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There’s a 5% interest rate, but this is only given to time deposits of at least 1 million pesos and should not be withdrawn within 5 years.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. Hi ms nora good day i just registered my MP2 today but when i try to pay online using my new MP2 # tru credit card and metrobank online banking it failed so do i have to pay it on the nearest Pag-ibig branch?or payment centers!thank u for ur reply????

  2. Hi mhee, it’s best to make your first MP2 payment at your Pag-ibig branch (branch where your Pag-ibig 1 records are based) so your next MP2 payments will be forwarded to that branch. You can make your second and succeeding payments at Bayad Center or SM Business Center. Based on Pag-ibig’s payment guidelines, credit card payments are not yet available for MP2.

  3. Hi Ms. Nora, I read on one of your replies that you earn more dividends when your contributions are spread out within a year rather than putting it in as a lump sum. Can you please share why this is so? I was planning to put lump sum 50k, and just wait for 5 years, not sure if it’s a good idea.

  4. Hi Drigo, your plan to save with MP2 is good. Sorry about my replies that you’ve read — maybe I failed to explain clearly, but that’s not what I meant. Dividends are not bigger if the payments are spread out within a year. The question that time was about one-time payment of a big amount to MP2. Pag-ibig does not have information about one-time payments, so I suggested to the person asking that she spreads out her big payment within the year, as anyway, the application of dividends is yearly, not monthly, not quarterly. The total savings within the year is computed for dividends; it does not matter in which months they were paid, as long as they were paid within the year.

    For example, if you want to put into MP2 a lump sum or one-time payment of 60k, I suggest that you pay the 60k, spread out as a monthly payment of 5,000 for 12 months (from Jan to Dec 2016). When the dividend rate is determined in March or April 2017, the dividend rate will be applied to 60k. If the dividend rate will be 4.5%, then your dividend for 2016 will be 2,700 (from 60k x 4.5% = 2,700). Your balance as of January 2017 will be 62,700. Calculations are estimated — I’m not sure about Pag-ibig’s formula.

    To be more accurate about my answers, I called Pag-ibig to ask about one-time payments, and the Pag-ibig officer said that this type of MP2 payment is allowed; you just need to inform the cashier that it’s a one-time payment with a term of 5 years.

  5. Good afternoon po. My Pag ibig II had just matured last September 2015. I saved 2000 pesos monthly with the hope that after five years of saving faithfully I will be receiving 139,687 pesos as is posted here in your website. Along the way, I found out that one month saving was not deducted, thus I was able to save a total of 118, 000 pesos only. After more than one month of processing, I found out, to my dismay, that I will be receiving only a little more than 124, 000 pesos. There is a big difference on what is posted in this website.
    I wrote this letter to verify the correctness of the computation. Malaki po ang tiwala ko Pag ibig Fund.
    I look forward for your response. I hope that you will put the welfare of your members on top of your priority. Thank you very much po.

  6. Hi Daisy, yes, you’re right about your concern. Why is the total dividend only a little more than 6,000? In the sample on my blog, the dividend rate was 6% (rates were higher in past years). Even if the average dividend rate for the past 5 years was 4.2, your dividend total should have been higher. Call Pag-ibig or visit your branch and request for a recomputation of your dividends. Tell them that they have a sample on their website Sample Computation with 4.76 Dividend Rate — a monthly saving of 500 pesos for 5 years, and the total dividend is 3,845.94. From Pag-ibig’s statements, the average dividend rate from 2010 to 2015 was 4.2%. Even if 4.2 is a bit lower than 4.76 (the one used in the sample), your total dividend rate should not be just a little more than 6k. I hope you can update us again.

  7. Hi Ayessa, yes, Pag-ibig says that we can have many MP2 accounts and maintain our original P1 account. In fact, MP2’s requirement is to maintain P1 while saving with MP2.

  8. Hello Ms. Nora, I have applied for pag-ibig 1 in Urdaneta Pangasinan branch because I used to wok there, now I’ve decided to enroll to pag-ibig 2, and I’m currently working here in Makati. I asked our payroll officer to include my contribution to MP2 as a salary deduction, and as per her advise,she will forward my application to MAKATI branch. Is it still okay that my MP1 was in Urdaneta, and for MP2 here in Makati? or do I have to personally apply my application to Urdaneta Branch?
    If in case, I’ll be transferring to other company,say I’ll resign from my current work, will this post problems in my records? and what are the necessary steps to do.
    Hoping for your immediate response Ms. Nora
    Thank you for answering all our queries

  9. Hi Lux, it’s okay if your MP2 savings records will be stored in Makati because you work in Makati. I think your P1 will also be filed in Makati as your company files there in Makati. If later on, you work in another city, your P1 savings will be filed at the Pag-ibig branch where your new company is filing. If in the future, Pag-ibig is still not centralized, you can later consolidate your records in one Pag-ibig branch using this form: Transfer of Member’s Records.

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