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Philippines’ Central Bank ramps up investments through its digital scheme

The Philippine Central Bank continues to reap the benefits of innovation following the launch of a virtual investment system that boosts retirement savings. Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno announced that the number of investors in its Digital Personal Equity and Retirement Account (PERA) application has increased by almost 50% from 1,600 since the programme’s launch. 

Investments in PERA were pegged to be at 2,500. In terms of additional investments, these amounted to PHP 18.9 million (US$ 392, 846). 

The PERA is the Central Bank’s retirement savings system. It provides supplementary support to retiree investors aside from benefits already provided for under the Government Insurance System and the Social Security System. It was launched as an initiative of the BSP to lock in more investments and cater to the public’s need for seamless financial transactions.  

The BSP launched the Digital PERA last September, as digital financial transactions got a boost during the current pandemic. The BSP Governor claimed that the PERA application is a form of “superior savings option” which grants tax incentives that many retirements and investment strategies in the market fail to offer. 

To explain further, the BSP said that income derived from the Digital PERA is exempt from taxes including final withholding tax, capital gains tax and regular income tax. On top of these, it enables investors to earn a credit of 5% for annual contributions. Investors can use this tax credit to help decrease other investors’ annual income tax.  

Because amounts invested under this online programme are not subject to tax, this means that if the investor dies, his heirs or beneficiaries will not be held accountable to settle the estate taxes of the deceased.  

Placing a limit on investments under the PERA 

Due to an overwhelming response from investors, the BSP Governor is now considering suggestions to raise the ceiling of PERA investments. This, he said, shall benefit Filipino retirees who plan to invest their retirement money in the BSP.   

He said, “This will give Filipinos more flexibility in choosing the right pair of products and better prepare for their retirement”. 

The BSP Governor discussed during a virtual briefing that the impacts of inflation should be considered in determining the investment ceiling because the PERA system was enacted 12 years ago. 

To determine the possible limit or investment cap for PERA placements, the BSP said that it will be in talks with the Department of Finance (DoF) and the Bureau of Internal Revenue (BIR). The Central Bank must consider the proposals of the DoF and BIR as putting a limit on investments will necessarily involve fiscal implications. 

Currently, the Digital PERA programme has an annual cap of PHP 100,000 (US$ 2,078) for domestic investors. However, for overseas Filipino retirees, the investment limit is at PHP 200,000 (US$ 4,156). 

During the meeting, the BSP Governor also alluded to plans of setting up a more active drive for investments in 2021 on the back of aggressive efforts to scale up operations through innovation. He added, “The BSP is seeing early gains after PERA became digital. While figures remain modest, we are confident that the number will continue to grow as more Filipinos can access PERA conveniently”. 

Aside from the Central Bank, other government agencies have introduced innovative methods to shore up investments in the country. OpenGov Asia reported that the Bureau of Treasury (BTr) has surpassed its bond placement targets through a digital banking platform. This system allows domestic and overseas Filipino investors to participate in the agency’s sale of Premyo bonds. The report showed that three-fourths of overseas placements were coursed through the BTR’s Bonds.PH app and digital lender Overseas Filipino Bank. 

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