Personally, I don’t want to grow old poor. I’m sure you don’t want to be poor when you grow old either. And I bet that nobody in the world ever wants to be old and poor. So in order to help Pinoys prepare to be not poor when they’re old, I will discuss PERA in-depth, and why you need one right now.
Retirement planning is a crucial yet regretfully neglected part of financial planning in the Philippines. People usually put off saving for retirement in the last 5 to 10 years of their working lives.
Unfortunately, the money they save is not enough, what with all the medical bills, lifestyle adjustments, and inflation eating up the funds only a few short years later.
This is if they’re lucky. Most of the time, people are not able to save up anything for retirement. They have to rely on small pensions from SSS or GSIS which are frankly never enough. Worse, they are reduced to relying on their children’s sense of obligation and guilt to maintain them until death.
Basically, their kids become the retirement plan. Sounds familiar, huh? Many of us are in this predicament. It’s bearable if you’re a big earner. But if you just left college and still building a career but are required to share your income with an entire household, the situation can be very demotivating. Of course, you love your parents but at the back of your mind, you swear that you won’t do this to your kids when you retire. You will be smarter than your parents.
Reddit’s r/Philippines subreddit is littered with confessions/pleas for help and advice from anonymous young Pinoys in similar situations and looking for a way out. They are rightfully worried about their own futures and subsequent retirement. My very rough estimate is that 2 in 3 working young adults are supporting parents who no longer work/have no retirement plans. Or maybe I just live amongst and/or hang out with the poor? I dunno…possibly?
This is a grim way to start the post but my goal is to scare the shit out of people so that they will start investing for retirement. Luckily for you, I’m obsessed with being not poor when I grow old, so I will try to break down the benefits of PERA for your future and hopefully convince you to get one right now.
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What is PERA?
PERA, which stands for Personal Equity Retirement Account is a scheme that allows Filipinos to voluntarily invest for their retirement. It was enabled through Republic Act 9505, passed in 2008 but only implemented in December 2016. This scheme allows:
- Filipinos of legal age and with a tax identification number (TIN) to invest up to Php 100,000 for those based in the Philippines and up to Php 200,000 for overseas Filipinos.
- Income tax exemption from the investments and its reinvestment.
- Claim 5% income tax credit of your total PERA contribution.
- PERA cannot be touched in case of insolvency
- Provision for the possibility of private employers to contribute to their employee’s PERA up to the maximum amount allowed. This is provided that the employer complies first with the mandatory Social Security System (SSS) contribution and retirement pay.
Let’s break down the benefits of PERA.
Breaking down PERA benefits
Range of allowed investment amount
First of all, you must be a Philippine citizen of legal age with a tax identification number (TIN). Filipinos who are based in the Philippines are allowed to invest up to Php 100,000 a year. Overseas Filipinos are allowed to invest up to Php 200,ooo a year.
I think this rule is crazy because why are overseas Filipinos allowed to invest 100% more than those who remained in the country? I don’t know what the intention of the framers of the PERA law was in setting these limits. Were they thinking that those in the country can’t afford to invest Php 100,000 a year, max, in PERA? Did they think that overseas Filipinos deserve to have a better retirement than those who stayed in the country, like 100% better? Or perhaps they imagined that those in the Philippines are already well covered by SSS or GSIS? But SSS is also available to overseas Filipinos.
This is maddening and I hope that this will be adjusted soon (paging: Secretary of Finance!!!) to increase the investment limits and make it equal for both those who stayed in the country and those who left for better opportunities overseas.
Income tax exemption
So far, the only PERA products offered are based on equities, bonds, and money markets. Here I will focus on equities because I recommend people to invest in equities-based PERA instruments, especially if they are young and a long time away from retirement age.
In the Philippines, the sale of shares for stocks traded in the Philippine Stock Exchange is charged a stock transaction tax. With the implementation of TRAIN Law, the stock transaction tax is now at 0.6% of the total value of the transaction/investment. Before TRAIN, this tax was set at 0.5% of the total value of the transaction/investment. This increase represented a 20% increase in taxes, which will be deducted from the entire investment.
For example, let’s assume that you sold Jollibee shares worth Php 1 million (just thinking of a nice, round number, and also, disregarding associated fees for illustrative purposes), your stock transaction tax would have been Php 5,000. If in 2018 you sold your shares amounting to the same value, your taxes would have been Php6,000, a big increase.
Further note that unlike in other countries such as the US, the Philippines charge the stock transaction tax against the total amount of the transaction/investment and NOT only against the profit or capital gains. There is a reason why if you Google “capital gains tax Philippines” you get a totally different explanation and computation from the one I just gave above.
PERA’s income tax exemption is what made me really excited about participating in the scheme. If you invest in PERA, your investment will be exempt from the above-mentioned tax. You get to keep the entire value of your investments to yourself (except the annual management fees charged by your PERA administrator). Plus, your retirement money will also be protected from future changes in the tax law.
