Especially now when life has become so unpredictable, so many insurance agents are coming out from the woods and informing everyone that they should be putting their money into life insurance as it is the best way for you to protect your future and loved ones in case you immediately pass away. Many boast that the money you get at the event you get is tax-free, and buying life insurance is truly one of the best ways for you to invest and safeguard your money for the future.

While there are some advantages to investing in an insurance policy, I do want to remind everyone that there is another investment vehicle that is actually better than a time deposit or a life insurance policy — And this is the Pag-IBIG MP2 Savings Fund.

In this blog post, I will talk about what the Pag-IBIG MP2 Savings Fund is.

I will dive on why it’s such a great investment vehicle to get into, how to apply for one, and why I’m putting my money into my Pag-IBIG MP2 Savings Fund instead of any life insurance policy or educational policy that’s currently on offer.

Here’s the flow of this blog post — Top 10 Questions Answered About the Pag-IBIG MP2 Savings Fund, one of the best locally available investment vehicles in the Philippines:

1. What is the Pag-IBIG MP2 Savings Fund?

2. Who Can Invest into the Pag-IBIG MP2 Savings Fund?

3. What is Benefit of Investing in the Optional Pag-IBIG MP2 Savings Fund?

4. What are the Disadvantages/Risks of Investing the Pag-IBIG MP2 Savings Fund?

5. How Much Can I Historically Earn by Investing in the Pag-IBIG MP2 Savings Fund?

6. So How Does the Pag-IBIG MP2 Savings Account BEST Work? Can You Use it for Your Child’s Educational Plan?

7. How to Enroll in a Pag-IBIG MP2 Savings Account?

8. Can You Use Your Credit/Debit Card to Invest in a Pag-IBIG MP2 Savings Account Online?

9. What Happens When my Pag-IBIG MP2 Savings Fund Reaches the 5-Year Maturity Period?

10. What If I Died Before My Fund Matures? Where Will Happen to my Money at the Pag-IBIG MP2 Savings Fund?

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1. What is the Pag-IBIG MP2 Savings Fund?

The Pag-IBIG MP2 Savings Fund is an OPTIONAL savings fund that is offered by the Philippines very own Pag-IBIG Fund:

Mind you, this is different from PhilHealth who has been tasked to manage the universal health coverage in the Philippines. This is the other government vehicle with the financial scandals so let’s not mix up the two.

Brief History of the Pag-IBIG Fund:

Also known as the Home Development Mutual Fund (HDMF), the Pag-IBIG Fund was created in June 1978 via Presidential Decree No. 1530. The Fund addresses an important basic needs of the Filipino — 1) Provide reasonably-priced housing and 2) Offer a national savings program for the normal Filipino worker.

In the beginning, both the SSS and GSIS oversaw the HDMF Fund.

However, on June 1979, they funds were merged into a separate single authority called the Pag-IBIG Fund. On December 1980, the Pag-IBIG was made independent from the NHMFC with the signing of PD 1752, which amended PD 1530.

It was the PD 1752 made Pag-IBIG membership mandatory for all SSS and GSIS member-employees. Hence, if you’re employed, you and your employer MUST remit to the Pag-Ibig Fund.

Now, the Pag-IBIG Savings Fund has TWO SEPARATE savings funds in its roster:

1) The Regular Savings Fund that everybody enrolled in Pag-ibig are mandated to deposit into (Note: That’s where your Php 100 Employee share of benefits goes per month), and

     2) The OPTIONAL Pag-Ibig MP2 Savings Fund.

The Pag-IBIG Fund is mandated to invest 70% of its money to housing finance, which is offered back to its members. Members do this via applying for Pag-IBIG Housing Loans, of which they are charged a fixed percentage depending on tenure.

Source: Pag-IBIG Housing Loan Calculator

The Pag-IBIG Fund also invests in government securities and corporate bonds. They then set aside at least 70% of its annual net income and credits it proportionately to its members’ Pag-IBIG Savings as dividends. 

The biggest difference between the Regular Pag-IBIG program and the MP2 Savings Program is this —  Unlike the regular Pag-IBIG program that every employed and self-employed Filipinos are part of, the Pagibig MP2 Savings Program is a VOLUNTARY PROGRAM.

