QuestionsQuestions (PNP CIRCULAR NO. 2006-19)
In addition to the applicable requirements under Title 10 (Variable Contracts), particularly Sections 227 to 240 of the Insurance Code, Circular Letters Nos. 27-2005 and 32-2011, and the Guidelines on Variable Life Insurance Contracts, the PERA contracts must also contain in substance specific conditions under the PERA Act provisions listed in the circular.
A contributor may maintain a maximum of five (5) PERAs at any one time, but must designate and maintain only one (1) Administrator for all his/her PERAs.
The contributor makes all investment decisions. However, the contributor may appoint an Investment Manager, in writing or electronically, to make investment decisions on his/her behalf without prior consultation.
The maximum aggregate contribution is PHP 100,000 or its equivalent in any convertible foreign currency per year to his/her PERA.
Each spouse may contribute up to PHP 100,000 (or its equivalent) per year to his/her own respective PERA, i.e., the spouses’ limits are separate.
An overseas Filipino is allowed to make maximum contributions double the allowable maximum amount (i.e., up to PHP 200,000 equivalent per year, subject to the circular’s terms).
The excess contribution may be allowed, but it will no longer be entitled to the tax credit of 5%.
The Secretary of Finance may adjust the maximum contribution taking into consideration the present value of the maximum amount using the Consumer Price Index (as published by the National Statistics Office), the fiscal position of the government, and other pertinent factors.
Premature termination is treated as an early withdrawal under Section 13 of the PERA Act.
Penalties do not apply if the entire proceeds are immediately transferred to another PERA investment and/or another Administrator.
Distributions may be made upon reaching age 55, provided that the contributor has made contributions for at least five (5) years.
Upon retirement, distribution may be in a lump sum or as a pension for a definite period or lifetime pension; the contributor chooses among these options and may also opt to continue the PERA.
Yes. Complete distribution must be made upon the death of the contributor irrespective of the contributor’s age at the time of death.
The penalty amount is determined by the Secretary of Finance payable to the government, but in no case may it be less than the tax incentives enjoyed by the contributor.
No early withdrawal penalty applies when withdrawals are for: (1) payment of accident or illness-related hospitalization in excess of thirty (30) days; or (2) payment to a contributor who has been subsequently rendered permanently totally disabled as defined under the Employees Compensation Law, Social Security Law, and Government Service Insurance System Law.
Examples include annuity contracts, insurance pension products, and traditional life insurance products with living benefits, provided that expected/anticipated accumulation of living benefits must exceed total premiums paid as of the eligibility date for the contributor’s tax exemption (eligibility is at age 55 or after five years contribution, whichever is later).
Excluded are benefits payable upon the insured’s death, disablement/dismemberment, hospitalization, diagnosis of critical illness, and other benefits due to injury or sickness.
It must be invested in units of unit investment trust funds, shares of stock of mutual funds, government securities, shares of stock or other security listed and traded in a local exchange, or exchange-traded bonds.
Contracts must bear the attached PERA Product Logo, and the contributor must have the capacity to contract and must possess a Tax Identification Number (TIN).