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senat 
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Retirement is the culmination of a person's endeavors. It is the time when he is 
supposed to relax and enjoy the fruits of his labor as he is relieved from the pressures of 
daily work, Relaxation and enjoyment during the retirement stage, however, largely 
depend on the avaiiability of finances. An ordinaty employee who used to depen on his 
dependable retirement plan will be a big help in alleviating the retiree's financial needs. 
salary for his daily subsistence. will now have to rely on other sources of . 
f nd. A 
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At present, only a small portion of the population avails of retirement plans. The 
1998 National Statistical Information Center data show that only 1.25 million are 
covered by Government Service Insurance System (GSIS) Funds, 19 million are 
members of the Social Security System (SSS) and approximately 4 million are 
beneficiaries of the Pag-IBIG Fund. This means that only around 24.25 million out of the 
73.13 million Filipinos have retirement plans. Thus, there are still millions of Filipinos 
who are facing uncertain retirement. 
The Personal Equity Retirement Account (PERA), as proposed in this bill, 
promises to be a valuable tool to remedy the situation. PERA is a long-term savings plan 
designed to achieve a comfortable and financially secure retirement through planned 
savings, sound investment and tax exemptions. It will encourage Filipinos to save 
because contributions to the savings funds are deductible from taxable income, and 
earnings from said savings are tax exempt. 
This proposed bill makes the PERA a more attractive retirement plan for the 
Filipinos by the introduction of valuable features such as withdrawability of funds in case 
of certain emergencies, transparency of investment records and government-regulated 
and contributor-Influenced investment decisions of the PERA administrators. 
While the proposed PERA Act will reduce government tax revenues, the increase 
in savings mobilization will result to a concomitant deepening of the capital market that 
will eventually result to a reduced interest costs. 
With the aforementioned premises, approval of this bill is earnestly sought. 
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18 
13TH CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
1 
,%-t Regutar Session 
1 
S E N A T E  
S.B. NO. 1(;2 1 
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~ ..,. . . . ” , 
Introduced by 
Senator Edgardo J, Angara 
AN ACT 
ESTABLISHING A PROVIDENT PERSONAL SAVINGS PLAN 
KNOWN AS THE PERSONAL EQUITYAMD REi7REMEMTACCOUNT(PERA) 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
Section 1. 
ntle, - This Act shall be known as “Personal Equity and etirement 
r 
Account (PERA) Act of 2004.” 
It is declared the policy of th 
State to 
promote capital market development and savings mobilization by establishing the legal and 
regulatory framework of retirement plans for persons, comprised of voluntary personal savings 
and investments, that is supported by government incentives. For this purpose, the State shall 
rationalize and streamline the functions of the Regulatory Authorities with the main objective of 
generating investments and accelerating savings mobilization by providing simple-to-understand 
basic PERA investment products. 
7 ”  
Section 2. 
Declaration of Policy - 
Section 3. 
Definition of Terms 
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As used in this Act, the following terms shall 
have the following significance, unless the context requires otherwise: 
a. 
“Administrator” is an entity accredited by the Bureau of Internal Revenue (BIR), 
after pre-qualification by the concerned Regulatory Authority. The Administrator 
shall be responsible for overseeing a PEW, whose functions shall include, but 
not limited to: reporting on contributions made to the account, computing the 
values of investments, educating the Contributor, enforcing PERA contributions 
and withdrawal limits, collecting for the government appropriate taxes and 
penalties, issuing certificates of contribution for BIR purposes, and consolidating 
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reports on a1 investments, income, expenses and withdrawals on t e account 
and ensuring that PERA contributions are invested only in permitted investments 
as required by Section 8. 
“Contributor” is any person of legal age who is a duly registered taxpayer and is 
earning a taxable income other than those subject to final income tax as defined 
under the National Internal Revenue Code of 1997. The Contributor establishes 
and makes contributions to a PEW. 
“custodian” is an entity separate and distinct from the Administrator, accredited 
by the Bureau of Internal Revenue after pre-qualification by the concerned 
Regulatory Authority, providing services in connection with the custodianship of 
funds and securities of the PEW. 
The Custodian shall be responsible for 
receiving and disbursing all funds in connection with the PERA, maintaining 
custody of all original securities, evidences of deposits or other evidences of 
investment. 
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~ The Custodian shall operate independently from the Administrator. 
The Custodian is required to report to the Contributor and the concerned 
Regulatory Authority at regular intervals all financial transactions and all 
documents in its custody under a PEW. 
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b. 
C. 
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d. 
“Investment Manager” is an entity authorized by a Contributor to make 
investment decisions for his PEW. As such, it shall assume fiducia: duty and 
responsibility for PEW investments. It shall act with utmost fidelity b observing 
policies directed towards confidentiality, scrupulous care, safety a d.:,prudent 
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management of PEW funds. 
“Personal Equity Retirement Account (PERA)” refers to the voluntary retirement 
account established by and for the exclusive use and benefit of the Contributor 
who shall retain the ownership of funds placed therein, including all earnings of 
such funds. 