To incentivize members to invest more in the voluntary program, Pag-IBIG ensures that those who invest in the Pag-IBIG MP2 Savings Program will earn a slightly higher return than if they invested mandatorily in the Pag-IBIG Regular savings account.

Hence, Pag-IBIG MP2 Savings Fund always has a slightly higher dividend rate than the Pag-IBIG Regular Savings account.

2. Who Can Invest into the Pag-IBIG MP2 Savings Fund?

The Pag-IBIG MP2 Savings Fund is open to the following:

• All active Pag-IBIG Fund Members (both in the Philippines and Overseas Filipinos)
• Former Pag-IBIG members with a source of monthly income and/or Pensioners regardless of age with at least an equivalent of 24 monthly Pag-IBIG hulogs.

Before you can apply to be a Pag-IBIG MP2 member, you need to be or have been, a Pag-IBIG 1 member in good standing first.

Pag-IBIG 1 is the government program that allows you to save for retirement through a small monthly contribution — It costs Filipinos a small Php 200.00 per month to be exact — And of course, allows you to take out housing loans if you ever need them. If you’re employed in the Philippines, you’re automatically a PAG-IBIG member.

If you’re abroad, you would need to apply to be a member first and make Pag-IBIG 1 contributions. Only then you can apply for Pag-IBIG MP2 Savings Fund.

If you are based abroad, you can apply for your Pag-IBIG 2 membership with your Pag-IBIG Fund Services Member Services Desk.

3. What is Benefit of Investing in the Optional Pag-IBIG MP2 Savings Fund?

I have worked in an investment bank before so I know the different types of investment vehicles that are being offered locally and overseas.

Locally, the Pag-IBIG MP2 Savings Fund is one of the BEST investment vehicles available for the average Filipino. Php 500.00 is an amount that’s reasonably reached by any Filipino, even those minimum waged.

The lock-in period is between 1 to 5 years, which is decided upon your application. And the best part is the principal is government guaranteed. Since its inception, the Pag-IBIG MP 2 Savings Fund has consistently given positive returns, which is way more than what most equity linked insurance vehicles and mutual funds can guarantee.

Specifically, here are the many benefits in investing in the Pag-IBIG MP2 Savings Fund:

1. The Maturity of the Pag-IBIG MP2 Savings Fund is STRICTLY FIVE (5) Years. Your MP2 savings will mature in five years, after which you can withdraw your money. This makes Pag-IBIG MP2 ideal for medium-term investment goals.
   
   Unlike insurance policies, your money is not stuck in the Pag-IBIG MP2 Fund for the long-term: For many other investments, your contract limits you from withdrawing your money on the short term. If you did, you will incur a lot of penalties.The Pag-IBIG MP2 Fund on the other hand only lasts for 5 YEARS. That means that after the 5-year period, you have the freedom to re-invest or fully withdraw the money and the dividends, without penalties. Pwede mo na magamit ang pera without waiting for death or a debilitating disease to withdraw.It is also better than the SSS Mandatory WISP Fund which only generates you less than 5% of dividends, and you can only withdraw by the end of your working life, a semi-Ponzi scheme if you ask me. I’ve wrote about this in depth in a blog post, HR Talk – Top 13 Questions Answered on the New SSS Mandatory Provident Fund.
2. The Pag-IBIG MP2 Savings Fund is government-guaranteed.That means, your principal will 1000% be returned to you regardless of fund performance. It is only the annual dividends which may vary depending on several factors, such as Pag-IBIG Fund’s financial performance.
   
