Blue chip stocks, REITs qualify for ‘Pera’ funds

The Securities and Exchange Commission (SEC) has allowed Personal Equity and Retirement Account (Pera) funds to be invested in real estate investment trusts (REITs), blue chip stocks, corporate bonds with “investible” rating and mutual funds managed by reputable fund managers.

Established by Republic Act 9505 or the Pera Act of 2008, Pera is a voluntary retirement program that allows any person with a tax identification number (TIN) and capacity to contract to build up additional funds for retirement. The law offers generous tax incentives, such as a 5-percent tax credit on annual contributions alongside exemption from investment income taxes.

Last Saturday, the SEC released the list of equities, bonds, funds and other securities where Pera funds may be invested in, enforcing SEC Memorandum Circular No. 7, Series of 2022 issued on Aug. 11. The new guidelines identify securities registered pursuant to the requirements of the Securities Regulation Code and the Investment Company Act that are deemed to be eligible Pera investment products.

Among those listed as eligible investments are newly formed mutual funds, including any sub-fund of an umbrella fund and exchange-traded funds whose fund managers have a track record for the past five years. The name of the newly formed mutual fund must contain the words “Personal Equity and Retirement Account” or “Pera.”

REIT shares, corporate bonds with an investible rating issued by an accredited credit rating agency and equity securities that form part of the Philippine Stock Exchange Index (PSEi) as well as the PSE Dividend Yield Index may also be eligible as Pera investment products.

The PSE (Philippine Stock Exchange), however, must certify to the SEC that the listed companies meet the requisites of being nonspeculative, readily marketable and with a track record of regular income payment to investors. The SEC will in turn disseminate the PSE-certified list of Pera eligible securities comprising the PSEi through its website.

The guidelines further identify government securities, securities issued by the Bangko Sentral ng Pilipinas (BSP) and corporate bonds issued by banks in compliance with BSP requirements as eligible Pera investment products.

The SEC may qualify other securities if they meet the same criteria of being nonspeculative and readily marketable and have a track record of regular income payment to investors.
Grounds for disqualification

“A security loses its eligibility as a Pera investment product when the SEC declares it to be ineligible,” the SEC said in a press statement.

A registered equity security may also lose its eligibility if its registration statement gets suspended or revoked, or in the case of a PSEi member security, if it is removed from the PSEi.

Meanwhile, corporate bonds may be deemed ineligible if they are declared to be in default by a competent authority or person in accordance with applicable laws, rules and contracts and if their credit rating is downgraded to a “non-investible” grade. The same provisions apply for corporate bonds issued by banks. INQ