Future generations of Filipinos will likely remember outgoing Albay 2nd District Rep. Joey Salceda for his role in a landmark legislative measure aimed at bolstering retirement security.

Salceda lauded the signing of Republic Act 12214, or the Capital Markets Efficiency Promotion Act (CMEPA), by President Ferdinand R. Marcos Jr. on 29 May.

“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,” Salceda said in a statement. “This law begins to change that.”

Salceda, who chairs the House of Representatives’ Ways and Means Committee and was the bill’s principal author, introduced expanded Personal Equity and Retirement Account (PERA) provisions during the Senate-House bicameral conference committee.

The new law allows employers to claim an additional 50% tax deduction for PERA contributions if they match or exceed their employee’s contribution.

For example, an employer contributing P10,000 to an employee’s PERA, matching the employee’s P10,000 contribution, could claim an additional P5,000 as a deductible expense.

This reduces the employer’s tax liability by P1,250 at the 25% corporate income tax rate, in addition to standard deductions for employee benefits. 

The incentive applies only when the employer’s contribution equals or exceeds the employee’s share.

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.” 

He highlighted that fewer than 6% of companies currently offer formal retirement plans, leaving most workers to rely on the Social Security System, where the average monthly pension is P5,800 — a sum he noted is "far below the cost of food, medicine, and basic needs."

“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.

Despite being created in 2008, PERA has seen limited use, with only 5,945 active accounts and P491.4 million pesos in assets by the end of 2024, according to Salceda.

He projects the new law, with its enhanced incentives and institutional backing, could boost PERA assets to P140.6 billion by 2034, with 1.48 million contributors.

While the reform is expected to result in P6.7 billionin foregone government revenue over 10 years, Salceda anticipates at least P4.8 billion pesos will be recovered 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,” Salceda explained. “But the economy will feel its benefits right away — higher savings rates, deeper capital markets, and stronger long-term investments.”

The law also introduces capital market taxation reforms, including a reduction of the stock transaction tax from 0.6% to 0.1%, removal of documentary stamp tax on mutual funds and unit investment trust funds, tax exemption on income from redemption of mutual fund and Unit Investment Trust Fund units, standardization of the final withholding tax on interest income at 20%, and a 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.

Salceda emphasized that expanded PERA is part of his three-pillar approach to retirement reforms: securing a universal social pension, expanding benefits for senior citizens, and fixing 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,” Salceda said. “Together, they give every Filipino a fairer shot at a decent life in old age.”