Personal Equity and Retirement Account: Path to building long-term retirement plan

By Mhicole A. Moral, Special Features and Content Writer, BusinessWorld

For some Filipinos, retirement carries the promise of stability, where daily needs no longer depend on a paycheck. Yet for others, the same moment brings uncertainty, as savings stretch against rising costs and the absence of steady income.

Such divide traces back to how early and how deliberately a person prepares. According to financial experts, structured savings is a good way to build stability over time. In that sense, the Personal Equity and Retirement Account, or PERA, is a government-backed retirement program that urges Filipinos to treat retirement as a long-term goal.

Under Republic Act No. 9505, PERA serves as a voluntary retirement savings account with tax incentives. It is not an investment product by itself, but a framework that allows individuals to place funds into approved investment instruments.

The account can hold various investment products approved by regulators, including unit investment trust funds, mutual funds, annuities, insurance pension products, and government securities.

Moreover, contributors retain ownership of their funds and earnings, while administrators oversee compliance and reporting.

“PERA is best seen as a personal retirement account that complements SSS, GSIS, employer retirement plans, and personal savings. It gives Filipinos a dedicated and tax-advantaged way to save and invest for retirement,” said Raymund Benedict C. Zalamea, President and Chief Executive Officer of E.M. Zalamea Actuarial Services.

Recognizing long-term value

PERA’s appeal lies in its tax treatment. Contributors receive a 5% income tax credit on annual contributions, subject to limits set by law. Investment income earned within the account is tax-exempt, and qualified withdrawals upon retirement are also free from taxes.

“[PERA] encourages people to treat retirement as a real financial goal that requires long-term planning and discipline,” Mr. Zalamea noted.

The account also carries legal features tied to long-term planning. Under the law, PERA assets are kept separate from other assets and are not treated as part of the contributor’s estate for certain purposes, which may support estate planning.

However, Mr. Zalamea said PERA is designed for long-term use, which may limit liquidity.

“They should consider liquidity needs, time horizon, and risk tolerance,” he explained. “If the money is for long-term retirement, PERA is worth considering.”

Withdrawals before age 55 and before completing at least five years of contributions may lead to penalties, including the return of tax incentives. Exceptions apply in cases such as prolonged hospitalization or permanent disability.

These rules, while restrictive, may help contributors stay focused on retirement goals by reducing the temptation to withdraw funds early.

Starting and managing a PERA account

Opening a PERA account starts with defining personal financial goals, capacity to save and investment horizon. Accredited administrators guide contributors through suitability assessments and match them with eligible investment products.

“A saver should first understand his or her goals, financial capacity, and time horizon. A good administrator platform should then guide the person through the process, including the client suitability assessment, and help match investment options to the saver’s risk profile and level of understanding,” Mr. Zalamea said.

Contributors may maintain up to five accounts but must work with a single administrator. They may also appoint an investment manager to handle decisions on their behalf.

Mr. Zalamea added that consistency remains one of the most important factors in building retirement funds. As such, contributors should treat PERA contributions as part of a fixed financial plan rather than an occasional decision.

“The best approach is to treat PERA contributions as part of a regular financial plan, not something funded only when there is extra cash,” he explained. “Even modest but consistent contributions can grow meaningfully over time because of compounding.”

This approach, he said, helps individuals maintain steady contributions even during periods of financial pressure.

Expanding awareness and access

Despite being introduced in 2008, PERA adoption took time as financial institutions developed products and secured accreditation. Broader access recently began to take shape with the rollout of digital platforms.

In 2020, the launch of online PERA services opened the program to more retail investors by allowing account creation and management through digital channels. New entrants, including non-bank financial firms, have also begun offering PERA access.

Mr. Zalamea said education and user experience must improve to reach more workers and investors.

“Better public education and a better user experience are both important. PERA must be explained in a practical and relatable way.”

He added that employers could help expand participation by promoting financial wellness programs in the workplace.

“Employers can also play a major role by promoting financial wellness and PERA awareness,” he said.

As more Filipinos face the limits of traditional pension systems and personal savings, Mr. Zalamea urged an earlier and more structured preparation for retirement. Programs such as PERA offers a platform that aligns long-term investment towards clear financial goals.

“Over time, “[PERA] can help foster a culture of discipline, long-term thinking, and personal responsibility for retirement readiness,” he concluded.

This article appears on the latest BusinessWorld In-Depth’s special edition with the Trust Officers Association of the Philippines for Trust Consciousness Week. To get your free copy, go to https://bworld-x.com/product/free-beyond-today-a-modern-strategy-for-retirement-planning/.

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