Income tax credit
Those who invested in PERA are eligible to receive a tax credit of 5% of the total investment amount. The Omnibus Investment Code of the Philippines (EO 226), article 21, states (emphasis mine):
that tax credits are any of the credits against taxes and/or duties equal to those actually paid or would have been paid to evidence which a tax credit certificate shall be issued…The tax credit shall be used to pay taxes, duties, charges and fees to the National Government…Provided further that such tax credits shall be valid only for a period of ten (10) years from the date of issuance.
For example, if you invested Php100,000 in a year, you are eligible to receive P5,000 tax credit. The Secretary of Finance will issue you a tax credit certificate (TCC, which will be coursed through your PERA administrator). The tax credit will not be given to you in cash; unfortunately, PERA does not allow tax credit refunds. The tax credit can only be used to pay taxes and other fees due to the Philippine government.
This tax credit is valid for ten years, not only in the year when the investment was made. Keep in mind though that the TCC is only valid for five years. This means that if the TCC holder has not yet used the TCC five years after its issuance, they have to apply for revalidation before the end of the fifth year. The revalidation will extend the TCC for five more years.
If you are an employee, the credit can be deducted from the withholding tax from the income earned from your employer. If you’re a self-employed freelancer or businessperson, you can use the tax credit to pay your taxes. Overseas Filipinos can apply the income tax credit for taxes they owe the Philippine government if any. However, as of January 2019, the BIR has not yet finalized the process for the tax credit. I will post an update once there is more clarity on this.
Safe from insolvency and estate tax
In the event that you become bankrupt, PERA will not be touched and will not be considered in settling your debts to your creditors. Likewise, in the event that you die before withdrawing your whole PERA funds, it cannot be used to settle estate taxes and instead, go directly to your heirs.
Can be another form of employee incentive in the future
In addition to SSS or GSIS, PERA may also be an incentive that employers can grant to their employees in the future. At the moment, I haven’t heard of any company that grants PERA as an incentive but at least the enabling law is already in place, making this a huge possibility in the future.
Control where to invest retirement funds
Another great benefit of PERA is that it allows the contributor to control the financial instrument their retirement funds will be invested in, unlike SSS and GSIS wherein members have absolutely no say as to where their contributions are invested.
The PERA Act allows Pinoys to invest in the following vehicles as long as they PERA-qualified products:
- UITFs
- mutual funds
- entity contract
- insurance pension products
- pre-need pension plans
- shares of stocks
- other securities listed and traded in a local exchange, exchange-traded bonds or any other investment product of outlet which may be allowed by the concerned Regulatory Authority
So far, BPI and BDO – the only banks allowed by the BSP to offer PERA-qualified products – only offer equity, bonds, and money-market PERA products.
Hopefully, banks and other investment institutions offer more PERA-qualified products in the future to cater to the different risk appetites and needs of investors.
Another way PERA will allow you to have stronger control over your retirement investment is by letting contributors have a maximum of five PERA accounts with 1 administrator, and even transfer administrators.
Contributors have the option to divide and diversify their PERA contributions between investment vehicles. You can devise your own, personalized retirement investment strategy depending on your risk appetite and needs. For example, in your 20s and 30s, you might opt to put all your retirement money in equities. By the time you approach your 50s and 60s, you can transfer them to bonds or money markets instead. You can do all these without paying taxes. Isn’t that great?
Time is your friend
Another factor that makes PERA a very powerful tool for retirement is time. PERA was not designed to be a short-term investment. As a matter of fact, because this is a retirement account, you can only withdraw from your PERA account once you hit 55 years old AND have invested for at least five years. Otherwise, you will be penalized.
The earlier you start investing in PERA, the longer time you have for your money to grow.
To illustrate, say you’re interested in investing your retirement money in an equity-based, PERA-qualified account. You’re in your mid-20s and you’re not sure when you’ll retire, maybe in 20, 25, 30 years. You decided to contribute Php100,000 annually. You can use the table below as a reference to check how much you’ll get in what year.
We will assume that your equity PERA account had an average annual return of 10%, which is very achievable, especially if it’s pegged to the PSEi. (Please ignore the US$ sign, I got this calculator from a US-based site. Still, the underlying computations are the same.)
If you continuously invested in PERA for 31 years starting with Php100,000 initial investment, you would have contributed a total of Php 3.1 million. By the time you retire, that money would’ve grown to Php 19.839 million (again, we assume that you invested in an equity-based PERA account). The good news is, since PERA is tax-free, you get to enjoy almost this entire amount for yourself (since the bank takes away an annual management fee).
If you invested this money in a mutual fund/UITF/ETF that is not PERA-qualified, you will be charged a stock transaction tax of 0.6% (as of 2018) of the total investment amount. Of course, the tax regime may again change just like what happened with TRAIN.
