S. BILL NO. 
Introduced by SENATOR RALPH 
Explanatory Note 
In Japan,'the savings rate is high. Sociologist? point to Confucianism as 
the main influence on the acquisitive instincts of not only the Japanese, but also 
that of the Chinese. They follow an ethic to work hard and long, and to sacrifice 
present happiness for prosperity in the future. An East Asian economist noted 
that in the Asian region, the three most rapidly growing countries after Japan are 
Taiwan, South Korea and Singapore. In all cases, these countries share a similar 
cultural and religious background. 
This bill borrows the Confucian philosophy of thriftiness and encourages 
workers and non-workers alike to practice the virtue of saving. It provides for the 
creation of the Personal Equity and Retirement Account (PERA) for employed or 
self-employed individuals for their exclusive use and benefit, in which the 
contributor also retains the beneficial ownership of the funds he/she deposits 
therein as well as the earnings from investments of said funds. 
The PERNSEP-PERA is conceived as a savings plan specifically for 
those who do not have a retirement plan with the GSIS, SSS or PAG-IBIG. 
Millions of Filipinos would be given the chance to achieve a comfortable and 
financially secure retirement years through a sound investment scheme 
envisioned in the bill. 
It is in this light that immediate passage of this bill is earnestly sought. 


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OF THE P ~ I ~ I P P ~ N E S  
) 
First Regular Session 
) 
S. BILL NO. 
introduced by Senator Ralph G. Recto 
AN ACT 
HlNG A PROVIDENT PER ONAL S A V I ~ ~ S  
PLAN  KNOW^ AS 
THE PERSO~AL EQUITY AND RETIREMENT ACCOUNT 
Be it enacted by the Sennte and the House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Title - This Act shall be known as the "Personal Equity and 
Retirement Account (PERA) Act of 2004." 
SEC. 2. Declaration of Policy - It is declared the policy of the State to 
promote retirement plans for individuals comprising of voluntary personal savings 
and investments supported by government incentives. 
SEC. 3. Definition of Terms - As used in this Act, unless the context 
requires otherwise, the following terms shall have the following significance: 
a) 
"Administrator" is a bank or trust company accredited by the 
Bangko Sentral ng Pilipinas, investment companies, investment houses 
accredited by the Securities and Exchange Commission, and life insurance and 
pre-need companies accredited by the Office of the Insurance Commission. 
Investment companies, investment houses, life insurance and pre-need 
companies shall not be required to obtain a separate trust accreditation by the 
Bangko Sentral ng Pilipinas. The administrator holds legal title to the 
contributions and earnings in the PERA or SEP-PERA administered on behalf of 
the contributor until the retirement of the contributor or the transfer of assets of 
the retirement account as provided in this Act; 
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b) 
"Contributor" is a person who establishes and makes contributions 
to a PERA or SEP-PERA and who designates an Administrator to administer and 
manage the said account. The contributor retains beneficial title to contributions 
and earnings in a PERA or SEP-PERA. The contributor must be the beneficiary 
of his or her own PERA or SEP-PERA; 
c) 
"PERA refers to the retirement account created or organized by an 
individual who is employed known as the contributor, for his or her exclusive use 
and benefit, in which contributor retains the beneficial ownership of funds he or 
she deposits therein, as well as the earnings thereon from investment of said 
funds: 
d) 
"SEP-PERA (Self-employed persons - Personal Equity and 
Retirement Account) - refers to the retirement account created or organized by 
an individual who is self-employed, known as the contributor, for his or her 
exclusive use and benefit, in which said contributor retains the beneficial 
ownership of funds he or she deposits therein, as well as the earnings from 
investments of said funds; 
e) 
"Compensation" is all actual remuneration received for employment 
of services of any type, including, but not limited to fees, salaries, wages, 
commissions, income derived from the conduct of a trade or business or the 
exercise of a profession or consulting services, distributive shares from the net 
income of a general partnership; 
f) 
"Ordinary Retirement Age" is the age of retirement set by the SSS; 
and 
9) 
SEC. 4. Reserves - The Administrator is not required to establish 
reserves for PERA or SEP-PERA assets. PERAs and SEP-PERAs shall be 
"SSS" is the Social Security System in the Philippines. 