   IMPORTANT: No other fund in the market, especially those linked to your insurance policy guarantees your principal.
3. The Pag-IBIG MP2 dividend returns are TAX-FREE: Yes, just like your insurance. But they don’t tell you that.
4. The minimum amount you can invest in Pag-IBIG MP2 Savings account is a measly Php 500.00 and you never need to top up: That’s ultra reasonable! What’s more, unlike insurance premium investment payments, you are NOT tied to a contract or obligated to regularly pay a premium, just an initial deposit of ₱500. You can add money anytime you want.
5. There is no upper limit on the amount of money you can invest in Pag-IBIG MP2 Savings Fund: Because it is not governed by the BSP or AMLA, the sky is the limit and technically, nobody in Pag-IBIG will question where you got the money.
6. There are no extra or hidden management fees: Investors to the Pag-IBIG MP2 Fund will pocket every cent of your dividends. Please note that mutual funds, bond funds, or equity-linked insurance funds usually charge an annual management fee of 1.5% to 2.5% depending on the fund. So you will usually get less returns.
7. Historically so far as of 2020, the Pag-IBIG MP2 Funds have earned annually, with ZERO records of loss: That’s a record that’s hard to beat by any fund!
8. Conveniently, if you want to top-up, you can invest more money in the Pag-IBIG MP2 Savings Fund through payment centers: So you can do so anytime at your convenience. Here are the various ways you can pay for your Pag-IBIG MP2 Savings Account:
   • Salary deduction just like your monthly premium
   • Over-the-counter at any Pag-IBIG branches
   • Over-the-counter at any participating payment centers such as:
     • 7-11
     • Bayad Centers
     • SM Business Centers
     • M. Lhuillier
     • ECPay
   • OFWs can pay through  international partners such as
     • iRemit
     • PayPilipinas
     • Philippine National Bank (PNB)
     • Asia United Bank (AUB)
9. Multiple MP2 savings accounts – You can open as many MP2 accounts as you’d like. This is ideal if you’re saving money for different goals, like for emergencies, tuition fund, travel, retirement, etc.
10. You have a choice of withdrawing your dividends either per year or compounded after 5-years: Actually Pag-IBIG gives you the choice upon application — a) Do you want to withdraw the dividends on a per year basis, or b) Do you want to re-invest back into the fund so you can compound it with the previous principal, only to take it out when the fund expires in 5 years time?That’s great for housewives who would want to see a guaranteed positive return to their investments and cash out every year for daily expenses. It’s also great for medium-term investors like me who wants to keep my principal in a safe place for 5 years that gives me a dividend return rate of above time deposits and local inflation rates.The choice is yours. You can cash out your dividends per year or after 5 years compounding if you like. Whatever you choose, the dividends are automatically transferred to your dedicated bank account. Great, huh?This is the difference of the two type of withdrawals following Php 1 million savings assuming a 7.5% return, which by the way is reasonable given that the average 5-year was 7.26%:

4. What are the Disadvantages/Risks of Investing the Pag-IBIG MP2 Savings Fund?

There are a few risks but personally, I think they are super reasonable given the other alternatives. They are as follows:

• Lock-in period is at 5 years: After 5 years + 2, you have to withdraw, claim the investment and roll over. It is not automatically continuous beyond 7 years. Hence, you have to look for reinvestment options after the 7-year timeline.
• No rollovers are available: After 5 years, your contributions would earn the same returns as the mandatory savings. Two years later, it would not earn anything.
• If you wish to continue getting the benefits beyond five years, opening a new account is required. A hassle if you ask me.
• Doing transactions may be inconvenient for those without any Pag-ibig branches nearby.
• There is an opportunity cost when the earnings from MP2 are lower than other investment opportunities. For instance, the stock market, some mutual funds and UITF funds have reported higher returns.
• When account is closed before five years, those who opted to receive the dividends at the end of 5 years will only be entitled to get 50% of the dividend. Meanwhile, those who opted to receive dividends each year will only be able to get back their capital.

5. How Much Can I Historically Earn by Investing in the Pag-IBIG MP2 Savings Fund?

Quick and short answer: Usually higher than most local time deposit dividend rates and the country’s inflation rate.

The Pag-IBIG Fund usually declares the dividend rate earned by their savings fund every March of the year.  It’s published on their website and is announced in the news along with the company’s financial reports. This is the latest news from their performance last year — Pag-IBIG posts P31.18B net income in 2020.