If you didn’t invest that money at all and just left it in the bank, you just accumulated Php 3.1 million after 31 years, which is not really much if you calculate for future inflation.
Beware of early withdrawal
Withdrawing funds from your PERA account before the 55 and 5 threshold (55 years old and 5 years of investing in PERA) will make you subject to a penalty. The amount will be determined by the Secretary of Finance and payable to the government and will not be less than the tax incentives enjoyed from PERA.
To avoid incurring penalties, make sure that you have your emergency funds set up so as not to dip into your retirement account in the time of need.
Of course, as with all rules, there are exceptions. You may withdraw funds from PERA in case of the following:
- Payment for accident or illness-related hospitalization in excess of thirty (30) days with duly notarized doctor’s certificate attached to the Notice of Withdrawal/Termination/Transfer to be submitted to the PERA processing office.
- If you have been rendered permanently totally disabled as defined under the Employees Compensation Law, Social Security Law and Government Service Insurance System Law.
- Transfer to another PERA qualified product with the same administrator and transfer to another PERA administrator within 15 calendar days
Current status of PERA
Available PERA-qualified accounts
As of January 2019, the BSP has accredited only BPI and BDO to offer PERA-qualified accounts.
BPI offers:
BDO offers:
Both BPI and BDO offer these products with a minimum of Php 1,000 investment. A savings account with the bank is required to open a PERA account.
Application process
At this time, opening a PERA account with either bank can be a frustrating process. A lot of branches are not aware of this scheme yet. Tellers and even bank managers will stare blankly at you when you try to explain to them that you want to open a PERA account.
For BPI, the best way to open one is to email their PERA-dedicated team instead of visiting a branch. Send an email to bpi_asset_management@bpi.com.ph or call them at (63) 816-9035. They will schedule a meeting between you and a PERA staff at the branch nearest you.
While BDO’s employees are similarly clueless about PERA, their process is actually much simpler. If you already have a BDO online banking account, you can open your PERA account from there directly. You only have to answer a short questionnaire and watch a video explaining what PERA is. They will send you communication to complete the process via email. There is no need to go to a branch.
If you are an expat, the better choice for you is actually to open a PERA account with BDO, especially if you already have a BDO account or is lucky to live in a country that has a BDO branch. BPI requires prospective investors to meet with a representative face-to-face.
Income tax credit
As of January 2019, BIR has not yet released the guidelines for the tax credit process.
Final thoughts
I believe that everyone should get a PERA account right now. We should take advantage of the time factor and start preparing for our old age while we’re still young. Now is the time to prepare for retirement, not when it’s already on the horizon.
Investing in PERA as early as possible will help us feel secure in our old age and will give us peace of mind. We will be able to enjoy our retirement and avoid being a burden to our children and their future families.
We should also take into consideration, however, that investing in PERA is not “an all-or-nothing” thing. You don’t need to invest Php 100,000 right away if you only have Php50,000 or less to invest. As long as you’re putting away a portion of your income to your PERA, you’ll still end up ahead of those who are not investing for their retirement.
Compared to other widely-available retirement and pension programs such as SSS and GSIS, investing in PERA will give us more control over our financial futures because we have the freedom to choose the instrument where we can put our money.
FIRE
If you’re aiming for FIRE (financial independence/retire early) and actually want to have a higher amount for retirement than what can be earned through PERA, I still recommend that you fully maximize PERA first before putting your money in taxed instruments.
For example, your first Php 100,000 for retirement should be placed in a PERA account to maximize the tax-free status and the 5% tax credits. The remaining funds can then be placed in other financial instruments of your choice.
I hope that this post will convince you to open a PERA account and invest for your retirement. I’m very passionate about this issue because I have seen a lot of people who suffered greatly because they or somebody close to them were unprepared for retirement.
Is there anything stopping you from putting aside money for retirement through PERA? Do you have any experience you want to share? I’m interested to hear back from you guys.
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78 Responses
Really good and informative. Found this through reddit actually. Early 2018, planned to invest in PERA. it was better then to do a bigger amount of investment to avoid the fees. but the process was so time-consuming that I procrastinated and didn’t do anything. But I’m glad to hear that one can now invest via online banking. Have you tried it?
Hi Sera,
My PERA account is currently with BPI although I’m just waiting for BSP to clarify the rules to on transferring from one administrator to another.
I actually tried opening a BDO PERA account online months ago and received an email from BDO that I can’t do so since I already have one with BPI. The process was as easy as I laid out in the post, just follow the prompts, watch a video, and they will send you emails.
Thank you for this information. What is your recommended percentage split between index fund (FMETF) and PERA if I were to save monthly for retirement fund.
If your time horizon is until retirement (meaning you won’t withdraw until you reach 55 and at least 5 years invested in PERA), I suggest maximize PERA first before FMETF.
