March 1, 2024

PERA Account Earnings – Peso Lab


In an earlier article, I talked about how PERA account is a great investment option to prepare for retirement that comes with loads of tax-free benefits. As a voluntary savings program, it is the Philippines’ version of the US 401(k).

Employers may even choose to contribute towards it, and you may save up to the maximum limit, which is P200,000 for overseas Filipino workers (OFWs) and P100,000 for those earning an income in the country.

But how much does a PERA account earn? That’s the question I’d like to explore in this article.

PERA investment

While many of us are worried about getting old and losing the ability to work, there are only a few who are doing something about it.

The PERA account was established by law through the Bangko Sentral ng Pilipinas. Its primary financial goal is to give everyone an chance to retire with comfort later in life. This is done by saving as early as possible. Your savings are put into different options to invest to let your money grow over time.

The great thing about the account is that you are given the option on PERA investments. Here are your choices:

PERA potential earning

So this brings us to a very important realization: the potential earning of your account depends on the investment you choose.

Buying shares of companies like Jollibee may not have the same growth as, say, investing in government bonds. The former has higher past growth but is very volatile, the latter is relatively less risky and earns modest interest. In short, earnings vary and are not guaranteed.

That’s why when you open an account, the law requires that an administrator walks you through the process. This way, someone can help you make the decision.

Factors that would be considered in coming up with the appropriate investment would include your current financial status, the level of risks you’re willing to take, number years before retirement, etc.

Approved PERA investment funds

While there are many options that you see, I can only find 10 investment funds that are approved to be offered under the program. They are managed by Banco de Oro-Unibank, Bank of the Philippine Islands, and Landbank.

The funds fall under the following categories:

BDO PERA Short Term Fund BPI PERA Money Market Fund Landbank PERA Money Market Fund
BDO PERA Bond Index Fund BPI PERA Equity Fund Landbank PERA Bond Fund
BDO PERA Equity Index Fund BPI PERA Corporate Income Fund Landbank PERA Global $ Fund
BPI PERA Government Fund

PERA equities fund

Index funds mirror the growth of the stock index, which is composed of the blue chips or Philippines’ top 30 companies whose shares are traded in the Philippine Stock Exchange. For more information, here’s a great guide about index funds.

According to BDO, this fund is not for short-term because of how it can be very volatile.

PERA bond funds

For bond funds, the BDO PERA Bond Index fund comes in next in terms of ROI with 5.60% return. It is designed to follow the returns of the Markit iBoxx ALBI Philippines 1-5 index. Among the assets it buys and sells are listed fixed income, government securities, or bank deposits.

PERA short-term fund

The third on the list is PERA short-term fund. Its goal is to offer people a way to preserve capital that is liquid and earns income by investing in money market securities.. It is primarily invested in fixed income securities such as special deposit accounts and bank deposits.

Effect of fees on PERA earnings

So the first projection that I’m going to make would be to assess the impact of fees on your return on investment (ROI). It is kind of hard to make a comparison for all funds, and so this example only shows BDO PERA Index Fund. I have also included a zero-fee fund, which does not exist in reality, as a benchmark. This is what we’re going to use as a means of comparison.

On overview of PERA, the management fee ranges between 0.20% and 1.50%. In the table, the following assumptions are used.

  • These are projections. Actual results vary.
  • Time horizon of 30 years.
  • Rate of return is 10% per year.
  • Deposit is assumed to be 10,000 pesos one-time and 1,000 pesos monthly.
YEAR DEPOSIT ZERO-FEE 0.20% 1% 1.50%
1 22,000 23,670 23,623 23,434 23,315
2 34,000 38,767 38,578 38,063 37,742
3 46,000 55,440 54,996 53,994 53,645
4 58,000 73,853 73,020 71,343 70,963
5 70,000 94,187 92,806 90,236 89,822
10 130,000 232,489 224,837 213,124 212,490
15 190,000 459,697 435,358 401,336 400,365
20 250,000 832,972 771,025 689,599 688,112
25 310,000 1,446,237 1,306,237 1,131,095 1,128,818
30 370,000 2,453,819 2,159,617 1,807,281 1,803,793

The above table just shows the impact of these fees if all funds have the same earnings. In reality, different funds have different forecast of earnings and different fees. For instance equities may be volatile with higher growth potential, while bond funds and money market funds may have lower risks but also moderate gains.

What’s clear from this table is that the choice of your PERA fund determines the amount of earnings that you’re going to get in the end. Fees are going to impact your gains in a significantly negative way. And if you add the tax credits worth 5% of the amount that you put into PERA each year, then the total benefits would actually be 72,610.77 pesos more which can be used to deduct from your annual income tax. (Tax credit is adjusted with inflation of 3% three decades into the future.)

However by saying that, please be aware that there is a reason that funds have cheaper management fee. Maybe there is relatively less resources involved in the operation of these funds, or that they’re profiled to have less potential for growth.

PERA earnings in various returns

Now, there really is no reliable way to measure the returns of your PERA investment. They’re all non-guaranteed and subject to market forces. That’s why in this forecast, instead of choosing just one rate of return just like the previous example, the returns are assumed to be 4%, 8% and 12%. The management fee is also no longer computed into the table, and that’s because it is assumed that the net-asset-value per unit (NAVPU) of the PERA fund already reflects this.

Again the assumption is that the investment is made for 30 years and an initial capital of 10,000 pesos and 1,000 pesos for monthly for additional investment. Of course, you may also add the tax credit of 72,610.77 pesos should you want to take advantage of it against your annual income tax.

YEAR DEPOSIT 4% 8% 12%
1 22,000 22,663 23,333 24,009
2 34,000 35,833 37,732 39,700
3 46,000 49,529 53,284 57,273
4 58,000 63,774 70,080 76,955
5 70,000 78,588 88,219 98,999
10 130,000 162,036 203,148 255,846
15 190,000 263,563 372,017 532,264
20 250,000 387,086 620,141 1,019,406
25 310,000 537,371 984,716 1,877,918
30 370,000 720,215 1,520,397 3,390,909


When choosing a PERA investment, going for a fund with the least fee makes your investment cost-efficient. Sadly, there are very funds available in the market to date that there aren’t that many options from which to choose. Also the fees in all of our funds in the country are way higher than the ones offered abroad.


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