Philippines pensions face up to default threat
Pera, or Personal Equity Retirement Account, is also the Filipino word for money. If the Pera bills before congress ever get passed, it could mean a lot more money heading into the domestic capital markets and the local fund management industry.
The overriding philosophy driving the Pera initiative is to encourage Filipinos to save for their own retirement, rather than rely on the existing creaky state pension systems. The Philippines has the lowest savings ratio of any big Asian economy and this has hampered the development of the domestic capital markets.
Under the proposals, money invested in Pera schemes would be exempt from tax, and individuals would be able to choose different Pera-qualified investment instruments offered by fund managers, making the schemes portable and extremely flexible.
A primary target for Pera schemes would be the Philippines’ overseas foreign workers (OFWs) who repatriate more than $10 billion annually. OFWs are at present exempt from the government’s mandatory savings schemes and thus their huge savings potential is not captured.
Amando Tetangco, governor of Bangko Sentral Ng Pilipinas, the central bank, says that the financial community is just waking up to this savings potential.