As per
Republic Act No. 7641, Employers are required to pay retirement benefits to their
employees, in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid, except to those listed under the exemptions.
"... an employee upon reaching the age of sixty (60) years or more, but
not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of
service, a fraction of at least six (6) months being considered as one
whole year.
Unless the parties provide for broader inclusions,
the term one-half (1/2) month salary shall mean fifteen (15) days plus
one-twelfth (1/12) of the 13th month pay and the cash equivalent of not
more than five (5) days of service incentive leaves."
Given this, Employers should plan on how to establish and fund the retirement plan to enjoy the following benefits:
- Company can enjoy tax-free investments of the retirement fund.
- Employer will have no issues on cash flow even if there are big cash outlay when an employee retires.
- Benefits to be received by Employee (in excess of the minimum required by law) will not be taxable.
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| Retirement Plan: 401(K) 2012 |
There are a lot of ways on setting up the retirement fund and one way is through insurance. Personally, I think this is the cheapest and better option. Employer may insure the life of its employees, pay the premium, and use the insurance plan’s cash proceeds to pay the retirement benefits mandated under RA 7641. To learn more on how to set up your company retirement plan through this method, contact me for more details.
Article 287 of the Labor Code, as amended by Republic Act No. 7641, provides:
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| Retirement Plan. Credits: s_falkow |
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements; Provided, however, That an employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves.
Retail, service and agricultural establishments or operations employing not more than ten (10) employees or workers are exempted from the coverage of this provision.
Violation of this provision is hereby declared unlawful and subject to the penal provisions provided under Article 288 of this Code."
In a quick summary, if you, as an employee (in the Philippines),
- has served the organization for at least 5 years
- is between 60 to 65 years old
Then you may avail of your retirement benefit, which is
- equivalent to at least 1/2 month salary for every year of service
- a fraction of at least six (6) months being considered as one whole year
The law is intended to protect the welfare of the workers and employees.
Sharing another beautiful film by Sun Life.
In less than 9 minutes, "A Life in a Day" captures the cycle of life - from childhood to old age. It also captures the precious moments of life through the eyes of a young boy.
Even though the film is short, the story hits directly to the heart. And in less than 9 minutes, it made me reminisce on my childhood days, my school days, my wedding day, the day I gave birth to my son and on trying to be the best mom and wife in the world. It also made me think back how my parents had worked so hard to care for us and how I am now working hard and caring for my own family's financial security.
The short video is greatly executed through shadow play. It is simple; yet so sweet and so touching that I have to have some tissue papers beside me.
Thank you, Sun Life, for sharing such a meaningful video. It definitely made me reflect on life and especially on the future of my family.
After viewing this film, did you have a flashback and reflect like I did?
Life is short. Enjoy life. Say "I love you" to your loved ones. And don't forget to plan for yours and your family's financial security as we do not know what the future will be.
And if you haven't seen it yet, check out "1945", Sun Life's 1st SunShorts film. Don't forget to have tissue papers around as well because you'll need them when you watch this great real life story film. :)
One day, I came to a realization that there are only 3 secrets to building passive income:
- Time: Save as early as you can
- Money: Save as much and as regular as you can
- Interest rate: Find better than inflation interest rate
There are a lot of products that help build passive income. One particular product that I like is Sun Life's Sun MaxiLink Prime. I like this product because it maximizes my money and answers my fears:
- In case of dying too young
A portion of my premium is placed in insurance so that there's a guaranteed death benefit that will protect the financial security of my family.
- In case of living too long
A portion of my premium is invested in stock and/or bond markets, similar to mutual funds, to make the cash value grow and, hopefully, to fight inflation over time.
Sun Life product description for its VUL product:
Sun MaxiLink Prime is a peso denominated variable life insurance plan (VUL) that provides financial protection PLUS a potential source of savings that can fund future needs like retirement income through its investment earnings. There are 5 funds to choose from where your premium payments will be invested in. These funds are managed actively and prudently by our top-notch investment professionals.
Sun MaxiLink Prime is payable for at least 10 years*
* The premium paying period is not guaranteed. You may be required to pay additional premiums after 10 years if the fund value is insufficient to pay charges. (cases like consecutive years of bad economic situation, delayed payments and skipped payments)
Reference: Sun Life Financial Philippine Website
A sample computation below using Sun Life's products to illustrate the saving period vs age started:
- A 40 y/o saving 50,000 annually for 20 yrs will accumulate 3.1M at age 60.
- A 30 y/o saving 50,000 annually for 10 yrs will accumulate 5.1M at age 60.