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exempt from any reserve requirements of the Bangko Sentral ng Pilipinas for 
common trust funds or any reserve requirements of other government regulatory 
agencies. This is not part of the assets of the Administrator for purposes of 
bankruptcy. 
SEC. 5. Esfablishment of a PERA - Any individual who is employed, of 
legal age and who is earning an income may establish a PERA with an 
Administrator. 
SEC. 6. Establishment of SEP-PERA -Any individual who is employed, of 
legal age and who is earning an income may establish a SEP-PERA with an 
administrator. 
SEC. 7. Qualifying lnvesfment Rule - Contributions made to PERA or 
SEP-PERA, and on the earnings thereon may be invested only in: 
a) 
any equity listed on the Philippine Stock Exchange and any 
corporate or government bond, or commercial paper that is rated by a recognized 
rating agency in the Philippines; 
b) 
investments denominated in foreign currencies authorized by the 
Bangko Sentral ng Pilipinas, including the currencies themselves, traded on any 
recognized exchange but not to exceed 7.5% or whatever is the current SSS limit 
on foreign denominated investments for the aggregate PERA and SEP-PERA 
assets held by the Administrator; 
c) 
asset-backed securities, common trust funds, and investment 
companies (mutual funds); and 
d) 
cash and bank deposits in local and foreign currencies authorized 
by the Bangko Sentral ng Pilipinas. 
SEC. 8. General lnvestment Rules. (a) The contributor retains the 
authority for the final decision on all investments. 
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(b) A contributor may give an Administrator full written authority to make 
all investment choices without first consulting the contributor. 
SEC. 9. Maximum Annual PERA Contributions. (a) A single individual, or a 
married individual who files a separate tax return from his or her spouse, who 
participates in an employer-sponsored retirement plan may make a maximum 
contribution of P18,OOO for the tax year 2001. For each and every year thereafter, 
for which he or she is employed and earning an income, the person may make a 
maximum contribution of 15% of total joint annual compensation; Provided, that 
the maximum annual contribution shall not exceed 15% of the SSS annualized 
average monthly salary credit. 
(b) A married individual, who files a joint return with his or her spouse and 
who participates in an employer-sponsored retirement plan, may make a 
maximum contribution of P36,OOO for the tax year 2001. For each and every tax 
year thereafter, for which he or she is employed and earning an income, the 
person may make a maximum contribution of 15% of the total joint annual 
compensation, provided, that the maximum annual contribution shall not exceed 
15% of the SSS annualized average monthly salary credit. 
No contributions may be made to a PERA in excess of deductible 
amounts. 
SEC. 10. Maximum Annual SEP-ERA Contributions. (a) A self-employed 
individual who files a separate tax return from his or her spouse may make a 
maximum contribution of P28,OOO for the tax year 2001. For each and every tax 
year thereafter, for which he or she is self-employed and earning an income, the 
person may make a maximum contribution shall not exceed 23% of the SSS 
annualized average monthly salary credit. 
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(b) A self-employed individual who file a joint tax return with his or her 
spouse may make a .maximum contribution of P56,OOO for the tax year 2001. For 
each and every tax year thereafter, for which he or she is self-employed and 
earning an income, the person may make a maximum contribution of 23% of total 
joint annual compensation, provided that the maximum annual contribution shall 
not exceed 23% of the SSS annualized average monthly salary credit. 
(c) No contributions may be made to a SEP-PERA in excess of the 
deductible amounts. 
(d) A self-employed person may not make a contribution to his or her 
SEP-PERA on behalf of his or her own company. 
