Investing in PERA - fees charges and returns in 2021

Do you have PERA (Personal Equity Retirement Account)?

Updated Jan 11, 2021

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Contents:

• Description and Benefits of PERA
• Frequently asked questions
1. Where can I get PERA?
2. Can I open a PERA account with more than one bank?
3. What products can I invest in with PERA?
4. Can I invest in more than 1 product with PERA?
5. What is the limit for PERA investment?
6. Can I transfer my savings / investment from 1 product to another?
7. Can I transfer PERA administrators?
8. Can I withdraw my savings?
9. Can my heirs / children get my PERA after I die?
10. How to open PERA account?
11. Are there fixed transaction fees per investment? Or is it a percentage? 
12. Employer contributions - how will that work? How will the employer contribute to employee PERA account?
13. Employer contributions - how will that work? How will the employer contribute to employee PERA account?
14. Can someone older than 55 years old still open a PERA account just to avail of the tax free income benefit? Can s/he get proceeds after 5 years?
15. There is a tax credit of 5% of the total deposited amount (not market value at year end), is that correct? When is the tax credit certificate issued? How will we obtain this TCC? (BIR form 2339)
16. If the employer contributed 100K for employee's PERA investment, can the employee still claim 5% tax credit (even though 100% of the funds came from the employer)?

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What is PERA? 

Personal Equity Retirement Account.

It's a voluntary retirement account you can open but can't touch (without penalties, at least) until age 55. 

Benefits of PERA are: 

1) tax free earnings from investment 

2) tax refund of up to P5K / year (5% of amount invested for the year) you can use to pay your tax obligations

3) In case the employer of the Contributor contributes to his PERA, the qualified employer’s contribution to its employee-contributor’s PERA shall not form part of the employee-contributor’s taxable gross income. Hence, that qualified contribution from the employer is exempted from the withholding income tax of the employee-contributor whether on compensation or on fringe benefits.

(BUT, EMPLOYER CONTRIBUTION NOT YET AVAILABLE AS OF JAN 2021) 

Now, whether you are just thinking about opening an account or have just opened one, you may have a few questions. 

1) Where can I get PERA? 

BPI, BDO, Seeds.ph (online), 

Metrobank (??), BSP digital subscription (??)

2) Can I open a PERA account with more than one bank?

No. The bank will serve as administrator. There can only be one administrator. 

There is a database of each PERA account holder with the corresponding administrator. 

You may be able to transfer administrators though.

3) What products can I invest in with PERA?

There are many different products stated in the law, but under BPI, BDO, Metrobank and Seedbox.ph 

the selection is limited to the UITFs and mutual funds they offer. If you get BDO, there's three offerings: money market fund, bonds fund, equity fund. 

For BPI, you can choose the whole BPI UITF offerings, including dollar investments (all the UITFs and mutual funds are available for PERA investment). 

For Seedbox.ph, you can invest in any BPI, BDO, and Metrobank UITFs

4) Can I invest in more than 1 product with PERA?

Yes. Up to 5 products. 

5) What is the limit for PERA investment?

Limit is a total of P100K/ year, P200K/ year for OFWs. 

Or the dollar equivalent (if investing in USD products).

You can invest more but it won't be tax free, so that's really the logical limit.  

6) Can I transfer my savings / investment from 1 product to another?

Yes, but for each placement transaction there's a fee (I think it's the P40 Landbank fee). For BDO, it cannot be done thru the platform, it needs to be done by emailing a filled-out PERA Contribution and Investment Instruction Form. Same for BPI, I believe.  

7) Can I transfer PERA administrators? 

Yes, but you need to pay placement transaction fee again. 

BPI response: For this, you may need to coordinate with your current PERA Officer to signal your intention for transfer of administrator for PERA. After this, PERA team will coordinate with the other bank on the transfer of your account. Then the other brank will inform you of the requirements once the transfer process is initiated.

BDO response:

1. Below is our process for the transfer of administrator:
        a. The Contributor will accomplish the Letter of Intent and PERA
Notice of Withdrawal-Termination Form. These documents will be submitted to
his/her branch of account.

                (See attached file: LOI- Change of PERA Administrator
BDO-BPI-LBP.docx)
                (See attached file: PERA Notice of Withdrawal-Termination
Form.pdf)

        b. BDO Trust, as PERA Administrator, will prepare the Final
Computation/Accounting and will send this to the Contributor.

        c. The Contributor will review the Final Computation/Accounting and
will submit a signed Quit Claim to his/her branch of account.

        d. Client's PERA will be transferred to the new PERA administrator.