- A 25 y/o saving 50,000 annually for 10 yrs will accumulate 8.4M at age 60.
*40 y/o based on Sun Life Prosperity Fund (10% growth); 30 y/o & 25 y/o based on Sun Maxi Link Prime, min. FA + TDB, fund growth at 10%
Start building your passive income to reap the benefits of saving early for retirement. No one else benefits from this except you.
Sometimes, I had the chance to do a financial wellness presentation to companies. Before the presentation, we would have a simple workshop and in most cases, the participants would share their own financial knowledge and experience on how to set aside funds for their future as well as list their issues on not being able to save.
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| Savings. Credits: UNHHealth Health Services, University of New Hampshire |
To help answer the issue on not being able to save, some basic laws from Beth Kobliner's "Personal Finance in Your Twenties and Thirties" can help prioritize the checklist on the financial plan.
- Get health insurance – A single medical problem could bankrupt you. Therefore, health insurance must become your highest priority. If your employer doesn’t offer it, get one for yourself. This is the first step in financial planning.
- Reduce your debt – The best way to start saving is to reduce your high-interest debt. Or better, write off your debt. The interest rates on some loans / credit cards are higher than the return you’d receive from investing the money.
- Start saving for retirement – The best time to start saving is when you’re young. Interest rates will really start working for you as you get older and accumulate principal.
- Reduce your banking costs – Most Saving accounts, Checking accounts, etc have maintaining balances. If you are not careful and go below the minimum balance, fees can take a big bite out of your bank balance.
- Build up a nest egg for emergencies – What would you do if you were suddenly laid off? Save enough to cover your living expenses for at least six months. Some banks have facility to automatically shift funds from your checking account into a savings or mutual fund account.
- Become an investor – Join a mutual fund pool to reduce your risk. Invest in mutual funds, which reduce your risk and keep you even with inflation.
- Reduce your taxes – Look for ways to lower your annual taxes. Sometimes there are discounts if you pay your taxes early.
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| Success happens here. Credits: lee.fly |
"1945" is an amazing short documentary by Sun Life of Canada (Philippines), Inc.
I was touched with the short film's ending message. "In 1945, Sun Life
personnel traced and searched for the beneficiaries of those who
perished in the war. A time of chaos became a time of honoring
commitments and making lives brighter under the Sun."
This is truly customer satisfaction and relationship service!
From past to present, life insurance has only one objective -- that is,
to provide protection to the family left behind or protection to oneself especially in times of need.
Google has provided us a lot of powerful online tools and one of these tools help us "compare search volume patterns across specific regions, categories, time frames and properties."
Today, I wanted to understand what are the most common search keywords done in the Philippines in the last 12 months and with just a few clicks on Google Insight; I am able to generate the web search interest by region and keywords.
Guess which one is the winner? "Credit Card" comes up as number one, and interestingly, investment is at the bottom 4.
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| Google Insight Web Search Interest. Credits: Google |
I did the same search terms but filtered by countries to see how each countries folks do their searches for these 4 keywords.
United States and UK has the same ranking as the Philippines.
China, on the other hand, has "investment" as their number one keyword search.
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| Add caption |
Hong Kong and Japan have "investment" as the top keyword search.
Observation & Interpretation:
Base on the above trends, Filipinos are more interested in credit cards and loans. We have the same behavior and mindset with those of US and UK. This could be because we are highly influenced by Western behavior and the use of credit card enables instant gratification especially in keeping up with the lifestyle trends.
Although many knew about the benefits of investment and savings, it still shows that we are still lagging behind our Asian neighbors in terms of investment research and knowledge acquisition.
Now, what's your observation & interpretation?
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| Maslow's Pyramid of Needs. Credits: Wkipedia |
Maslow's hierarchy of needs interprets human's basic needs as the foundation of the pyramid and gradually elevates to the levels that human motivations generally move through -- safety, love/belonging, esteem and self actualization.
"For the most part, physiological needs are obvious – they are the literal requirements for human survival. If these requirements are not met, the human body simply cannot continue to function."
In the same way, Financial Planning also has a Financial Pyramid. It is a strategic approach in managing investment portfolio where the base of the pyramid is made up of low-risk investments, the mid-portion is composed of growth investments and the top is speculative investments.
For the most part, the base of the pyramid forms the requirements and foundation of a solid financial plan as well as for a long term financial freedom goal. Similar to meeting the physiological needs, if the basic financial requirements are not met, the plan for financial freedom simply cannot continue be achieved.