SEC. 11. lncorne Tax Deductibility. - All contributions made within the 
maximum limits allowed by this Act, shall be 100% deductible from the taxable 
income of the contributor, to the extent that such contributions are actually made. 
All earnings of the PERA and SEP-PERA account are tax-exempt until 
withdrawn. 
SEC. 12. Taxability. - All distributions, withdrawals or early withdrawals 
are taxed as income to the contributor in the tax year in which the funds are 
received. 
SEC. 13. Penalfy on far/y Withdrawal. - No early withdrawals may be 
made until contributions have been made for at least five years. Early withdrawal 
penalties shall be determined by regulation; Provided, however, that no penalty 
shall be imposed on any withdrawal of any funds for the following purposes: 
a) used to pay for hospitalization in excess of 30 days; 
b) for a contributor who has been determined to be disabled under PD 442 
as amended the Labor Code of the Philippines, RA 1161 as amended by RA 
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8252 the Social Security Law of 1997, or the RA 8291 the Government Service 
Insurance System Act of 1997; and 
c) for the purchase of the first family home of the contributor. 
SEC. 14. Records and Reporting. - The Administrator shall keep records 
for all contributions, earnings and total account balances and shall be required to 
report to the contributor these amounts on a quarterly basis for each calendar 
year. 
SEC. 15. Distributions Upon Retirement. - Distributions shall be made 
upon retirement of the contributor at Ordinary Retirement Age. Persons who 
participate in an employer-sponsored retirement plan, may withdraw their assets 
from a PERA either in a lump sum or in installments as determined by the 
contributor. For self-employed persons, at least 50% of the assets in a SEP- 
PERA must be withdrawn in the form of an annuity with a minimum term of five 
years. 
SEC. 16. Termination. - (a) The contributor may terminate a trust at any 
time, provided, however, that the assets of the PERA or SEP-PERA are 
deposited with a new Administrator or remain with the existing Administrator. 
(b) A contributor may hold more than one PERA or SEP-PERA with more 
than one Administrator, provided, however, that the maximum contribution limits 
are aggregate limits applicable to all PERAs or SEP-PERAs held by the same 
contributor. 
(c) A contributor may not transfer assets from PERA to a SEP-PERA or 
from a SEP-PERA to a PERA. 
SEC. 17. Assignability. - No portion of the assets of a PERA or SEP- 
PERA may be assigned, alienated, pledged, attached, garnished, levied upon, 
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seized or otherwise encumbered. PERA and SEP-PERA assets shall not be 
considered assets of the contributor for purposes of bankruptcy and estate taxes. 
SEC. 18. Creation of a PERA Regulatory Authority. - There is hereby 
created a Personal Equity and Retirement Account (PERA) Regulatory Authority 
which will have jurisdiction over the PERAs and SEP-PERAs and will have the 
full authority to issue and enforce regulations. The PERA Regulatory Authority 
will be composed of one representative from each of the following: 
a) Securities and Exchange Commission; 
b) Office of the Insurance Commission; 
c) Bangko Sentral ng Pilipinas; 
d) Bureau of Internal Revenue; and 
e) a Private Sector member to be appointed by the President of the 
Philippines upon the recommendation of the Secretary of Finance. 
The PERA Regulatory Authority has to create a staff of qualified 
personnel. 
All decisions of the PERA Regulatory Authority shall be arrived at by 
majority vote. 
SEC. 19. lmplementing Rules and Regulations. - Within 30 days from the 
effectivity of this law, the PERA Regulatory Authority shall issue the 
lmplementing Rules and Regulations for the PERA. 
SEC. 20. Separability Clause. All laws, decrees, orders, rules and 
regulations or parts thereof, inconsistent with this Act are hereby amended or 
modified accordingly. 
SEC. 21. Effectivity. This Act shall take effect 15 days following its 
publications in a newspaper of general circulation. 
Approved, 
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