In five years
The Bangko Sentral ng Pilipinas (BSP) is targeting to get five million Filipinos to contribute and invest in the Personal Equity and Retirement Account (PERA), a voluntary savings and retirement plan for Filipinos 18 years old and above, with its digital transformation.
The BSP goal is to increase PERA contributors to five million by 2025 from just 1,586 today. “We are targetting to reach five million Filipinos in a period of five years,” said BSP Governor Benjamin E. Diokno during Tuesday’s Digital PERA Launch. “The target seems ambitious. But with more than 40 million locally employed Filipinos prior to the pandemic and around 2.2 million overseas Filipino workers, I am optimistic that this goal is easily attainable,” he added.
Diokno remains confident that when the local economy -- which is currently in recession -- recovers the displaced thousands of jobless because of the pandemic will again find work and think about savings, investments, and retirement.
“We recognize that achieving this target needs commitment from all stakeholders,” said Diokno, and that the BSP with other relevant government agencies will “continue to promote a conducive regulatory environment for PERA.”
“I encourage the market players to provide convenient and affordable PERA experience to your customers. I also hope to see more market players participate in the digital PERA ecosystem, such as insurance companies and mutual funds,” said Diokno.
At the moment, central bank officials are bemoaning the fact that PERA is not popular to the working mass.
“Currently, PERA is underutilized,” said Diokno. “Since its implementation in December 2016, the PERA industry has not gained significant momentum.”
As of July 29 this year, there are only 1,586 Filipinos investing P137 million in PERA. About 69 percent or 1,099 of total contributors are locally employed; 17 percent or 273 are Overseas Filipino Workers (OFWs); and 14 percent or 214 are self-employed.
“On average, OFWs have higher contributions at P110,000; local employed workers at P82,000; and the self- employed at P76,000. These figures remain regrettably low,” said the BSP chief.
This is why the BSP and other relevant agencies and groups such as the Trust Officer Association of the Philippines have collaborated to digitalize PERA investment process through a one-stop shop digital response for investor education, client on-boarding, settlement of transactions, and monitoring of PERA investments, said Diokno.
The Asian Development Bank (ADB) funded the PERA development and upgrade to the registry system PERASys which connects API to PERA administrators in real time. The ADB is also funding the ePERA system for the Bureau of Internal Revenue for the end-to-end PERA digitization.
With digital PERA, Diokno is hoping to encourage more Filipinos to prepare financially for their retirement.
“You can immediately start investing from the comfort of your own home, without worrying about getting COVID- 19. At the same time, the cost of online transaction is relatively cheaper. PERA contributors can send funds via InstaPay and other digital means,” said Diokno.
He stressed that PERA, a voluntary retirement savings plans “are crucial in supplementing the state-based pension plans to meet retirement needs.”
“We deserve to sit back and enjoy our retirement after years of hard work. Unfortunately, this is not the case for many of us. In fact, most Filipinos do not expect to receive a pension in their old age,” said Diokno.
He cited a report from the Philippine Statistics Authority (PSA) that only 20 percent of the 7.6 million Filipinos aged 60 years old and above are members or covered by the two state insurance agencies, Social Security System (SSS) and the Government Security Insurance System (GSIS), and the majority 80 percent have no mandatory pension.
“According to a recent survey, we Filipinos tend not to prepare for their own retirement. Specifically, Filipinos only set aside 3.6 months’ worth of income for retirement––way below the regional average of 2.9 years,” said Diokno. “In terms of expectation, Filipinos believe that savings equivalent to 2.1 years’ worth of personal income would be enough for retirement. This is the lowest expectation in Asia compared with the regional average of 12 years.”
Diokno also said that based on PSA data, the Philippines share of social security benefits to GDP is only two percent (2012 to 2017) which is very low. These security benefits include retirement and survivorship pensions, sickness, disability, death, and other related allowances or benefits.