Last year, this was the decent results of the Pag-IBIG MP 2 Fund:

The amount can vary depending on its actual income. In 2020, the fund earned the following dividend rate:

Given the 2020 COVID-19 pandemic where markets were extremely volatile and returns were unpredictable, I still consider the Pag-IBIG MP2 Savings Dividend to have performed better than any savings or mutual funds out there. Fact o is, while you may think 6.12% return is low, this return rate is STILL A BETTER PERFORMER than any local time deposit or inflation rate especially since my cash principal and money value are protected.

For your reference, here are the historical dividend returns of the Pag-IBIG MP 2 Savings Fund vs. Bank Time Deposits and the Pag-IBIG Regular Savings Fund. As you can see, the Pag-IBIG MP2 Savings Fund consistently beat the dividend returns of local time deposits, PAG-IBIG Regular Savings, and many other available mutual funds or equity-linked life insurance in the Philippines.

Source: Modified Pag-IBIG MP2 Savings Fund Website and PesoLab.com: Passive Income Through Pag-IBIG MP2

And the reason why I would highly recommend it for my own use and to my people is that with the Pag-IBIG MP2 Savings Fund, the principal is government backed and positive returns are almost guaranteed, unlike in equity-linked insurance where returns may rise and fall depending on the fund performance in the market.

For other investments you may have such as in bond funds or mutual funds, your principal (or the money na pinasok mo) is NOT guaranteed, which means that if you read the fine print, other companies/insurance company CANNOT and WILL NOT guarantee that the money you put in is 100% protected. This means that your money that you put onto a mutual fund or insurance is still open to market risk, and there’s a chance that the principal you put in may rise and fall depending on fund performance, which it had when we put our money into one of the biggest insurance funds and lost 12-20% of its value over the last 3 years.

6. So How Does the Pag-IBIG MP2 Savings Account BEST Work?

Personally, the Pag-IBIG MP2 Fund is best used for THREE REASONS:

A. As an alternative educational plan for my children
B. To put in money that you’ve inherited from your parents so that you can earn passive income to spend
C. If you have any excess money you want to invest, and you want it to earn a guaranteed interest above inflation rate and time deposits.

Let’s go through them one by one, shall we?

A. As an alternative educational plan for my children

It’s the best vehicle to place in money that you won’t likely touch over the next Five (5) years. If you have excess money, this is the place to best put your money so you can’t touch it and spend the money on a phone or TV that would depreciate over time.

Personally, the Pag-IBIG MP2 Savings Fund works best against investing in an education fund. That’s what I did with the excess money I had — I invested the money for my daughter’s college education onto the Pag-IBIG MP2 Savings Fund.

You see, my daughter is only 5 years old. Hence, if I stash the money away into the Pag-IBIG MP2 Savings Fund and keep it there for 3 cycles — este 15 years — I will have more than enough to pay for her college education, regardless on whichever local university, expensive of not that she will choose.

This is way way way better than any locally offered educational plan out there which is actually just a luck of draw. Once again, there is no local educational plan that will guarantee principal protection and consistently positive historical returns, unlike the Pag-IBIG MP2 Savings Fund.

Here comes a personal story: My in-laws put in a chunk of money for their youngest daughter’s educational plan when she was a baby. They put in money for 10 years as per the contract. In 2008, during the Global Financial Crisis, their investment adviser called them up crying asking them to withdraw the money since the fund was at the risk of bankruptcy.

So fun fact, my in-laws only managed to withdraw half of their principal after at least 15 years of waiting. My sister-in-law went to Ateneo de Manila, and none of the money they placed in their daughter’s educational plan funded her tuition fee.

Their story is not unique as per this Marketmanila.com blogpost of many educational plans going bust. You can also read more distressing news in CNN Philippine’s Report: Educational Plan Victims Still Feel the Sting:

“Educational plans rose to prominence in the 1980s. CAP was the pioneer in the field but soon, nearly a hundred other pre-need companies followed.

Their  proposition? Parents make small, periodic payments to the company over the years and when the time comes that their children enter college, the company will pay for their tuition — no matter how much it costs in the future.

The model worked in the 1980s, when tuition fees were regulated and the Philippine economy was booming. Companies could invest the money entrusted to them and easily grow it to cover tuition fees, even if they increased.

