Saving Money with Modified Pag-ibig II — Higher Earnings, Government-Guaranteed

Updated April 1, 2015

You want to save and grow your money?  Modified Pag-ibig II (MP2) is a great savings plan.  It has advantages over regular savings accounts, time deposits, or pre-need plans.

pag-ibig-II-save-money

What are the advantages of Modified Pag-ibig II?

1.  Guaranteed by the Philippine government.

Your savings will not be lost. Your savings are guaranteed by the Philippine government.  Pag-ibig Fund will not vanish like the pre-need firms mismanaged by families who never returned what the planholders sacrificed to pay over many years.

2.  The interest rate is much higher.

In April 2010, the annual interest rate for Modified Pag-ibig II was 5.5% — much higher than savings account rates that are usually between 0.5% to 1.75%. MP2 earnings are not taxed. Interests on savings accounts are taxed.

The Pag-ibig board can also declare an interest rate of more than 5.5%.

If you look at time deposits, rates range from only 1.75% for deposits of at least 10,000 pesos to 2.75% for at least 5 million pesos.
There’s a 5% interest rate, but this is only given to time deposits of at least 1 million pesos and should not be withdrawn within 5 years.

Another thing, bank savings accounts are accessible — you can withdraw them anytime.

They also have maintaining balance requirements, and if you are not able to comply, instead of saving money,  you lose 300 pesos to 500 pesos or more for each month you fall below the maintaining balance.

The MP2 interest rate can go up, if the Pag-ibig board sees that Pag-ibig earned much more for a certain year.

Look at this Pag-ibig table of expected earnings; 6%  was used as annual interest rate:

 

Monthly Savings Total Savings After 5 Years (at 6%)
500 pesos 34,922 pesos
1,000 69,844
1,500 104,765
2,000 139,687
5,000 349,218

 

3.  Interest earnings for MP2 are tax-free.  No tax deductions.

For time deposits,  there’s a 20% withholding tax on the interest income, except for 5-year tax-free time deposit products. The same with savings accounts, there’s also 20% withholding tax on the few pesos earned as interest.

4.  Low monthly minimum savings amount, which is 500 pesos per month. Affordable.

You can increase your monthly MP2 savings anytime.

5.  All your savings are still yours, even if you missed paying for some months, or if you’re unable to continue contributing to the program.

If there are gaps in your contributions, you are not penalized. You get back all what you’ve saved, plus your dividend earnings.

With pre-need, your 50k, 100k, 150k savings or more are forfeited (mawawala sa yo parang bula) if you’re not able to complete your plan, even if your reason is valid. You signed the contract, and the forfeiture policy is in that contract. If you pre-terminate early, you get nothing back. If you pre-terminate after 3 or more years, you get only a little of what you’ve paid.

6.  You CANNOT withdraw your Pag-ibig savings anytime.  This is great, in the sense that you cannot just withdraw to buy a useless gadget on sale.  Your friend or relative cannot also force you to withdraw so they can borrow —  “Ay sori talaga, nasa Pag-ibig kasi savings namin eh, hindi puede iwidro.”

7. You CANNOT borrow it.  There’s no loan program for MP2 members.  The short-term loan program is only for the mandatory Pag-ibig I program.  Again this is good — your savings remain untouched.

8. Available for withdrawal after 5 years. Oh ayan, puede nang iwidro! For tuition, or for a house and lot downpayment, or outright property purchase, or business capital.

If you like to save more, you can keep on adding to your MP2 by renewing it for another 5 years.

Who can save with Modified Pag-ibig II?

Anyone who is already a member of Pag-ibig I.  You should first become a Pag-ibig I member, as Pag-ibig I is mandatory. Pag-ibig II is voluntary.  You can be an MP2 member whether you’re a land-based OFW, seaman, employee, self-employed or business owner.

How do we start saving with Pag-ibig II?

Apply for your MP2 account no. online at pagibigfund.gov.ph.

Or visit any Pag-ibig branch with your IDs and apply for Modified Pag-ibig II membership.  Fill out a Modified Pag-ibig II Registration Form (MP2RF).  You can start with 500 pesos, or go ahead with 5,000 pesos.

Note:

If you’ve reached your MP2’s 5-year term, and you want to renew it, contact Pag-ibig and renew it, otherwise, the interest rate for your MP2 savings will be the same as Pag-ibig 1, which is a bit lower than MP2.