The 4 levels of Financial Pyramid:
- Protection
This stage provides you with a cushion in case of unexpected events, such as job loss or health issues. Items you need to have in this stage:
-- Savings, Emergency Fund (6 months of salary)
-- Insurance (Life, Health, Critical Illness, etc) - Savings
This stage helps you to start building your wealth and investments. This is the baby steps in creating your passive income sources. Items you need to have in this stage:
-- Mutual Funds, Bonds
-- Real Estate / Your Home - Wealth Building
This stage helps your wealth and investments achieve maximum growth and income. This may be your long term passive income sources. Items you need to have in this stage:
-- Equity, Stocks
-- Business - Speculation
At this stage, you should have excess funds with zero or low debt, enough retirement and investment fund before investing in a much higher risk portfolio. Some items in speculation would be:
-- Gold
Success. One step at a time. Credits: deZengo
-- Art, Collectibles
Understanding financial pyramid:
The Philippine Insurance Commission has released the results of 2011 Top Life Insurance Companies based on total premium income. Sun Life of Canada (Philippines), Inc. ranked number one in life insurance company in the Philippines.
“We are very happy with the record-breaking results of our Philippine operations. We have full confidence that Sun Life Philippines will continue to achieve further growth. Our Philippines operation has led the way in many initiatives that focused on financial literacy, branding, operational efficiency and technology. These initiatives have been recognized globally and continue to be best practices in the organization,” Sun Life Asia president Dikran Ohannesian said.
The Top 15 Life Insurance Companies as of December 31, 2011:
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| Top life insurance companies in the Philippines according to premium income |
Below are 5 suggestions that can help you make the right decision for you and your family.
- Research and compare. Use the web to shop. Ask for insurance quotes that include all options or riders so you know exactly what is available.
- Ask questions so that you know what you are getting. Agents or insurance organizations should be able to fully explain exactly what you are buying and why.
- Choose the type of insurance that fits you. Rates will depend on your age and health status.
- Consider life insurance for the whole family. Expenses that follow a death or serious illness or accident will add more stress to an already devastated family.
- Consider your life insurance as a fixed and non-negotiable expense in the same way you would your mortgage or car payment. It’s easy to consider life insurance as an 'investment' rather than a need.
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| Choosing the right key. Credits: Tamahaji |
I found this article from the internet and I thought it best described life insurance.
I AM A LIFE INSURANCE POLICY
I am a piece of paper, a drop of ink, and a few pennies of premium.
I am a promise to pay.
I help people see visions, dream dreams, and achieve economic immortality.
I am education for the children.
I am savings.
I am property that increases in value from year to year.
I lend money when you need it most, with no questions asked.
I pay off mortgages so that the family can remain together in their own homes.
I allow people to dare to live and to die responsibly.
I create money where none existed before.
I am the great emancipator from want.
I guarantee the continuity of a business.
I conserve the employer’s investment.
I am tangible evidence that a man is a good husband and father, and that a woman is a good wife and mother.
I am a declaration of financial independence and economic freedom.
I am the difference between an old man or woman and an elderly gentlemen or lady.
I provide cash if illness, injury, old age, or death cuts off the breadwinner’s income.
I am the only thing that can be bought on the installment plan that a family doesn’t have to finish paying for.
I am protected by laws that prevent creditors from assessing the money I give to loved ones.
I bring dignity, peace of mind, and security to the family.
I supply investment capital that makes the wheels turn and the motors hum.
I guarantee the financial ability to have happy holidays and the laughter of children—even though father or mother is not there.
I am the guardian angel of the home.
I am life insurance.
*Courtesy from the Life Foundation site.
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| Insurance. Credits: lifeinsurance89441 |
Last year, I attended a Financial Literacy Workshop at the Philippine Supreme Court hosted by Mr. Rolly Robles, my RFP teacher, along with his team. It was a great workshop because it made the Philippine Supreme Court staff learns how to save, spend as well as understand the importance of investing their money wisely.
One of the activities in the workshop caught my attention. It is about a person’s perception.
Check the the image (fig 1) below. What do you see? Make a wild guess.
Yes, I also see a frog. What comes into your mind when you think of a frog?
- It is ugly.
- It is slimy and gross.
- It eats mosquitoes and flies; so, it is in a way helpful to us.
Aside from the frog, what else do you see? At that time, I thought I saw a fried chicken. I guess hunger could be a factor why one can see a chicken with the image of the frog. :)
When you angle the image above, below (fig 2) is the image of what will appear. What do you see now?
Yes! It is a horse. What comes into your mind when you see a horse?
- It is elegant.
- It is powerful.