Thank you for the reply. Overall will my money grow more in PERA (BDO index fund) compare to FMETF? I’ve read in your index fund article that FMETF has lower fee and lower tracking error compare to PERA.
Thank you for reading my other posts!
I assume you meant comparing an index fund-based PERA? Because there are other types of PERA accounts (bonds, money markets, etc). It’s true that FMETF has lower fees but the value of PERA, which I also outline in the above post is that it will protect your retirement money from stock transaction tax, changes in the tax regime, and provides tax credit.
Currently the stock transaction tax is .06%. Previously, it was at .05% prior to TRAIN. This increase in tax rates represents a 20% increase in taxes. We can never tell what changes there will be in the tax regime in the future.
Personally I max out the PERA limit before putting in money to FMETF for retirement because of these benefits.
Hi katie, just wanted to tell you how I appreciate your blog and foe creating such informative posts. I rarwly comment on blogs and read through a wall of texts buyltnyours is beautifully constructed and very engaging!
Thank you for the nice words Roy! I try to keep my posts as informative as possible for my readers.
Hi Katie, your posts are very helpful. I have a question though, is it better to open a PERA account in BDO since it only has a 1.00% p.a. Management fee or should I choose BPI (I have an account here and no account in BDO) even if it has additional fees like 1.5% trustee fee, custodianship fee of 0.07%, and external auditor fee of 1.59%? Or does BDO have these charges as well but are just “hidden”? Thanks so much!
For your reference for the fees:
BPI https://www.bpiassetmanagement.com/upload/files/EQ_UITF_BPI%20PERA%20EF%20for%20DEC2018(1).pdf
BDO
https://www.bdo.com.ph/personal/trust-and-investments/pera/bdo-pera-equity-index-fund
Hi N,
BDO’s 1% and BPI’s 1.5% fees are for the management of the account. There are still additional fees on top of that for custodianship, external auditor, taxes, etc, which will be billed on top of the annual management fees.
But, you have to consider that BDO’s equity fund is an index fund, which means it is pegged to the PSE index while the BPI fund is actively managed. Between the two, I’d choose the BDO index fund just because based on long-term data, index always outperforms actively managed funds plus, the fees are lower. Although I have to admit that currently, my PERA account is with BPI 😀 because when I opened a PERA account a couple of years ago, I got pissed off with BDO. Unfortunately, there’s no way to change PERA administrators yet but as soon as administrator change is allowed I will switch to BDO.
I hope this helps.
There’s something to be pissed off with BDO Trust indeed. I just opened an account and the transaction is still not showing up in my dashboard and it’s already way beyond the timeframe provided. To add to to that, there is no one you can actually speak with except for their customer service who stands as the middleman between the client and BDO Trust Marketing. Even if the prompt in the dashboard says talk to your Trust Marketing Officer if you have questions, there isn’t a particular person to speak with from the Trust Marketing department. It feels like hanging by the thread communicating via email alone. I can’t help but be bothered because of the issues with BDO that people’s money just get lost or something.
Having someone to actually speak with in person in an office like in BPI seems to make a difference. I should have just stayed with BPI. Now I am waiting in vain for my investment to show up in my dashboard. It’s difficult to have no particular person held accountable with your hard-earned money.
Dear N,
Oh no! Thank you for your comment and sharing your experience with us. That’s something we really need to think about as consumers. I hope that with this sharing of information online and more awareness created, banks will provide better service to us.
Katie Scarlett
Hi!
Just an update. Got a bit busy and was not able to provide an immediate follow-up.
It was me being overly concerned and impatient brought about by the differing notices in BDO’s processes (ie, after 2 days vs within 2 days – these two are different time frames). Can’t help it! Anyway, this has been cleared. I give credit to BDO Trust.
Patience is the key with lots of follow up and clarification on things. Their response takes time (according to my pace), but they do respond.
BDO PERA application is supposedly hassle-free for those who are tech savvy, can wait, and understand the process and timing; otherwise, for people like me who are more comfortable doing things the “traditional” way, you may probably opt for BPI.
Hope this helps!
Hi N,
To which email address did you send your inquiries? Is it trustandinvestmentgroups@bdo.com.ph OR pera@bdo.com.ph? I’m asking because I emailed the first address 2 weeks ago and all I received was an automated response. I followed up but still no response. Then I emailed the second address and received the same automated response. I even tried calling but I was not able to talk to anyone that the operator redirected me to. In my frustration I just went directly to my branch and was able to talk to an account officer who helped me with my questions. I did not remember going through this hassle when I opened my non-PERA UITF with them last year.
Best regards,
Jaclyn
Hello, Jaclyn.
I initially used both, and both do give out auto responses. Follow up calls and emails worked for me. I am glad to know that your branch knows about PERA. I did not try to inquire though.
