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.
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There’s a 5% interest rate, but this is only given to time deposits of at least 1 million pesos and should not be withdrawn within 5 years.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|
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 MP2 savings to up to 5,000 pesos per month.
5. Your savings are still yours, even 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 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.
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