Saving Money with Modified Pag-ibig II

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  1. Dear Nora, Just to ask an advise from you regarding my MP2 which is to be matured this coming June 2016. I’m planning to extend it for another 2 years in order to avail the same benefits as of now. Please help me, if what I will do about it. It’s my pleasure, if you could give me the requirements needed for the extension and esp. the e-mail of person or department in charge of it. Thank you very & more power to you.

  2. Hi, I am new to this MP2 program and I want to know how do you guys monitor your account? is there any online monitoring tool that I can access?

  3. Hi Dong, sorry for replying late. I had to find the relevant circular first. Emailed you.

  4. Hi Ms. Nora, I’ve just enrolled online in MP2. I’m an OFW in Qatar. I like to know if the Pag Ibig registered exchange outlets in Qatar accept MP2 payments? My MP2 payment might just be credited to my P1 savings. Thank you

  5. Hi Maridelle, if you can write your MP2 number on the payment/remittance slip, then your MP2 payment will be posted to your MP2. You can later on check your payment via https://www.pagibigfundservices.com/ If you find out that your payment was credited to P1, you can email Pag-ibig contactus@pagibigfund.gov.ph. I have an in-law who found out after more than a year of paying MP2 that her MP2 payments were posted to her P1, and after she complained at the Makati branch, Pag-ibig transferred her payments to MP2.

  6. Hi Ms Nora,
    Can I also ask for the circular for MP2, I did get information that it is taxable but more of my research indicated it is not. Would be helpful to get a copy of the circular to save for future use, and hopefully, it indicates it is tax – free.

  7. Nag start po ako ng MP2 last april 2015 thru salary deduction. This Jan. nag resigned na po ako sa companya, kaya from Feb until June hindi pa ako nakabayaran. Question, pwede ko po ba ipag-patuloy ang pagbayad at wala po bang penaltu for late payment?

  8. Hi Niez, yes, you can continue paying your MP2 as voluntary. You should also continue to pay your P1 (minimum is 200). Pay your MP2 at your branch. There’s no penalty for late payments because late payments from voluntary members are not accepted. This July, you can pay for July and onwards.

  9. Hi Ms Nora

    I would like to ask your advise. How will I know if my payments are posted to MP2 ? I got a print out of contributions and the Program code is listed as Pag-IBIG Overseas Program. Is that MP2? Thank you.

  10. hi, i made a payment for MAY amounting of 1000, and skip for june then i made a payment for July 1500. Then i had noticed that for MAY payment it’s stated in the receipt MAY-JUNE payment and for July payment it’s stated JUly-September 1500. That’s why i wondering if do i need to say that my payment is good for 1month only? because my contribution is not fix, sometimes is pay 500,1000 or 1500. Is there any impact, if i pay again this august? baka kasi mag doble doble? diba any amount po pwede ihulog. ang ginawa kasi nila eh hinati nila ung hulog ko.

  11. Hi, I have recently enrolled to MP2 program but did not receive the MP2 Account # yet. I was told that they will send it to my current company who I am working with Right now. But when I asked our HR about it they said that they are not processing such benefit in our company. My question is how can I enjoy the benefit of lowering my taxable income via MP2 if my company would not compute for it in our payslips’ non-taxable income? Diba dapat eh kasama ang MP2 dun sa SSS, Philhealth, HDMF para maibawas din sya dun sa taxable income at para mas mababawa Withholding tax ko. Pa-advise naman po. Need ko clarification nung process ng pagpapasetup ng automatic deduction from my payroll to my MP2 account. I would really appreciate your information on this. TIA

  12. Hi Francis, sorry you are not allowed by BIR to include MP2 to reduce your taxable income because MP2 is an optional savings scheme. BIR allows only the mandatory deductions, namely 200 pesos for Pag-ibig, your SSS employee share based on the SSS contribution table and your Philhealth share. About your HR refusing to process your MP2 deduction: Sorry it’s their prerogative or right to deny you the service because MP2 is optional, so you have to pay your MP2 through GCash or directly to your Pag-ibig branch’s cashier. What you can do is study the employee/individual withholding tax table. See the effect of your OT income on your tax rate so you can control your OT, if OT in your company is within your control.
    The gaps between the basic tax amounts are wide, so if you can manipulate your OT, without affecting the income you want, and you can stay within the lower basic tax amount, then it’s good.
    For example, the tax amount for a single or married person without dependent is as follows:
    Taxable income for the month is 15,833 to 24,999.99 — withholding tax for the month is 1,875 plus 0.25 x (taxable amount – 15,833)
    Taxable income for the month is 25k to 45,832.99 — monthly withholding tax for the month is 4,166.76 plus 0.3 x (taxable amount – 25,000)

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