Happy investing!
Hi Katie, N,
I submitted my online application for BDO PERA last Thursday afternoon, but since it’s past the daily cutoff, my application was considered as submitted on Friday, December 20, 2019. I hope it will be approved before the year ends, so it will be considered as part of 2019 contribution. Thanks for all the information that you’ve shared here!
Best regards,
Jaclyn
Jaclyn,
Nice! Starting 2020 the right way!
KS
Gusto ko lang sana malaman paano yung process ng pag-fund sa PERA account? Like automatic na po ba iyon ibabawas sa binigay mong savings/current account?
Hi W,
Kung sa BPI kailangan mo ng savings/current account kung saan kukunin yung pera (or idedeposit kung mag-withdraw ka). Kapag sa BDO naka-link din sya sa BDO online account mo.
I see! So if ever po may bank account ako with BDO, then nilagyan ko siya ng 5000 pesos, automatic na po ba yun na invested sa PERA products? Also, ano pong recommeded niyo na method, via employer or ako mismo mag-babayad? May difference po ba yung 5% tax credit if i’ll pay by myself vs yung hindi na subject to witholding tax yung contribution by my employer?
Hindi sya automatic. Kailangan mo pa din syang i-transfer sa PERA account mo. Kung meron kayong benefit ba employer matching then sa employer. Pero kung wala naman ikaw na mismo ang mag-aapply directly. Sa tax credit naman pangalan mo ang ilalagay sa certificate so walang difference.
Okay thank you so much po!! I’ll contact BDO for more details. 😀
Okay thank you so much po!! I’ll contact BDO for more details. 😀
Good luck! Feel free to share your experience here afterwards.
Congrats! Keep up the Good Work. God Bless!
Thanks Richard!
How often can one contribute to his/her PERA account? Once a year lang ba or pwedeng monthly contribution?
No limit on the number of times you can contribute but there are monetary limits. For those in the Philippines the maximum limit is Php 100,000 and for OFWs (with OECs) up to Php 200,000.
Hi Katie! You are absolutely correct that we need to prepare for our retirement early on. I’m an overseas Filipino and I found your site while browsing for investment opportunities in the Philippines. PERA is exactly what I was looking for. I’ll have a look at BDO’s website and see if it’ll work for me. Thank you so much for your informative posts.
I’m so glad that you found my site and I was able to help.
Also, if one prefers to invest in the PERA equity index fund, his only choice would be the BDO PERA equity index fund, which has a management fee of 1% per annum. This is higher than FMETF s 0.5% per annum.
I addressed that concern in the post; investments under the PERA scheme offer benefits that you cannot avail of from regular investment vehicles; i.e. PERA is bankruptcy-proof and it’s tax-free.
is your capital guaranteed?
Nope.
Thank you for sharing this info. I’m looking for a retirement fund and saw your blog in google. By the way, Can I have your insights which would be better PAG-IBIG Fund II or this PERA? I’m also thinking to take AXA Retirement Plan but I think PERA based on your table outperforms AXA’s offer to me. For Pag-Ibig 2, they offer 6-8 percent annually compounding interest and it’s good also for retirement since it is tax free and with sovereign guarantee, it has a term of 5 years only which you can re-invest after 5 years. Pleas I need your enlightenment. Thank you and Godbless you more.
Hi Billy,
I think that PERA and MP2 address 2 very different needs. PERA is for the long term and you cannot withdraw your money without penalties until at least 55 while MP2 matures after 5 years, renewable for another year, so a total of 10 years.
Technically, yes you can put your retirement money in MP2 but only if you’re going to retire in 10 years. If you’re retiring in 20, 30 years then MP2 is not going to cut it. What’s going to happen to your money after the 10-year limit set by Pag-ibig? Put it in a bank? Plus, Pag-ibig is not exactly transparent because they do not publish the performance of their fund; they just announce the interest at the end of the year. As I pointed out in one post, people are not complaining about this lack of transparency because the interests are relatively high (compared to low-risk investments). But what’s going to happen if the interest dips?
So these are some of the things that you need to consider. What will you do after the 10 year limit by Pag-ibig? Would you be okay with the lack of transparency?
I hope this gives you clarity or at least break down the issue for you.
Thanks for dropping by!
You may request PAGIBIG for a statement or ledger of your MP2 accounts. Medyo patience lang kailangan since they’re not yet fully automated.
Thanks for the info, N1!
May I ask where on the Pag-ibig site did you read/learned about a ten year limit to holding an account? I can find nothing like that in the FAQs. They did provide the answer below in quotes to one question that implies you may “roll over” your account into a new account when it attains the five year maturity period. You may also open an unlimited number of accounts which is the plan I devised for my wife’s potential medium term cash needs. We will open one new account for each of the next five years, If the money is not needed at maturity, roll it over into a new account. We plan to treat this like a bond of CD ladder, rolling it over at maturity unless she has a need for cash.
