3 big reasons why Filipinos chose to save money under Pag-IBIG MP2

The following does not constitute investment advice.

(Updated Feb. 10) The coronavirus pandemic has shown how important it is to have savings in case of emergencies, especially in the current situation when businesses are closing down, resulting in the disruption of people’s usual work routines.

In 2020, more individuals came to realize just that, with Pag-IBIG Fund posting a record-high number of people saving through its Modified Pag-IBIG 2 Savings program.

Pag-IBIG Fund members collectively saved P13.3B through the voluntary savings program last year, 11% higher than the P12.01B in 2019 -- setting a new record for the program even with the challenges and uncertainties posed by COVID-19.

A total of 338,248 members are now using the MP2 Savings program, according to Eduardo del Rosario, chairperson of the Department of Human Settlements and Urban Development and the Pag-IBIG Fund Board of Trustees.

There are several reasons for the 2020 record as confirmed by some individuals who are currently enrolled in the program.

Marvin Germo, a stock market trader who also provides financial consultancy services in the Philippines and abroad, noted that there are three main reasons that encourage Filipinos to save through MP2, which has a five-year maturity period.

1. Tax-free

Unlike investing in stocks, mutual funds, bonds and other investment vehicles, the MP2 program is completely tax-free—a feature that instantly attracts investors as well as people looking to save efficiently.

Jude Jamero, 30, is an assistant manager at a food factory. He began saving with the program in 2018 and currently works as a part-time financial advisor, said the MP2 program’s tax-free nature is one of the reasons behind his decision.

Once the maturity period is completed, people who saved through the program will get their full capital and earnings, without the hassle of having to give back withholding taxes, Jamero said.

The maturity period for the MP2 savings is five years and the money cannot be pulled out before the period is completed. After five years, Pag-IBIG fund allows members to open a new account should they decide to reinvest their money, including the returns.

According to Germo, if people will reinvest for 35 years, their money will continue to grow and would make a significant impact especially when the money reaches millions because of the savings program’s tax-free feature.

2. Makes one’s money work (better than banks)

In 2019, Pag-IBIG offered a 7.23% dividend rate under MP2, while the 2020 rate is expected to be declared by the agency in the first quarter this year The agency sets aside at least 70% of its annual net income for members’ Pag-IBIG savings as dividends.

Maria Eloisa Pedro, 28, a research associate who opened her MP2 account in 2017, cited the program’s dividend rate as one of the reasons for saving through MP2.

Earnings under MP2 are government-guaranteed, she said, adding that the program “offers an interest rate higher than banks.” People using the program do not have to worry about how the market performs because essentially, there is no potential loss.

3. More affordable than life insurance

Filipinos can start saving through the program with just P500 a month. MP2 is for people who do not have a large amount of extra money to start with, especially that people are advised to only invest the money they are not going to need in the near future, Germo explained.

Julito Gailanan III, a Davao-based electronics engineer, called MP2 a “budget-friendly” savings program. He noted that anyone can use the program unlike when buying life insurances, which is “expensive.”

Many insurance plans require P2,000 per month, a significantly larger amount compared to the minimum requirement of P500 monthly for the MP2 program, explained Gailanan III, who began using MP2 in 2018, when he was exploring how to grow his money.

“MP2 is a really good program for starters,” Gailanan III said.

Pedro pointed out the same, saying that the program is ideal for people who cannot open bank accounts, which require a high maintaining balance.

It's a win-win

While these are the three main reasons for people saving through the MP2 program, there is another reason that is often unnoticed, according to Germo.

One more good thing about the program is that it helps other people, specifically those who are making use of Pag-IBIG Fund for their housing loans. “Essentially, you (as an MP2 member) benefit from the program, but you are also helping realize people’s dreams of having their own houses,” Germo noted.

However, investment expert Germo reminds Filipinos that the MP2 is not the best savings plan for everyone.

“It is not a one-size-fits-all investment,” he said, noting that the program is for people whose goals are in line with MP2’s characteristics.

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Editor's Note: The update corrects the figures saved under the fund by swapping the dollar signs to peso signs. Pag-IBIG is also yet to announce the dividends in 2020, contrary to the earlier version's claim that it was at 8%.

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Read two other The Budgetarian reports on the MP2 Savings program:

• Is Pag-IBIG’s MP2 Program right for you? 3 factors to consider
• Compound, lump, forget: How to make the most out of Pag-IBIG's MP2 Program