But the government stopped capping tuition fee hikes in 1992. Five years later, the Asian Financial Crisis hit and markets took a nosedive.

It wasn’t just economic forces that caused the turmoil. The Sobrepeña-led CAP, in particular, came under intense scrutiny for its investment decisions.

It invested heavily in real estate — well above the amount allowed by regulators. This tied up bulk of its money in illiquid assets. Even more questionable was the fact that many of the properties CAP invested in were businesses owned by its board members like Nasugbu Properties and Camp John Hay Development.

The industry’s then-regulator, the Securities and Exchange Commission, was also heavily criticised for its oversight. Regulation has since been transferred to the Insurance Commission (IC), and a Pre-Need Code was passed in 2008.

Nearly a million Filipinos were affected by the downfall of the pre-need industry, especially when it came to educational plans. CAP alone had about 800,000 planholders. The Legacy Group had some 50,000 planholders, while the Yuchengco-owned Pacific Plans had more than 30,000.”

B. If your parents left you with a sizeable inheritance, and you want to put it in a place where nobody can “steal” it, and where you can live off the dividends as passive income.

This year, a good friend of mine inherited from his mother a cool Php 18 million already net of taxes after the mother sold a property at Tomas Morato.

Instead of buying a new house (which will earn you only 2-5% yield on average), a new car (which depreciates 30% as soon as you roll it off the showroom), a bahay showcase (which you will probably overspend on), a new phone/computer/whatever abubuts you want to think of, I would highly suggest you put the money into the Pag-IBIG MP2 Savings Fund and live off the yearly dividend for your monthly expenses.

A little patience reap higher rewards. And the best part is, after the 5-years are gone, you can always withdraw the principal and roll it over for another round of investments. Pwede nang hindi magtrabaho!

C. If you have any excess money you want to invest, and you want it to earn a guaranteed interest above inflation rate and time deposits.

Or for most people who have neither a big chunk of inheritance, you can simply invest in the Pag-IBIG MP2 Savings Fund so your money will not stay stagnant in the bank, depreciating vs. the inflation rate. By putting it in the growing Pag-IBIG MP2 Savings Fund, you can beat the inflation rate per year, guarantee your principal, and earn a little money on the side. Here’s the MP2 ladder to show you how this can be done.

Source: KatieScarletteNeedsMoney Blog

7. How to Enroll in a Pag-IBIG MP2 Savings Account?

You can actually do it by visiting the branch itself — which is my preferred way of investing my hard earned money — or by doing it online.

A. Go to the Branch to Invest into Your MP2 Savings Account:

Simply submit your duly accomplished MP2 Savings Application form at your nearest Pag-IBIG Fund Branch, along with the following:

• Valid Identification Card; and
• Passbook or ATM Card of your nominated bank account

You may download the Pag-IBIG MP2 Savings Application form here.

Downloadable Form: the Pag-IBIG MP2 Application Form.PDF

B. Enroll into the Pag-IBIG MP2 Savings Fund Online.

Here are 4 convenient steps to enroll your Pag-IBIG MP2 Savings Fund online:

A. Open the MP2 Savings Enrollment link to start the process.

Enter the following details:

• Pag-IBIG MID Number (12-digit MID)
• Last Name
• First Name
• Date of Birth (MM/DD/YYYY format)

Enter the code shown on the page for verification, then click the SUBMIT button to continue.

B. Complete the enrollment by entering the following information:

• Desired Monthly Contribution: Enter the minimum monthly savings of Php 500.00 or your desired higher monthly savings.
• Preferred Dividend Payout: Select if annually or after 5 years compounded
• Mode of Payment:
  • Salary Deduction
  • Over-the-Counter (OTC): I prefer this best
  • Thru any accredited Pag-IBIG Collecting Partners
• Source of Funds:
  • Employment Income
  • Savings/Deopsits
  • Property Sale
  • Sale of Share or Other Investment
  • Loan
  • Company Sale
  • Company Profits/Dividends
  • Gift
  • Maturity/Surrender of Life Policy
  • Other Income Sources

D. You can now start paying for your monthly MP2 savings or a one-time MP2 savings.

The start of your 5-year term will start on the day of your first payment.