“PEW Investment Product” refers to a common trust fund, mutual fund, annuity 
contract, pre-need pension plan or any other investment outlet which the 
concerned Regulatory Authority may by rule allow, subject to the approval OF the 
Secretary of Finance, and which is dedicated solely for PEW purposes. The 
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product must first be approved by the concerned Regulatory Authority before 
being granted tax exempt privileges (or otherwise referred to as tax- vored) by 
“Self-Directed PERA Account” refers to a PEW in which the investme fdecisibns 
the Bureau of Internal Revenue. 
are made by the Contributor. 
“Regulatory Authority” refers to the Bangko Sentral ng Pilipinas as regards 
financial services institutions or trust companies, the Securities and Exchange 
Commission for investment companies, investment houses, stockbrokerages and 
pre-need plan companies, the Ofice of the Insurance Commissioner For life 
insurance companies, and the Bureau of Internal Revenue as appropriate. 
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9. 
h. 
Section 4. 
Establishment ofa PEH 
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A Contributor who establishes a PERA shall 
designate an Administrator. The Contributor may also designate an Investment Manager and a 
Custodian but has the option to ask the Administrator to choose the latter on his behalf, 
The Contributor may transfer from one Administrator to another at any time; Provided, 
that a Contributor must only have one Administrator at any given time. 
Section 5. 
Investment Decisions - 
Generally, the Contributor shall make all 
investment -. decisions. 
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However, he may authorize an Investment Manager, either in writing or 
electronic form, to make investment decisions on his behalf without prior consultation. 
Section 6. 
f7t and Proper Rule for Ol-FiCers and #ir&ors 
of Admini&rratoG/ 
Investment Managers and Custodians 
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The concerned Regulatory Authorities shall 
coordinate to establish uniform fit and proper standards For Administrators, Custodians and 
. . .  
Investment Managers. 
This common regulatory framework shall maintain th quality of 
management in these institutions and afford better protection to the Contributors. Regulatory 
Authorities shall prescribe the qualification and disqualification standards of ‘individ .aIs’el&M&d 
or appointed as directors or officers of Administrators, Custodians and Investment Managers. 
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I n  determining whether an individual is fit and proper to hold the position of a director 
or officer of an Administrator, Custodian or Investment Manager, regard shall be given to his 
integrity, experience, education, diligence, training and competence. 
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An accredited Administrator, Custodian or 
Section 7. 
Maximum Fees 
Investment Manager for a PEW account shall charge fees not to exceed the amount or 
percentage to be determined or set by the concerned PERA Regulatory Authority. 
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Contributions made to PERA and 
Section 8. 
Permitted Investments 
earnings thereon shall be invested only in the following investments subject to fu 
standards and investment limits set by the concerned Regulatory Authori'q. 
a. 
b. 
C. 
d. 
e. 
f. 
national government securities or issues guaranteed by the 
government; 
disclosure 
Philippine 
corporate or government bonds, including issues of local governments or 
government agencies, or debt instrument including asset-backed securities, 
which are rated by a recognized rating agency in the Philippines; 
bank deposits in local and foreign currencies in the Philippine financial institutions 
subject to BSP regulation; 
foreign currency denominated investments 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 Social Security 
System (SSS) limit on foreign denominated investments, for the aggregate PEW 
assets held by the Administrator; 
non-speculative equities listed in the Philippine Stock Exchange (PSE); and 
.other investment outlets which the concerned Regulatory Authority may by rule 
allow subject to the approval of the Secretary of Finance. 
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A Contributor, through his Administrator, shall invest only in any of the following tax-favored 
PEW investment products: 
a. 
c. 
b. 
approved common trust funds and mutual funds registered in the Philippines; 
other investment outlets which the concerned Regulatory Authority 
ay by rule 
approved annuity contracts and pre-need pension plans; and 
allow subject to the approval of the Secretary of Finance. 
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Section 9. 
Basic Investment Products 
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Regulatory 
Authorities 
may 
designate basic PERA investment products that will be commonly offered by all Administrators 
to provide simple-to-understand options for Contributors. 
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Section 10. 
Maximum Annual PERA ContribuUons 
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A 
Contributor 
may 
make a maximum contribution not exceeding twenty-five percent (25%) of his/her taxable 
Gross Income-other t
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Internal Revenue Code of 1997, and, in any case, no more than Fifty Thousand PeSOS 
(P50,OOO.OO) per year. The maximum contribution may be adjusted from time to time to such 
amount that the Secretary of Finance may determine. 
Tax Treatment of Contributions 
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The total PEW contribution 
to the extent of Twenty Thousand Pesos (P20,OOO.OO) 
shall be deductible from the gross 
income of the Contributor, for the amount in excess of Twenty Thousand Pesos ( 20,000.00) 
but not to exceed Thirty Thousand Pesos (P30,000.00), 
an income tax credit equiv lent to tive 
percent (Soh) thereof shall be given to the Contributor; Provided, however, that such tax credit 
shall not exceed the amount of income tax due for the same taxable year, and shall not be 
transferable to any other entity. 
