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POSTED ON JULY 10, 2020    

How finance folk use it

The Personal Equity and Savings Option (PESO) Fund is a voluntary retirement savings plan offered on top of the government’s Social Security System (SSS) pension program. It’s open to all SSS members who are:

  • under the age of 55
  • have made contributions for 6 consecutive months within the last 12 months before signing up for the PESO fund
  • have not made any final claims on their retirement, total disability, or death benefits under the regular SSS program.

For SSS members who are self-employed, voluntarily contributing, or Overseas Filipino Workers, their contributions should be the maximum amount allowed under the regular program.

If you participate in the PESO fund, you can make contributions of up to P500,000 a year, with P1,000 being the minimum per contribution. You don’t have to put in money every month, so the schedule is up to you.

The money you put in will be allocated into three separate accounts.

The Retirement/Total Disability account gets 65% of your money and is invested in 5-year Treasury bonds (T-bonds). You cannot make early withdrawals from this account.

On the other hand, the Medical account gets 25% and the General Purpose account gets 10%. Both are invested in Treasury bills (T-bills). You can withdraw early from these accounts but if you do so in the first 5 years upon opening a PESO account, you will have to pay penalty fees and service charges.

You get your PESO fund when you file for the retirement, total disability, or death benefit. You can choose to receive the amount you’ve grown in the PESO fund together with your SSS pension or you can withdraw it as a lump sum.

Is it good or bad?

The T-bonds and T-bills invested in by the PESO fund are backed by the government and can grow your money at a rate higher than a typical savings account. However, the holding period can be very long, depending on how far you are from retirement.

Still, this fund is worth considering if you’re looking at ways to prepare for the time when you’re no longer working.

What it means for you

The PESO fund can help you save up for retirement, even if you just started working. However, withdrawing your money from it isn’t as easy as doing it from a savings account. At the same time, it might grow too slowly for investors with a more-aggressive risk profile.

If you’re going to invest in the PESO fund, you can enroll at any SSS branch or via their website. After that, you can make contributions via bill payment centers or deposits at partner banks.

Like the similarly-named Personal Equity and Retirement Account (PERA) or an employer-provided provident fund, its sole purpose is to help you to save up for retirement. It could make a good addition to your financial portfolio, but you will need different investments for your other goals.

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