account that encourages individuals to save and plan for their retirement while enjoying the tax incentives both from the amount contributed to the PERA and the income from PERA investments.
Q. When was PERA signed into law?
A. The PERA Act of 2008 was signed into law on August 22, 2008 and tax incentives became effective on January 1, 2009.
Q. Is PERA similar to the 401 (k) Plan (401K) and Individual Retirement Account (IRA) of the United States?
A. Yes. Similar to what is known in the US as the 401K and IRA, PERA provides alternative investment opportunities for all.
Q. Why should I open a PERA (account)?
A. Simply because,
• Your annual contribution—if within the maximum limit and kept in PERA until age 55—will be entitled to a 5% income tax credit, in other words, if you max out your contribution to P100,000, you get to deduct P5,000 from your annual taxable income.
• All income earned from your investments and reinvestments upon reaching retirement or death are tax exempt.
• Unlike your regular contributions to the GSIS and SSS, you will have full control over your PERA—make all the investment decisions, choose where your money goes, and grow it faster.
• Life is too short to stop dreaming of a comfortable and hassle-free retirement.
Q. What if I am already 55 years old or older, can I still open an account?
A. Yes, you can still open an account even if you are already 55 years or older. However, the tax benefits kick in only if you have contributed in your PERA for 5 years.
Q. How much can I contribute to PERA?
A. Per year, you can contribute a maximum of P 100,000 if living in the Philippines, and P 200,000 if living and working overseas. Married couples can contribute a maximum of P 200,000 or P 400,000 for those living and working overseas, respectively.
Q. What if I want to put in more than the prescribed maximum annual PERA contribution?
A. You may contribute an amount exceeding the prescribed maximum annual contribution but the excess will no longer be entitled to the 5% tax credit.
Q. Who can open a PERA?
A. An individual who is employed or self-employed, of legal age, in the country or overseas, earning an income, and with a Philippine Tax Identification Number (TIN) can open a PERA. A person who opens an account is called a contributor.
Q. What if I am below eighteen (18) years old, can I still open an account?
A. Yes. Individuals below 18 years old may open an account through a guardian.
Q. How do I start investing in a PERA?
A. First, you need to get an administrator who will oversee your account. Your administrator can be a securities broker, bank, mutual fund company, insurance company, or any other financial-related institution accredited by the Bureau of Internal Revenue (BIR). You can only have one (1) administrator for all your PERAs.
Once you have assigned an administrator, you may now choose a custodian who will receive the funds you contribute. Your custodian could be an investment manager or a trust entity accredited by the Bankgo Sentral ng Pilipinas (BSP). The custodian will operate independently from the administrator.
With the guidance of an administrator and a custodian, the contributor may now choose which PERA investment product to invest in.
Q. What are the available PERA investments products I can choose from?
A. You may invest in the following investment products:
• Shares of stock and other securities listed and traded in the local exchange
• Unit investment trust fund (equity funds, balanced funds & others)
• Mutual fund (equity funds, balanced funds & others)
• Annuity contract
• Insurance pension products
• Pre-need pension plan
• Exchange traded bonds
• Others (for more details, see PERA Act of 2008 Implementing Rules and Regulations)
Just remember to choose wisely and put your money where it will have higher potential earnings.
Q. How many investment products will I be allowed to invest in?
A. You can open a maximum of five (5) PERAs with one administrator at any given time. This allows you to explore and to experience different investment products where you can best grow your retirement funds.
Q. When can I withdraw my PERA contributions?
A. You are entitled to receive distributions from your PERA when you reach the age of fifty five (55) or when you have already made contributions to your PERA for at least five (5) years.
Q. Will I be penalized in case I withdraw my contributions prior to my retirement?
A. Yes. In case you withdraw before the period of distribution, you will have to pay a penalty to the government which shall not be less than the tax incentives enjoyed.
You will ONLY be allowed an early withdrawal without a penalty if distributions will be made for payments to a contributor hospitalized for more than thirty (30) days, and if rendered permanently totally disabled.
Q. How will payments be made?
A. You may choose to be paid either in lump sum or pension for a definite period or for a lifetime.
Q. After I have withdrawn my contributions at fifty five (55), what will happen to my PERA?
A. You may choose to continue your PERA even beyond the age of fifty five (55), but your complete contributions will be given upon and after your death.
Q. What will happen to my PERA if I die before the age of fifty five (55)?
A. If you die before reaching fifty five (55) or any other age for that matter, your administrator will terminate your account and all your contributions will go to your heirs (lawful beneficiaries) without going into probate (a legal process that typically delays the release of money).
Q. Will my employer be required to contribute to my PERA?
A. Your employer will not be required to contribute to your PERA, but they are encouraged in order to enhance employee benefit packages on top of the SSS and GSIS contributions. Employers’ PERA contributions will be deducted from their taxable income.
Even if your employer contributes to your PERA, you still have sole control over all your PERA assets.
Q. If an employer contributes to the PERA of its employees, does that exempt the employer from SSS and GSIS contributions and retirement pay under the Labor Code of the Philippines?
A. No, employers are still required to comply with the mandatory SSS and GSIS contributions and retirement pay under the Philippine Labor Code.
Q. Is PERA transferable?
A. No, it is non-transferable. PERA cannot be used to secure indebtedness, therefore, creditors cannot run after PERA assets, and courts cannot attach, garnish or seize those to enforce a court judgment.