“Can I re-apply for a new MP2 Savings Account once my MP2 Savings matures?
Yes. Once your MP2 Savings reach the 5-year maturity period, you may re-apply for a new MP2 Savings Account.
You may claim your MP2 Savings anytime upon maturity. If unclaimed, your MP2 Savings shall continue to earn dividends for two more years based on the dividend rates of the Pag-IBIG Fund Regular Savings Program. After the said period, it shall no longer earn dividends, and must be withdrawn or claimed. “
Jack,
I consulted with PERA country representatives about the information on my MP2 posts. MP2 accounts will only be eligible for the MP2 dividend rate for 5 years. But, you may choose not to withdraw the money after 5 years and leave it there for another 5 years, wherein it will receive lower dividend rate for a time).
I have a post about 3 ways to make MP2 work for you: https://katiescarlettneedsmoney.com/3-pag-ibig-mp2-hacks/
KS
Hi Katie, thank you so much for this informative post!
Ask ko lang ano yung pinaka okay na method sa pag invest sa PERA? I just opened a PERA account and initially invested 5,000 in BDO Equity Index Fund. Would you suggest ba na ipunin ko muna yung pera ko until December then saka ko siya ihulog (lump sum method since may bayad every transaction) or ok lang naman na cost-averaging method na monthly/quarterly? Thank you so much for you help!
Hi Rose,
I personally prefer investing in PERA once a year, putting in the maximum amount all at once simply to save on transaction fees. There’s a P50 transaction fee everytime you buy or sell so I limit my buying to once a year to save P50.
Thank you for the reply.
Ask ko lang if may difference ba sa result if mag cost averaging vs lump sum sa PERA? or prefer mo lang talaga mag lump sum to avoid transaction fees?
Also, may recommended month ba to invest lump sum or just anytime na maging available lang yung completed money mo?
Hi!
kabubukas ko lng po ng account online BDO, (from abroad)
and status is “PENDING FOR ADMIN APPROVAL” daw, since last week… nagmessage na din po ako sa email nila, wala din nangyari…
or kailangan po ba personal na magapply…?
Hi! Isn’t it required to have a minimum additional investment every month in BDO PERA? At least 1000.00?
Hi Katie thanks for your post. Very educational and enlightening. I’m reading thru the questions dito sa thread para ma educate din ako. If PERA is up to age 55 bago maka withdraw, what if I don’t want to withdraw pa. Let’s say paabutin ko pa til age 60 ako or 65? Pwede ba yun? Eh what if kaya ko pa paabutin ng age 70? I”m already 48 this July 2019. I”m hoping to supplement my SSS thru this PERA either thru BPI or BDO. I have an existing account sa BPI, pero wala sa BDO. For convenience, mas malapit BDO branches sa bahay ko. Nasa 12 yrs na lang ang siguro allowable time span para mag contribute ako sa SSS at sa PERA fund. Pero I hope to pay for the two para naman hindi ako aasa sa only child ko. Ayaw ko rin sya ma burden sa financial needs ko pag tanda ko. Hindi dapat inaasa lahat sa anak ang gastusin sa pagtanda kaya maski papaano I’m looking into finding ways ma supplement ang SSS pension na in all honesty eh kulang na kulang. I’m trying to stay fit & healthy para maganda health condition ko and avoid sicknesses. Ayaw ko rin mag retire early kasi ayoko ma bore at maging useless. The way I see things eh maraming Pinoys ang capable pa at healthy even way past 65. I have friends sa church na nasa age 72 na and still earning and working. May purpose pa in life sabi nga nila. May reason to wake up and bumangon to work. Pls advise. Thank you God bless!
Dear Marissa,
Thank you for reading my blog!
If you reach 55 but you don’t want to withdraw yet, that’s completely fine. Pwedeng-pwede patagalin until 65 and onwards.
Goodluck. I’m sure madaming maiinggit sa anak mo lalo na may plans ka na for your own retirement at walang plano na umasa sa kanya. 🙂 I agree na sobrang importante ng health pag nagkaka-edad na, kaya ako din now pa lang namumuhunan na sa health dahil wala ako planong ubusin ang retirement money ko pambayad lang ng hospital if ever.
Katie Scarlett
Hi Katie, how do you monitor your PERA account from abroad? Do you also receive statements from the custodian bank / Landbank? Thanks!
For BPI they send monthly updates via email. The custodian does not send statements because they dont actually manage the funds.
Thanks!
Thanks for a very informative post.
May links ka ba stating the possible annual interest ng PERA? Like sa average return lang.
Thank you.
