ACHIEVING a higher level of saving propensity can immensely benefit a developing country like the Philippines. Many of those who save place their money in bank accounts. Still, one particular saving alternative that has grown in popularity through the years is the “Pag-IBIG MP2,” or the “Modified Pag-IBIG II (Pag-IBIG MP2) Savings Program.”
The “Pag-IBIG MP2” is a voluntary savings fund launched by the Home Development Mutual Fund (Pag-IBIG) in 2010. Data from Pag-IBIG reveals that, as of 2022, total savings under Pag-IBIG MP2 reached almost P40 billion with 977,643 total savers.
Pag-IBIG MP2 is considered to be a voluntary savings scheme. It was initially open only to active Pag-IBIG members. However, its participation has already been expanded to include former Pag-IBIG members like pensioners and retirees with income and with at least 24 monthly savings before retirement. For active Pag-IBIG members, the Pag-IBIG MP2 is separate from their Pag-IBIG Regular Savings, where the contribution is commonly seen as a deduction in the pay slip on a periodic basis. It has a maturity period of 5 years.
One reason why many people fail to save is due to hectic work schedules. Another reason would be cumbersome processes. The good news is that opening a Pag-IBIG MP2 account is relatively simple and safe. It can be done online and once the account number is generated, saving can now proceed. Opening an account is also facilitated through any Pag-IBIG branch nationwide. It is possible to open multiple Pag-IBIG MP2 accounts. It is possible to save a one-time lump sum amount for the entire 5-year duration.
Succeeding savings can be done through salary deduction or online remittance channels. The minimum saving amount is P500 per remittance. There is no maximum amount of saving per remittance. If the one-time saving amount done is greater than P500,000, payment will be through check. Those whose savings are greater than P100,000 will be required to show proof of income or source of funds. To help savers monitor their savings, there is the “Virtual Pag-IBIG” where all pertinent information can be accessed.
The funds saved in Pag-IBIG MP2 are mainly placed in housing finance. A common aspiration of many Filipinos is to own property. The loanable funds can help fulfill that aspiration. There is a multiplier effect since more savings can imply more loanable fund supply and consequently lower interest rates for those who borrow. These lower interest rates then help spur economic activity. The funds are also invested in government securities and corporate bonds. These instruments drive investments that support growth.
Apart from democratizing participation through the convenient opening, saving mechanisms and the relatively low minimum saving of P500 per remittance, the Pag-IBIG MP2 offers more advantages. The Pag-IBIG MP2 savings are guaranteed by government which means that risk is addressed to a certain extent. The Pag-IBIG MP2 offers higher dividends than Pag-IBIG Regular Savings. The dividends received are tax-free. There is flexibility since the dividends can be withdrawn at the end of the 5-year period or annually.
However, there are certain considerations that must be taken into account with respect to saving in Pag-IBIG MP2. Dividends received are not guaranteed as they depend on the general financial performance of Pag-IBIG. Looking at its history, the dividend rate in 2011 was 4.63 percent while the dividend rate in 2021 was 6.00 percent. However, the dividend rate has been on a decline since 2018. Those who have high risk appetite might also not be that satisfied with the returns of Pag-IBIG MP2 as compared to other saving options.
Saving is the first step in achieving financial freedom. While there are considerations, the Pag-IBIG MP2 can be a good saving alternative for many Filipinos. It has great personal finance consequences. It also has great macroeconomic possibilities. The Pag-IBIG MP2 can help fulfill many personal dreams and national goals.
Gemmy Lontoc is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 101st RFP program this April 2023. To inquire, e-mail info@rfp.ph or text at 0917-6248110.