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The central bank on Tuesday (September 8) urged Filipinos to take advantage of an “underutilized” law to fatten up their pension programs, noting that Filipino citizens are among the worst prepared in the region for the financial challenges of retirement. .
Speaking at the online launch of the Personal Equity and Retirement Accounts (Pera) digital initiative, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said that the law has so far failed to build a critical mass of investors as envisioned by its authors. .
“Currently, Pera is underutilized,” he said in his speech, noting that only 1,586 Filipinos had joined the scheme as of the end of July 2020, with total contributions of just P137 million. “Since its implementation in December 2016, the Pera industry has not gained significant momentum.”
Of the total taxpayers, 1,099 or 69 percent are employed locally, 273 or 17 percent are Filipino workers abroad, and 214 or 14 percent are self-employed. On average, OFWs have higher contributions with P110,000; local employees, 82,000 pesos and the self-employed, 76,000 pesos.
“These numbers are still woefully low,” Diokno said.
According to the latest report from the Philippine Statistics Authority (PSA), the Philippines has about 7.6 million Filipinos aged 60 and over. Of this group, only 20 percent are covered by SSS or GSIS, leaving 80 percent of the elderly without any mandatory pension.
Retirees who are lucky enough to be covered by state-sponsored retirement systems receive an average monthly pension of P5,123 for SSS and P18,525 for GSIS.
“Depending on the lifestyle you would like to have in your senior year, this pension may or may not be enough to meet all your needs,” the central bank chief said, adding that surveys also showed that Filipinos tend not to prepare. for yours. Retirement.
“Specifically, Filipinos only set aside 3.6 months of income for retirement, well below the regional average of 2.9 years,” he added.
“In terms of expectation, Filipinos believe that savings equal to 2.1 years of personal income would be sufficient for retirement. This is the lowest expectation in Asia compared to the 12-year regional average, ”Diokno said.
PSA reported that the share of social security benefits, including retirement and survivor pensions, sickness, disability, death and other related allowances, in gross domestic product also remained relatively low at around 2 percent from 2012 to 2017.
“As such, voluntary retirement savings plans like Pera are crucial in supplementing state pension plans to meet retirement needs,” Diokno said.
Tuesday’s launch will allow Filipinos to invest in pension plans through their mobile phones, and the digitization process will allow Pera-accredited banks and financial institutions to provide convenient and affordable retirement savings products to more investors as through more efficient channels.
Under Pera, contributions within a calendar year, up to a maximum of P100,000 for local residents or P200,000 for Filipino expats, will be entitled to a 5 percent tax credit, which can be used against income tax obligations. income or, in the case of Filipino workers abroad, against any domestic income tax liability.
Investment income from Pera’s investments is also exempt from investment income tax.
TSB
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