You can read more about PERA here, including some computations.
https://katiescarlettneedsmoney.com/ultimate-guide-to-pera-investment-instruments/
Hi katie! Very informative post. Discovered your blog just recently. Anyway, i cant see the option to enroll in PERA thru my BDO online account 🙁 can I please ask for your help in navigating thru BDO’s website? Sorry
Hi, good day. I am a PERA investor for almost 2 years already. One of the exciting about this vehicle is the tax credit. I am a government employee. Do you have any info on whether i can use this tax credit of 5 percent of my total contribution to be deducted from my withholding tax? Your reply will be much appreciated.
At this time, the guidelines regarding the tax credit have not yet been released but based on the IRR of the PERA bill, you can use the tax credit to pay your other tax obligations, including income (withholding) tax.
Thanks so much. This law needs an IRR and the government needs to educate the public about it. Even BDO tellers dont know about PERA. Thanks for the information.
The law itself already has an IRR but the banks themselves have to educate their employees. Also, BSP itself need to ramp up their information drive. I’m an expat and fairly knowledgable about Philippine information drives for OFWs but I haven’t heard of any info drive from BSP about PERA, which is sad because everyone needs to start preparing for retirement as early as possible.
Attended a BDO PERA Seminar when they first launched. It seems the way to maximize it is by making a one-time maximum investment per year. Otherwise the transaction fees are ridiculous.
BDO’s PERA Administration Fees & Charges
Transaction Type | First Year | Thereafter / Regular
Buy Transactions | None for the first buy | Php 100.00
Sell Transactions | Php 100.00 | Php 100.00
Other BDO Fees
• One Time Entry / Setup Fee | Php 1,000.00 | N/A
• Annual Maintenance Fee | Php 1,000.00 or 0.50% p.a. of the principal value of the fund
• Additional request of SOA / Reports: Php 100.00 for reports other than regular
• Closing / Transfer Fee: 0.25% of the assets under management at the time of closing/transfer
The Cash Custodian and Securities Custodian may also impose fees on PERA transactions
E.g. Land Bank, as Cash Custodian , charges Php 50.00 PERA transaction fee, Php 200.00 annual maintenance fee and Php 100.00 for settlement account maintaining balance.
Salarymen planning to do peso-cost averaging (like Php 1,000.00/mo) should look elsewhere.
It seems viewing and managing the account can also be a hassle since there are no ways to view it online (then [2017]- not sure now though[2019]). Even requesting for a SOA has a fee, lol. There is also no way to invest online so additional investments would have to be done in the bank/branch.
My takeaway was, the pros may not be as rosy when compared against the cons – specially for me who puts a premium on convenience (viewing accounts, making additional investments and redemption requests and having it deposited to my bank account online).
What did I do? Maintained my retirement investments in the low-cost no-load index fund I had in the first place. This one I had set-up to automatically invest every month through my bank’s scheduled bills payment facility. 🙂
Hi John,
You’re right that it”s not ideal to peso cost average PERA because of the fees. It’s best to put in the money in a lump sum.
But there’s really nowhere else for people to invest in with this type of benefits and potential gain and zero taxes (plus other benefits besides).
If you have a BDO PERA account, I believe you can view your fund in your online account. For BPI we are sent a monthly statement. Can you share which one charges a fee for a statement of account?
You can actually invest with both banks online. Indeed with BDO you can only open your account through your online account. With BPI you just have to send in documents via mail for the consent and signatures (they’re old school that way). I’ve done it.
Regarding redemption, I havent redeemed my funds yet since that will defeat the purpose of PERA, which is supposed to be there until retirement. But the absence of instant redemption of funds is not a big deal since there’s not a lot of benefit in fast redemption.
Hi, I read that PERA transactions are actually not exempt from the 0.6% stock transaction tax. So an equity UITF will still have to pay that tax when they sell stocks (for rebalancing or redemptions) within the fund, as part of its expenses. Hopefully dividends and interest income received by the PERA UITF should be correctly received tax-free and reinvested by the fund accordingly. In any case, if the new tax law on passive income is passed, the stock transaction tax would have gone down to 0.1% by the time PERA contributors redeem their investments.
Hi ambitiouspawn nice to see you here. I like what you’re doing in your blog. Is it possible for you to share your source with me? There’s not a lot of publicly available sources on PERA online clarifying these matters.
I agree, I hope PERA is implemented fully, including the tax credits in the next years.
Hi, the info is on BIR RMC No. 99-2018 https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2018/RMC%20No%2099-2018.pdf
I’m planning to open this but my local BPI does not offer it and when I emailed the BPI PERA division directly, they advised me to go to the main office, which is such a hassle. That’s why I’m thinking of opening a BDO account and open a PERA account with them. But since I have never been a BDO user, the only thing I know about them is that they charge so many fees on top of transactions. Would you know where I’d get more returns based on fund performance and extra fees? Sadly, there’s not a lot of information online.