Section 11. 
I., 
Section 12. 
Tax Treatment of lnlnvestment Income 
All investment income 
earned by BIR-approved PEW investment products are tax exempt. 
Section 13. 
Tax Treatment of Distributions 
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All distributions from the 
PERA are tax exempt. 
Section 14. 
Penalty on Early Withdrawal - 
No early withdrawals may be made 
until contributions have been made for at least five (5) years. Early withdrawal penalties which 
shall be payable to the Government as may be determined by the Secretary of Finance shall be 
imposed on any withdrawal of any funds for the following purposes: 
a. 
b. -~ 
 for payment- to a Contributor who has bee subsequently rendered permanently 
disabled as defined under the Labor Code of the Philippines, RA 7641, the Social 
Security Law and Government Service Insurance System Law; and 
c. 
For the purpose of the first family socialized housing unit of the Contributor. 
However, no penalties shall be imposed on distribution made in the event that the 
For payment of hospitalization in excess of 30 days; 
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An employer 
Contributor reaches the age of fifty (50) years or upon his or her death. 
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Section 15. 
Employer3 Contibution 
employee's PEW to the extent of the amount allowable to the 
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that the employer complies with the mandatory Social Security 5ptem (SSS) contribution and 
retirement pay under the Labor Code of the Philippines. Such contribution shall be allowed as a 
deduction from the employer’s gross income, but shall be treated as part of the employee’s 
compensation for tax purposes. 
Section 16. 
Records, Reporting and Audit- 
The Administrators, Custodians and 
Investment%anagers shall as applicable 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. Such records shall be made available for inspection by 
the Regulatory Authority during office hours. The Regulatory Authority concerned may conduct 
routine and case audits of Administrators, Custodians and Investment Managers. 
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Distributions shal be made 
upon reaching the age of fifty (50) years provided that contributions have been 
ade to the 
PEW for at least five (5) years. The distribution shall be made in any mode t , a t  may be 
elected by the Contributor. The Contributor then has the option to continue on with the 
account. In the event that a Contributor opens an account at the age of fifty-six (56) and 
above, distributions shall be made at any time without corresponding five-year holding period 
nor penalties. 
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Section 17. 
Disrriutruns Upon Ketirement 
Section 18. 
Non-Assignabibty 
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No portion of the assets of a PERA may be 
assigned, alienated, pledged, encumbered, attached, garnished, seized or levied upon PERA 
assets shall not be considered assets of the Contributor for purposes of insolvency and estate 
taxes. 
Section 19. Penalty 
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A fine of not less than Fifty Thousand Pesos 
(P50,OOO.OO) nor more than Two Hundred Thousand Pesos (P200,OOO.OO) or imprisonment for 
not less than six (6) months nor more than two (2) years or both such fine and imprisonment, 
at the discretion of the court shall be imposed upon any person, association, partnership or 
corporation-;ih officer,--zmployee or agent, who shall: 
1. 
Act as Administrator, Custodian or Investment Manager without being properly 
qualified or without being granted prior accreditation by the concerned 
Regulatory Authority; 
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2. 
Invest the contribution without written or electronically authenticated authority 
from the Contributor except in the case of Self-Directed Accounts; 
Knowingly and willfully make any statement in any application, report, or 
document required to be filed under this Act, which statement is false or 
misleading with respect to any material fact; and 
Violate any provision of this Act or rules and regulations issued pursuant to this 
Act. 
3. 
4. 
Notwithstanding the foregoing, any willful violation by the accredited Administrator, 
Custodian G-d Investment Manager of any of the provisions of this Act, or its implementing 
rules and regulations, or other terms and conditions of the authority to act as Administrator 
may be subject to the administrative sanctions provided for in applicable laws. 
Section 20. 
Abuse of the Tax Exemption And Privileges - 
Any person, natural 
or juridical, who unduly avails of the tax exemption privileges herein granted, possibly by co- 
mingling PEW accounts in an investment with other investments, when such p rson is not 
entitled hereto, shall be subject to the penalties provided in Sec. 19 hereof. I n  a dition, the 
offender shall refund to the government double the amount of the tax exe ptions and 
privileges enjoyed under this Act, plus interest of twelve per cent (12%) per year from the date 
of enjoyment of the tax exemptions and privileges to the date of actual payment. 
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Section 21. 
Repealing Clause 
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All 
laws, 
decrees, 
orders, 
rules and 
regulations or parts thereof, inconsistent with this Act are hereby amended or modified 
accordingly. 
Section 22. 
SeparabMy Clause 
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If any provision or part hereof, is held 
invalid or unconstitutional, the remainder of the law or the provision not otherwise affected 
shall remain valid and subsisting. 
Section 23. 
Effectivily 
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This Act shall take effect 15 days following its 
publication in a newspaper of general circulation. 
Approved. 
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