The Personal Equity Retirement Account or PERA scheme is a voluntary savings and investment account passed into law in 2016 meant to help the average Filipinos build their retirement fund. 

With it, you can save and invest up to 100,000 Php annually with returns that are 100% tax-free when you reach age 55. This is supposedly the FIlipino counterpart of the United States’ 401k Contribution Plan or Individual Retirement Account.

While other pension schemes like SSS and GSIS exist, PERA was made to augment the amount that retirees would receive for retirement.

All income earners above 18 years old, whether locally or OFWs, with a TIN or tax identification number are qualified to invest in PERA.

The difference with PERA is that it can only be availed through banks or insurance companies regulated by the Bangko Sentral ng Pilipinas (BSP), the Securities and Exchange Commission (SEC), and the Insurance Commission.

With PERA, your funds are invested among different investment instruments such as stocks, bonds, insurance products, mutual funds, UITFs, and government securities.

As of this writing, only Landbank, BDO, BPI, PNB, and Metrobank are authorized to offer PERA. The requirements are valid IDs, an ITR, a deposit account with the partner bank, and your initial investment payment.

The downsides to PERA are the additional costs. Every contribution you make is subject to a 1% administrator’s fee, plus trust and custodian fees of 0.5% to 1.5%. 

Given this, it would be better to put your contributions in a lump sum instead of monthly.

Also take note that these investments are not exempted from crashes in the stock market, lowered interest rates, or fluctuation. 

One of the more popular and known ways to build a retirement plan is through investing specifically in mutual funds or in unit investment trust funds (UITFs).

Mutual funds and UITFs are investment instruments wherein you pool your funds with other investors and invest them in a diverse portfolio of assets. You can place them in a variety of schemes like bonds, stocks, government securities, and money markets.

One of the best performing money market funds in the Philippines today is the ALFM Money Market Fund. This is usually recommended for conservative, short-term investors, but it will also do well for a retirement plan.

The best thing about mutual funds is that they’re a relatively safe, beginner-friendly investment to make over purely going for stocks, and are much better than letting your money sit idly in a bank.

What we particularly love about ALFM as a BPI UITF is that it serves as a perfect emergency fund, as it has no holding period. This means that you can redeem your money anytime without having to worry about penalties.

They have higher potential for long-term growth, and it’s very convenient because you have a professional fund manager handling the investing for you. With ALFM Money Market Fund, your fund manager is BPI Investment Management Inc.

Your BPI fund manager will handle your portfolio, make the decisions, and just inform you of where your money is being put.

What you should be wary about when it comes to mutual funds like ALFM Money Market are those hidden fees. You find yourself paying extra in management fees, custodian fees, and a sales load.

The money market is also short-term, so you can see more gains in monitoring and withdrawing in a few year’s time compared to letting it sit for decades.

Another downside is that you only play a passive role in the investing process, and that the success of your investment relies on your fund manager’s calls. All in all, this is best for retirees with low risk profiles.

One of the more popular ways to build your retirement plan is through pension. These pension plans are mandated by law and are characteristically deducted automatically from your monthly salary when you are an employee.

The great thing about pension plans is that they can provide you with either monthly allowances or a lump sum equal to your total contributions through the years upon your retirement. 

If you work in the private sector, you get it from the Social Security System or SSS. If you’ve been working in government for most of your life, you get it from the Government Service Insurance System or GSIS.

Another pension plan worth looking into is the PAG-IBIG MP2. This is different from the SSS, GSIS, and the PAG-IBIG Regular Savings Program because MP2 is purely voluntary for all PAG-IBIG members.

Other PAG-IBIG retirement plans will only allow you to withdraw your contribution after 10 years, whereas with MP2, the lock-in period is just 5 years.

You use the PAG-IBIG MP2 as a retirement fund by manually re-investing your capital when your account matures every half-decade.

Another thing that makes PAG-IBIG MP2 attractive is its high, 6% interest rate, and that it offers higher dividends than the Regular Savings Account. You can also pay whatever amount you wish whenever you want to.

While this does sound too good to be true, a slap of reality is that Philippine pension plans in general, including the PAG-IBIG MP2, are reputedly among the worst in the world in terms of coverage for all the needs of retirees.

Another downside to the PAG-IBIG regular savings program is that the future pension amount will not change according to the price of basic commodities.

Whether you’re working as a corporate employee or as a freelancer for most of your professional life, it’s best if you get to start early in investing in variable universal life insurance (VUL). 

This is a type of life insurance plan that includes an investment component in its terms. These financial products could be bonds and stocks, paired with living, disability, and death benefits.

PruLife UK offers one of the best, most balanced investment products through PRULink Assurance Account Plus. We found that you can start by paying their minimum annual premium of 15,000 Php.

We reviewed PRULink and saw that it’s a pretty affordable, investment-linked life insurance plan that also covers hospitalization due to critical illness or accidents.

You can apply for this until you reach the age of 70, and can enjoy this coverage until you reach the age of 100!

What sets PRULink Assurance Account Plus apart from other VULs like it is that you don’t have to pay any surrender charges should you decide to withdraw part of or all of your policy’s fund value. 

This is noteworthy because some VULs are notorious for milking high fees for surrender charges. 

PRULink Assurance Account Plus can act as your retirement fund, as your monthly, quarterly, or yearly contributions will culminate in lump sums later on in life. 

The downside of investing in variable life insurance like with PruLife is that it also has a high risk of loss. Poor performance of your sub-accounts or investments will reflect in your cash value.

There may also be instances where you’ll find yourself putting in more money just to keep your policy from lapsing.

Insurance policies in general are also a little complex if you don’t understand your plan and don’t manage it well over time.

In the Philippines, the real estate industry has been booming for the last two decades.

New developments have sprung up left and right in areas even outside of Metro Manila, making residential lands, office spaces, and condominiums, and a hot commodity.

Going into real estate can be a very good retirement plan. However, dipping your toes in real estate investment seems intimidating for the average Filipino, following the belief that you need a lot of capital to purchase land and properties.

Fortunately for us, real estate investment trusts or REITs exist, and among the top ones for the Philippines is Robinsons Land (RCR). 

RCR has been in the stock market since 2021, and they have been steadily growing in terms of reach and give generous quarterly dividends to their investors.

Robinsons Land has a projected yield of above 5% at best. They were tagged with “Stable Outlook”, which is the highest issuer credit rating of PRS Aaa. 

This means that the Robinsons Land REIT is viewed to meet its expectations and financial commitments among other corporations in the market.

Another reason why it’s great to invest in Robinsons Land is because their properties are mapped and clustered around commercial areas and business districts. With the BPO industry continuously growing, RCR will continue to dominate among REITs.

With this alone, you can feel more secure that your money could grow with RCR.

The downside to investing in RCR is that its business model of building offices for BPOs may backfire in the face of work-from-home or hybrid workplace culture. Even if dozens of office spaces are built, it would be a bust if no one ends up using them.

The other risk of real estate investment trusts like RCR is acknowledging how volatile the market can be. Prices will be heavily impacted by trends and changes in the real estate industry.

All in all, REITs are a sound investment for long-term and retirement planning.