Hi Katrina,
You can start reading this post:
https://katiescarlettneedsmoney.com/ultimate-guide-to-pera-investment-instruments/
I wrote that post to compare all the currently available PERA instruments, including fees.
Hi Katie,
Im part of those percentage you said that sadly did not invest much for their retirement. Im so much of a late bloomer in investing. Im now in my 50s and have some savings in the bank that are earning a meager 1% annually. Retirement is so near so Im seeking your advice on where to best invest these savings rather than the bank?
Thank you for your posts!! Keep it up!!
Ms. Tarongga
Ms Tarongga,
rather than saving your money in the bank or investing in high-risk instruments, I suggest you put your money in Pag-IBIG Mp2. Here’s my post about MP2: https://katiescarlettneedsmoney.com/3-pag-ibig-mp2-hacks/
So, this means you are not required to put money monthly, right? (Similar to MP2)
If I choose to put 20k this month, not deposit for three months and do 50k by October, that’s fine?
You’re not required to contribute every month. You can contribute only once a year, every quarter, once every half a year.
What’s your thoughts on starting a PERA account right now? I’m not that knowledgeable with the ins and outs of the market yet but it seems to be in an all-time low.
Second question is, if I do start a PERA account (with BDO) with the intention of just putting 100k yearly and letting it mature on its own without me doing anything, which of the three should I go with?
• BDO PERA Short Term Fund
• BDO PERA Bond Index Fund
• BDO PERA Equity Index Fund
And lastly, after I choose from those three, which PERA-qualified products should I go for? I’m not really aggressive at the moment and just thinking of maximizing the amount of money I can cash out by the time I reach 55.
For context I’m 25 right now, earning around 60k monthly. Thanks a lot you blog is a huge help!
Hi Nico,
I wrote a post analyzing the various available PERA investment instruments here
Good luck!
madam salamat sa inpormasyon tungkol sa pera. sinubukan ko po magpasok ng 5000 sa bdo, empleyado lang ako, sana makagawa pa ako ng paraan para may maihulog o madagdagan ang naumpisahan ko… maraming salamat po…
Good luck at sana maipagpatuloy mo ang pag-invest para sa retirement.
Hello Miss Katie,
Thank you for your very informative blogs on PERA and MP2. Para po sa isang ordinaryong government employee malaking tulong po yung blogs niyo po kasi marami ang naliliwanagan when it comes sa pagprepare for retirement funds. My mom was also a retired government employee, when had cancer, her pension was not enough to sustain her medications. Kulang po. Then wala din po siyang investments sa insurance and wala pong savings. So doon ko po na realize na dapat may savings and kung pwede mag invest yung mga average earner like me para sa retirement mo, kasi kung di mo man kailanganin at least man lang maenjoy mo in the future yung hard-earned money mo. Kaya simula noon, mahilig na po akong mag search ng mag articles on savings and investments. Sayang kasi ngayon ko lang nabasa about po yung MP2 kaya nakapag open ako last week. Then kasunod po itong PERA kaya po I am planning to open a BDO PERA account and I will also encourage my husband to open a BPI Pera account. Do you think po ba practical siyang gawin na separate banks or sa isang bank na lang kami pareho mag open ng PERA account?
Thank you sa reponse.
Thank you Katie! I am an expat living abroad as well. You mentioned that it’s better to open a PERA account with BDO. I don’t have a BDO account but I have a BPI account. Would you suggest opening a bank account with BDO instead of opening a PERA account with BPI?
Yes, or alternatively, open an account with ATRAM/PERA by Seedbox.
Nice post! However, let me clarify that GSIS in itself is a good pension cover. If you retire with a high salary grade, you’ll be earning 75-90% of that amount during your retirement (depending on no. of service at the government). It’s SSS which you should be worried about since the highest one can get from it is 10k whereas with GSIS, you can retire and still receive a tax-free pension from as low as 11,700 net (SG 1, now almost entirely gone in the plantilla of most government agencies) to as high as 168,772 (SG 29 range, excluding SG 30-32 which are almost reserved entirely for politicians). So, GSIS is not as bad as people would make it seem. However, having a complementary retirement fund like PERA is of course always welcome. Thanks for sharing about PERA!
Thank you for sharing your insights, Simon. I agree. GSIS is good if you end up at the higher SGs when you retire. For the vast majority of government employees who are not able to achieve this status, having additional investments would supplement their GSIS benefits. As employees stay on the job for decades and at the beginning of their careers in government it’s not yet guaranteed what will be their career progression, it would benefit them to invest for retirement with PERA or other instrument as soon as they are able.
Thanks for dropping by.
Your blog is very informative. I’m glad I ran across it. Do you have any comments/advice for Philippine based employees who want to open a BDO Equity PERA account given the pandemic? Thanks
Go for it! I don’t see how the pandemic can be an issue especially if your time horizon is at least 10 years, which I’m betting it is since PERA is for retirement. Good luck!