The Bangko Sentral ng Pilipinas (BSP) is encouraging Filipinos to begin preparing for retirement as early as possible, warning that relying solely on monthly benefits from the Social Security System (SSS) or Government Service Insurance System (GSIS) may not be enough to cover future living expenses.
Jose Recon Tano, senior director of the BSP’s Finance Supervision Department, said Filipinos should consider additional retirement savings programs such as the Personal Equity and Retirement Account (PERA).
According to Tano, the average monthly SSS pension is below P5,000, while GSIS pension payments are generally below P14,000. He noted that these amounts may fall short of what retirees need to maintain their standard of living after leaving the workforce.
PERA as an Additional Retirement Fund
PERA is a voluntary retirement savings and investment program designed to supplement pension benefits from SSS, GSIS, and other retirement sources.
Filipinos who are at least 18 years old and have a Tax Identification Number (TIN) may open a PERA account. Account holders can make contributions up to P200,000 per year, while overseas Filipinos are allowed a higher annual contribution limit of P400,000.
Rather than simply keeping the money in a savings account, PERA contributions can be invested in different financial products. These may include stocks, mutual funds, insurance-based pension products, government securities, and exchange-traded bonds, depending on the investment options offered by the PERA administrator.
One of the program’s major advantages is its tax treatment. Investment earnings within PERA can grow without being reduced by taxes, allowing returns to remain invested and potentially benefit from compound growth over the long term.
Tax Benefits for PERA Contributors
PERA also provides tax incentives to encourage Filipinos to save for retirement.
Eligible account holders can withdraw their PERA savings and earnings tax-free once they reach 55 years old, provided they have maintained the account and made contributions for at least five years.
SSS implements pension increase and loans.
Early withdrawals may still be possible, but these can be subject to applicable penalties and tax consequences when the required conditions for tax-free withdrawal have not been met.
Contributors may also receive a 5 percent tax credit, which can be applied against certain income tax liabilities, subject to the program’s rules and limits.
Employers Can Also Participate
The BSP is also encouraging businesses to establish employee-sponsored PERA programs, allowing companies to provide retirement savings as an additional employee benefit.
Under the program, employers can contribute to their workers’ PERA accounts while potentially receiving tax advantages for doing so. Tano said companies may claim up to 150 percent of qualified employer contributions as tax deductions, an increase from the previous 100-percent deduction.
BSP Governor Eli Remolona Jr. likewise encouraged employers to consider PERA as a way of strengthening employee benefits.
He said retirement programs such as PERA could help companies attract and retain workers while potentially improving employee engagement and performance.
Starting Early Can Make a Difference
The BSP’s message is straightforward: retirement planning should not be postponed until a person is already approaching retirement.
Starting contributions while still relatively young gives savings more time to accumulate and potentially benefit from investment returns and compounding.
Filipinos interested in opening a PERA account can explore the services of accredited PERA administrators, including ATRAM, BDO, BPI Wealth, DragonFi, Luna Securities, and Zalamea.
Ultimately, PERA is intended to serve as an additional layer of financial security rather than a replacement for SSS or GSIS.
For workers, the earlier retirement planning begins, the more time there is to build a fund that can help bridge the gap between pension income and actual expenses during retirement.