8) Can I withdraw my savings?

Yes, at age 55 (provided there were 5 years with contribution which can be
non-consecutive).

Or, if you get hospitalized for a super long time, you become disabled, or you die. 

If you really need the money, you may withdraw earlier than 55, but all the benefits such as tax exemptions enjoyed, you will have to pay for them, also the 5% tax credits will be charged back to you.

9) Can my heirs / children get my PERA after I die?

Yes, just like insurance, it won't be subject to tax. For Qualified Distributions made upon the death of the contributor, it will be excluded from the gross income of the heirs or beneficiaries and not subject to estate tax.

10) How to open PERA account?

Go to the bank's website, check the requirements. 

Basically BDO is 100% online (must have an account). 

BPI is thru email (fill up some forms and email them). They have good email support, a real person who knows their stuff replies.  

For Metrobank not so sure how to open.

Seedbox.ph is fully online, can be paid online. 

11) Are there fixed transaction fees per investment? Or is it a
percentage? (some say it's better to do lumpsum to minimize fees)

Note from BDO:
We are pleased to inform you that effective 06 January 2020, Land Bank of the Philippines (LBP) is no longer charging a maintenance fee for its PERA Cash Custody Service while starting 04 January 2021, their transaction / activity fee has been reduced to PhP40.00 per transaction / activity.

For BPI (as of May 2020, may have changed due to Jan 2021 LBP announcement):
Kindly see breakdown of fees below for an initial contribution of PHP
100,000.00

Contribution Amount             :       PHP 100,000.00
PERA Admin Fee          :       PHP 1,000.00 (1% based on contribution amount)
LBP Cash Custodian Fee  :       PHP 200.00 (charged annually) -> may now be zero
LBP Transaction Fee             :       PHP 50.00 (per transaction) -> may now be P40
Total amount to be debited      :       PHP 101,250.00

Plus, UITF charges (usually 1% built into the UITF price)

For BDO 

Contribution Amount             :       PHP 100,000.00
PERA Admin Fee          :       PHP 0.00 (for now, might change in the future?)
LBP Cash Custodian Fee  :       PHP 200.00 (charged annually) -> may now be zero
LBP Transaction Fee             :       PHP 50.00 (per transaction) -> may now be P40
Total amount to be debited      :       PHP 100,250.00

For Seedbox.ph

Please check the website. 

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Below are based on helpful responses by BPI   

12) Employer contributions - how will that work? How will the employer contribute to employee PERA account?

BPI PERA is not yet available for Corporations. It is only offered on
an individual basis. For clients to contribute to their PERA Account, they
would need to submit an originally signed PERA Contribution and Investment
Instruction Form to their PERA Officer.

13) Do I have to withdraw my PERA assets at exactly age 55 (given that I
have at least 5 years of investment)?

You may opt to stay invested in PERA beyond age 55.
 

14) Can someone older than 55 years old still open a PERA account just to
avail of the tax free income benefit? Can s/he get proceeds after 5 years?

A Contributor beyond 55 years of age can still open a PERA Account. Client
can withdraw her PERA after 5 years of contribution (can be
non-consecutive), given that the 55 years of age requirement is fulfilled 

15) There is a tax credit of 5% of the total deposited amount (not market
value at year end), is that correct? When is the tax credit certificate
issued? How will we obtain this TCC? (BIR form 2339)

Please note that the implementing rules regarding the tax credit is not yet
released by our regulators. Rest assured that once this becomes available,
we will advise how clients can claim their tax credit.

Update as of Jan 11, 2021 from BDO:

BIR has started to issue electronic Tax Credit Certificates (TCCs) to 2016 PERA Contributors. We are currently working
with BIR on the schedule of the release of the TCCs for PERA Contributors from 2017 onwards. 

16) If the employer contributed 100K for employee's PERA investment, can the employee still claim 5% tax credit (even though 100% of the funds came from the employer)?

BPI PERA is not yet available for Corporations. We can only offer this on
an individual basis. 

Short answer: No. 

From the form of BDO for employer contributions, the following is stated in the employer declaration. "And that my contributions to our employee's PERA is not entitled to the 5% tax credit."

Tax credit goes only to the entity who made the contribution: to the employee, for employee contributions or the employer, for employer contributions. 

If the employer provides optional taxable allowances though, perhaps arrangements could be made for the employee to receive them directly into his / her PERA account instead? (In that way, the employee does not have to pay 20% or more income tax for those allowances and the employer also receives a tax break.)