I got this article from ABS-CBNnews.com and thought that its interesting enough to share to the readers of this blog. Good to know that the Philippine Government finally realizes the importance of investment avenues for the common people especially OFWs. This should definitely create more awareness as well as security in terms of financial terms when retirement comes in. Read on…
Lawmakers have approved the “Personal Equity and Retirement Account” (PERA) bill, a supplementary private retirement plan for all public and private employees.
“It’s been forwarded to Malacañang for signing,” said Sen. Edgardo Angara, chairman of the Senate Committee on banks, financial institutions and currencies and the principal author of the PERA bill.
Angara said the measure aims to fill the gap that do not have any savings or pension coverage and are not looking forward to retirement. He said about eight million working Filipinos are not covered by the government pension plan Government Service Insurance System and the Social Security System.
“I think this is going to be one of the most effective mobilizers of savings in this country. I think this is the first time that we really offered a menu of investment avenues or instruments to Filipinos,” said Angara.
Among the highlights of the consolidated Senate and House versions are the increase in the maximum annual contribution to P100,000 and harsher penalties for violators or mistrust.
“A couple can put aside about P200,000 a year and with that they’ll get a five percent credit, we’ll give them P10,000 credit, against any taxable income. The income from that investment will be tax free. The income will be reinvestment until you hit 55. You can either withdraw it in lump or annuity yearly pension. It’s up to you to choose,” he said.
Also targets overseas Pinoys
Angara said the measure is also targeting Filipinos overseas to give them a way to accumulate savings for their retirement years.
“In the case of our overseas Filipino, the expats, they can set aside double what a local can set aside which is P400,000–at the current exchange is about US$5,000 a year–that’s easily attainable. Some of our overseas Filipinos send more than that,” he said.
He added: “The big difference this time, what they send will go into a savings that will later on build up and when they want to stop working abroad and they want to come home then they’ll have nest egg,” he said.
The funds in a bank trust account will be develop either by an investment manager or “you can even try and manage it yourself.”
“That’s the beauty of it. You can choose the investment manager who will manage and invest these funds for you,” he said.
He explained that the law does not allow the investment manager to put it in a non-earning investment.
“It has to be marketable. It has to have a record of dividend or income payment and it must be safe. So there is an assurance that investment instruments are safe and secure,” he said.
The PERA bill will also help develop the country’s capital market, invigorate stock exchange and fixed income market like the corporate bonds and government securities trading.
“More financial instruments can be developed and this can be utilized for economic development,” he said.
The Philippines has two other pension funds, the Social Security System (SSS) for private employees and the Government Service Insurance System (GSIS) for state employees. Reports from ANC’s Dateline