BDO Unibank (BDO) has begun building the infrastructure for the first-ever Personal Equity and Retirement Account (Pera) product, as the central bank calls for the launching the system by year-end.
Just two months after the Bangko Sentral ng Pilipinas announced the Sy-led bank as the first to be accredited as Pera administrator, BDO President and CEO Nestor Tan said they are on track to putting the product in the market very soon.
“We’re working on the infrastructure to put the product in place so it would take time. But it’s moving in the right direction,” Tan said.
The much-delayed Pera Law or Republic Act (RA) 9505, passed yet in 2008, aims to encourage Filipinos to save for their retirement by serving as investment mechanism.
Beyond the cryptic “We’re working on it now,” Tan refused to say more.
Pera aims to deepen the domestic capital market and mobilize savings for greater economic impact.
It also aims to contribute to long-term fiscal sustainability through the provision of long-term financing and reduce the need for social pension benefits.
Moreover, it is the country’s attempt at providing retirement savings vehicles prevalent and long-standing in more developed countries. Pera establishes the legal and regulatory framework for voluntary personal retirement plans.
When launched, a qualified Pera contributor may place their money in five Peraaccounts.
The system has five recognized investment products, including trust funds, mutual funds, insurance, preneed, government bonds and listed equities, for the money to grow.
Annual contributions no more than 100,000 are entitled to a 5-percent tax credit.
The money will be on top of pensions that will be paid by state-run Social Security System or the Government Service Insurance System.
The contributor may claim his or her proceeds once the individual reaches the age of 55 on a periodic or lump sum basis or has contributed to the investment product for at least five years.
According to RA 9505, as an administrator, the core function of BDO is to oversee the Pera, which includes consolidating reports on all investments, income, expenses and withdrawals on the account and ensuring that Pera contributions are invested in accordance with prudential guidelines set by the regulatory authorities.
“Implementing Pera is complex, as it involves efficient coordination with the various Pera participants like the cash/securities custodians, investment product providers and investments managers, as well as providing the required regulatory reports,” said Ador A. Abrogena, executive vice president and trust officer of BDO Trust, in September.
“More important, it involves educating and inculcating financial literacy in the Pera contributors. For further reach, we also have to increase our number of accredited individual Pera administrators who are the only ones allowed by regulations to market Pera. All these need to be carefully readied before a Pera launch,’’ he added.