For the first payment, it is advisable to pay directly to any Pag -IBIG Branch to avoid any confusing or floating payment. If you use Gcash, the payment will probaby be updated in your account via a few days.

8. Can You Use Your Credit/Debit Card to Invest in a Pag-IBIG MP2 Savings Account Online?

Absolutely — You can use the Pag-IBIG Online Payment Facility with your credit card or debit card to conveniently add into your Pag-IBIG MP2 Savings Fund. Here are the steps:

How to Pay Pag-IBIG MP2 Savings using Credit Card or Debit Card

9. What Happens When my Pag-IBIG MP2 Savings Fund Reaches the 5-Year Maturity Period?

Once your MP2 Savings reach the 5-year maturity period, you may re-apply for a new MP2 Savings Account.

You may claim your Pag-IBIG MP2 Savings anytime upon maturity. If unclaimed, your Pag-IBIG MP2 Savings shall continue to earn dividends for two more years based on the REGULAR dividend rates of the Pag-IBIG Fund Regular Savings Program. After two years, if no withdrawal is done, they don’t earn any gains anymore, so the money must be withdrawn, claimed or if you want to continuously enjoy the benefits, open a new Pag-IBIG MP2 Savings Account again.

10. What If I Died Before My Fund Matures? Where Will Happen to my Money at the Pag-IBIG MP2 Savings Fund?

You may withdraw your money at the end of the lock-in period, which is 5 years. Certain situations allow you to close your Pag-IBIG MP2 Savings Fund (And your Regular Pag-IBIG Savings Fund) within 5 years such as the following:

• Membership maturity after 20 years, equivalent to 240 monthly contributions
• Retirement at age 60 (optional) or 65 (mandatory)
• Separation from service due to health reasons
• Permanent departure from the country
• Permanent and total disability or insanity
• Upon death, in which case, his legal heirs will receive his TAV plus an additional death benefit
• Critical illness of the member or any of his immediate family member, as certified by a licensed physician.

Should you close the account before the period on grounds not covered above, there’s going to be consequences. For compounded accounts, you’re only entitled to 50% of the dividends and those in annual accounts will only get their total savings minus all the dividends.

FINAL WORDS

Here’s my full disclosure so that everything’s out in the clear:

1. I am very passionate about the Pag-IBIG MP2 Fund because I do believe it’s one of the best, if not the best investment vehicle for the average Filipino, more than time deposits, insurance, equity-linked funds, mutual funds and bond funds: And yes, I have investments on these other investment vehicles that I mentioned so my conviction has receipts and proof. I have investments in some of the biggest insurance companies in the Philippines, and no, they have underperformed against the Pag-IBIG MP2 Fund.
2. The Pag-IBIG Funds have a captured borrowers market so I know why exactly they can offer a higher dividend than the rest.
3. I have invested in the Pag-IBIG MP2 Savings Fund myself for my daughter’s college education fund, and am very happy and confident with my decision: Please note that I am also a typical Filipino and Pag-IBIG is NOT paying me for my endorsement and support. But I do want my fellow Filipinos to make better informed investment decisions so I cannot help but share what I know to others.

Once again dear readers, the choice is up to you. All I can be is to be a good friend and recommend without any bias, commission, or benefit. The Pag-IBIG MP2 Savings Fund is one of the best investment vehicles offered to the average local Filipino to date, so I really hope that you research more about this awesome program, and maybe put in the money for your future investments and the good of your family.

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For Frequently Asked Questions (FAQs) and to know more about the Pag-IBIG MP2 Savings FUND, click this Pag-IBIG Fund link.

And for more information about the Pag-IBIG Fund, visit their official website and Facebook page:

• https://www.pagibigfundservices.com/
• https://www.pagibigfund.gov.ph/
• https://www.pagibigfundservices.com/virtualpagibig/
• https://www.facebook.com/PagIBIGFundOfficialPage
• http://www.philippine-embassy.org.sg/wp-content/uploads/mp2faq.pdf