It’s payday once again! Before you run off to go play a one-day millionaire, consider an alternative use of your money. RETIREMENT!
PERA (personal equity and retirement account) is a creation of Republic Act No. 9505, which was passed waaay back in 2008. However, it only became effective this year, as commercial banks became accredited with the Bangko Sentral. The time lag appears to be due to some disagreement between the regulatory authority (BSP) and the banks regarding how the PERA is to be enforced.
PERA is supposed to be our local form of the US’ 401K. Unlike the typical SSS, GSIS, or even insurance, you have more control over your PERA account as you will personally pick which investment instruments to invest in and what amounts to allocate. It’s just more (supposedly, hopefully) transparent.
I’m not going to give you a primer, which is readily available on the internet anyway. I will give you a firsthand account of how I opened my PERA account with BPI.
How to get started
As an avid reader of money blogs, I first read about PERA from one of them. I have an account with BPI so I went over to their website, read the BSP primer, and then emailed BPI through their website.
Since I’m based in Cebu, I specified such fact in my email. A local BPI investment officer then got in touch with me and set up a meeting. At the meeting, I was apprised of the specifics, and I obtained answers to my questions such as the charges and capital instruments available for investment.
I was told that so far, I was the second person in the whole of Cebu City to ask about PERA. (is nobody curious about retirement anymore?) Anyhow, I was asked to prep some documentary requirements such as:
1. TIN ID
2. Marriage contract
3. Proof of income such as certificate of employment, payslips, BIR form 2316 (proof of withheld income)
As you can see, the documentary requirements are quite simple and straightforward. Unless you’re unemployed, I guess.
Transactional fees and other charges
To open an account, only PhP 1,000.00 is required. I personally wouldn’t recommend it. I opted to start with PhP 50,000.00 to open my account in order to save on the fees. Some fees are per transaction, so the less number of transactions per year, the better. Note that you can only put in a maximum of PhP 100,000.00 per year. I’m guessing this is to prevent people from taking undue advantage of the tax credits.
The charges are:
1. Not exactly a charge but a one-time maintaining balance for your Landbank account (the cash custodian) – PhP 100.00
2. Administration fee based oN contribution (charged by bpi as your administrator) – 1% of contribution
3. Maintenance fee per year – PhP 200.00 Payable to Landbank deducted every year automatically
4. Transaction Fee per activity charged by Landbank – PhP50.00. Per Contribution/ withdrawal proceeds
There are fixed yearly charges so better invest in something that should grow beyond the fixed yearly charge! Also some fees are per transaction so I advise a large contribution upfront (PhP 50,000.00 twice a year is ideal, if you can manage it).
Don’t let these costs deter you as the investment horizon is still long ( at least, if you’re still my age).
Capital instruments available right now
Capital instruments that are available for investment are still limited as PERA is still in its “experimental “ stage. How limited? Only UITFs are available. Hahaha. So boring, right?
The only value I see in being a first client (or at least part of the first five here in Cebu), is that one gets to invest in a UITF fund that has a Navpu price in its infancy.* The UITFs are PERA-centric and newly-created, so certainly there is some first -mover advantage here, akin to an IPO (initial public offering).
Have you opened your PERA account?
A lawyer-schoolmate just started blogging at http://theferrerasabroad.weebly.com/
Her take on life as an expat and the diplomat life in Riyadh, Saudi while raising her kid and another one on the way, is an interesting read.
Sorry for slacking in my posts guys. Frugal husband and I were busy car-shopping and the consequent negotiations that come with that.
* I explained what UITFs are here