Contemporary and future generations of Filipinos will likely never forget Albay 2nd District Rep. Joey Sarte Salceda for having crafted a piece of “landmark legislative measure that addresses one of the most vital and painful gaps in the country’s labor system: the lack of real and dignified retirement security.”
Salceda has welcomed the recent signing into law of the measure — Capital Market Efficiency Promotion Act or R.A. 12214, last May 29 by President Ferdinand R. Marcos, Jr.
“We dread retirement in this country because it means losing one’s income security since most workers have no employer pension, and the public pension system cannot provide enough. This law begins to change that,” noted Salceda, the House Ways and Means Committee chairman who completes his current term shortly.
Salceda crafted the measure in the House as its principal author. He introduced the expanded Personal Equity and Retirement Account (PERA) provisions during the Senate-House bicameral conference committee on the bill.
Under the new law, employers may now claim an additional 50% tax deduction for PERA contributions, provided they match or exceed their employee’s contribution. For example, if an employee contributes ₱10,000 to PERA and the employer matches it with another ₱10,000, the employer may claim an additional ₱5,000 as a deductible expense.
At the corporate income tax rate of 25%, this reduces the employer’s tax liability by ₱1,250 — on top of the usual deductions for employee benefits. The incentive only applies if the employer contribution is equal to or greater than the share of the employee. .
Salceda noted that RA 12214 “… is the first serious initiative in decades to build a real retirement system for Filipino workers in the private sector.” Currently, fewer than 6% of companies offer formal retirement plans. For most workers, the only fallback is the Social Security System, where the average pension is just ₱5,800 per month — far below the cost of food, medicine, and basic needs, he noted.
“PERA fills the gap. It allows workers to build private savings with the support of their employers and the tax system. Over time, it becomes the difference between mere survival and retirement with dignity,” he added.
Salceda pointed out that although PERA was created in 2008, it remained largely unused, with only 5,945 active accounts and ₱491.4 million in assets by the end of 2024. He said the new law revives it with more meaningful incentives and broader institutional backing. Projections suggest that PERA assets could reach ₱140.6 billion by 2034, with 1.48 million contributors.
While the reform entails ₱6.7 billion in foregone government revenue over ten years, it is expected to recover at least ₱4.8 billion through capital gains taxes, financial sector activity, and reduced reliance on future public pensions.
“The full effect will be felt when today’s workers begin to retire. But the economy will feel its benefits right away — higher savings rates, deeper capital markets, and stronger long-term investments,” Salceda explained.
The law also introduces long-needed reforms to capital market taxation including: 1) Reduction of the stock transaction tax from 0.6% to 0.1 %; 2) Removal of documentary stamp tax on mutual funds and unit investment trust funds; 3) Tax exemption on income from redemption of mutual fund and UITF units; 4) Standardization of the final withholding tax on interest income at 20%; and; 6) Flat 15 % capital gains tax on sales of foreign corporate shares.
“These changes reduce the cost of investing and make long-term savings more accessible to ordinary Filipinos,” added Salceda, a respected economist.
He emphasized that the expanded PERA is part of his three-pillar approach to retirement reforms: a) secure a universal social pension, b) expand the benefits for senior citizens, and c) fix the corporate pension system by enabling employer-based retirement savings.
“Public pensions protect the poorest. PERA allows working Filipinos to build something of their own – the first prevents poverty; the second builds security. Together, they give every Filipino a fairer shot at a decent life in old age,” Salceda concluded.