By Billy Begas
House Committee on Ways and Means chairperson Joey Salceda called for the passage of a measure that will reform the private pension and make it adequate for a decent retirement.
“Current private pension plans are extremely inadequate for decent old age, and if we don’t do this reform soon, young workers won’t have any good retirement plan to look forward to,” Salceda said.
Salceda’s committee approved the tax provisions of the proposal, which was initially approved by the House Committee on Banks and Financial Intermediaries.
The measure proposes the establishment of an employee pension and retirement income (EPRI) account from the proposed private retirement and pension system.
The EPRI account shall be a permanent account until retirement, owned, maintained, and managed by the employee, regardless of changes or transfer in employment. As a private pension system, the EPRI owner shall make all investment decisions pertaining to his EPRI assets.
EPRI shall be compulsory to cover all employees and employers in the private sector, while self-employed and professionals may opt for its voluntary coverage.
Salceda said the appropriate rates of contribution should be determined.
Under the current version, employers will pay 4% of worker salary and the worker, 1% of their salary to the pension plan. Micro, small, and medium enterprises (MSMEs) will only pay 2% of worker salary, while very small businesses with under three workers will be exempt.
The employer’s contribution made to the EPRI shall be allowed as a deductible expense of the employer. Counterpart employee contribution shall be subject to the necessary income tax.
All income of whatever nature earned by the EPRI, including interest and gains earned from the placements or investment of the EPRI assets, shall be exempt from all taxes.
All benefits and distribution received by the employee at the time of vesting or retirement shall be exempt from all taxes.