THE Philippine Stocks Exchange (PSE) sees the implementation of the Personal Equity and Retirement Account (Pera) Act now that its implementing rules and regulations (IRR) have been approved by regulators led by the Bangko Sentral ng Pilipinas.

The Pera Law establishes the legal and regulatory framework for the creation of a voluntary personal savings and investment plan as a means of providing financial security to Pera contributors during their retirement years.

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Aside from the BSP, the IRR approval was also in coordination with the Securities and Exchange Commission, Department of Finance (DoF), Office of the Insurance Commissioner, and the Bureau of Internal Revenue (BIR). However, the revenue regulations for the Pera Act have yet to be approved by the DoF and the BIR.

“The next challenge is coming up with the revenue regulations that will implement the tax provisions of the law. We hope the tax regulations will not water down the tax incentives given by the basic law, otherwise the purpose of the law to encourage savings and investments in the local capital markets will be defeated,” PSE president and chief executive officer Francis Lim said.

Momentum

Lim also said the approval of the IRR is a welcome milestone in sustaining the momentum for Philippine capital market reforms.

“Given that our regulators already approved the implementing rules for the Pera, we hope that various market players will soon apply as Pera administrators, investment managers and custodians so that interested individuals may already open Pera accounts as early as now,” Lim said.

Perks

To encourage individuals to set up Pera accounts, the Pera Law provides the following perks: a tax exemption for all income earned from Pera investments and reinvestments and all distributions upon death or retirement, provided that in case of retirement, the contributor has reached the age of 55 and made contributions for at least five years; a tax credit equivalent to five percent of the member’s maximum annual Pera contribution; and a tax deduction for employers who contribute to their employees’ Pera account.

Also, Pera assets shall not be considered as assets of the contributor for purposes of estate taxes.

The Pera IRR clarified operational procedures to completely implement the law while adding measures to ensure protection of the investing public.

The IRR also established qualifications and grounds for suspension or revocation of accreditation of a Pera administrator, investment manager and custodian who are the primary parties involved in creating and maintaining a Pera account.

Administrator

The Pera administrator is responsible for helping individuals establish and monitor a Pera account.

Under the IRR, banks, trust entities, investment company advisers, securities brokers, investment houses, insurance companies, insurance brokers and other entities allowed by the regulatory authorities may apply as a Pera administrator.

However, only a Pera administrator with a trust license may concurrently perform the functions of a Pera investment manager.

The engagement of a Pera investment manager is optional on the part of the Pera contributor. However, the approved rules and regulations do not allow the Pera investment manager to recommend or sell its own investment products or that of its subsidiaries and affiliates.

The Pera custodian is classified as either a cash or securities custodian and is responsible for the safekeeping of funds and securities comprising the Pera investments.

Contributions

Under the Pera Law, individual and married couples may contribute up to 100,000 and P200,000 per year. If the contributor is an overseas Filipino, the maximum annual contribution goes up to P200,000 per individual and P400,000 per couple.

A Pera contributor may give more than the maximum annual amount but the excess contribution shall no longer be entitled to a tax credit.

All Pera investment products must be approved by the concerned regulatory authority before the BIR can grant tax-exempt privileges to its holders.

Investment product

To be eligible as a Pera investment product, a product must be non-speculative, readily marketable and has a track record of regular income payment to investors.

To protect Pera contributors from abuses, investor protection measures are put in place.

For instance, a security for the faithful performance of the Pera administrator’s duties under the Pera Law is required. This security may be used to settle claims arising from the Pera administrator’s breach of its duties as evidenced by a final and executory court order.

The rules shall take effect immediately upon its publication in a newspaper of general circulation. (PR)