- It helps human in travel and labor work; so, it is helpful.
To perceive is “to become aware of through the senses.” The above sample is just a preview on how human minds perceive or conclude an understanding of any objects based on what is seen by their naked eyes.
The dual view also presents how some people perceive financial planning and insurance. Often times, we thought saving for retirement or buying an insurance policy is an added expense to the already piling expenses we have at home.
Like the Frog or Horse illusion above, there are a lot of misconceptions or negative thoughts attached to "insurance".
- Life insurance will bring misfortune to ones’ lives since it talks about death, disability and sickness.
- Life insurance is just another expense on the list.
- Life insurance is only good for the beneficiaries since money will be claimed upon death of the insured.
Concept of life insurance:
- To protect those who depend on your paycheck, such as your wife, children and quite possibly, your parents.
- To provide ongoing income to your dependents, until they are able to live comfortably without it in case you die prematurely.
- To provide emergency support (in some cases) for legal, medical and funeral costs, should family savings not be sufficient to cover them.
At this stage in your life, if you still don’t have life insurance, maybe it’s time to consider getting one.
The top 40 richest in the Philippines are:
- Henry Sy - $9.1 billion (SM Prime)
- Lucio Tan - $4.5 billion (Phillip Morris Fortune Tobacco)
- Enrique Razon Jr. - $3.6 billion (International Container Terminal Services)
- John Gokongwei Jr. - $3.2 billion (JG Summit)
- David Consunji - $2.7 billion (DMCI)
- Andrew Tan - $2.3 billion (Alliance Global)
- Jaime Zobel de Ayala - $2.2 billion (Ayala Corp.)
- George Ty - $1.7 billion (Metropolitan Bank)
- Roberto Ongpin - $1.5 billion (Atok-Big Wedge)
- Eduardo Cojuangco Jr. - $1.4 billion (San Miguel)
- Roberto Coyiuto Jr. - $1.3 billion (National Grid)
- Tony Tan Caktiong - $1.25 billion (Jollibee Foods)
- Lucio and Susan Co - $1.2 billion (Puregold Price Club)
- Iñigo and Mercedes Zobel - $1.15 billion (Ayala Corp.)
- Emilio Yap - $1.1 billion (Philtrust Bank)
- Jon Ramon Aboitiz - $955 million (Aboitiz Equity Ventures)
- Andrew Gotianun - $825 million (Filinvest Development)
- Manuel Villar - $720 million (Vista Land and Lifescapes)
- Beatrice Campos - $700 million (Unilab)
- Vivian Que Azcona - $690 million (Mercury Drug)
- Alfonso Yuchengco - $570 million (Rizal Commercial Bank)
- Mariano Tan Jr. - $420 million (Unilab)
- Enrique Aboitiz - $400 million (Aboitiz & Co.)
- Eric Recto - $365 million (Alphaland)
- Jose Antonio - $300 million (Century Properties Group)
- Gilberto Duavit - $270 million (GMA Network)
- Menardo Jimenez - $265 million (GMA Network)
- Frederick Dy - $260 million (Security Bank)
- Manuel Zamora Jr. - $255 million (Nickel Asia)
- Alfredo Ramos - $$250 million (Atlas Consolidated Mining and Development)
- Oscar Lopez - $245 million (ABS-CBN)
- Felipe Gozon - $240 million (GMA Network)
- Betty Ang - $235 million (Monde Nissin)
- Wilfred Uytengsu Jr. - $230 million (Alaska Milk)
- Juliette Romualdez - $200 million (Banco de Oro)
- Bienvenido Tantoco Sr. - $195 million (Rustan Commercial)
- Jacinto Ng Sr. - $190 million (Rebisco)
- Tomas Alcantara - $160 million (Alsons Consolidated Resources)
- Michael Cosiquien - $150 million (Megawide Construction)
- Edgar Sia II - $140 million (Mang Inasal)
Forbe's listing of world's top 10 billionaires:
- Carlos Slim Helu & family - $69 B (telecom, Mexico)
- Bill Gates - $61 B (Microsoft, United States)
- Warren Buffett - $44 B (Berkshire Hathaway, United States)
- Bernard Arnault - $41 B (LVMH, France)
- Amancio Ortega - $37.5 B (Zara, Spain)
- Larry Ellison - $36 B (Oracle, United States)
- Eike Batista - $30 B (mining, oil, Brazil)
- Stefan Persson - $26 B (H&M, Sweden)
- Li Ka-shing - $25.5 B (diversified, Hong Kong)
- Karl Albrecht - $25.4 B (Aldi, Germany)
