The Savings Hack Your Future Self Will Thank You For

If you told me there’s a way to earn stock market-level returns that is tax-free and risk-free, I’d probably raise an eyebrow and say, “That sounds too good to be true.”

But guess what? It’s real. And it’s called Pag-IBIG MP2.

In today’s edition, we’ll go over:

• Earning tax-free dividends with Pag-IBIG MP2

• Eligibility

• Getting started

TLDR;

The Bottom Line

• The Pag-IBIG MP2 is a special savings account with a 5-year maturity period. Pag-IBIG will release the dividend rate for your account annually, which determines how much your savings earn you. 

• Dividend earnings from Pag-IBIG MP2 are non-taxable.

• Visit the Pag-IBIG MP2 enrollment page to open an account.

THE CONTENT

You should probably hear this…

Pag-IBIG MP2 stands for Modified Pag-IBIG II. It’s a special voluntary savings facility with a 5-year maturity, designed for active Pag-IBIG Fund members who wish to save more and earn higher dividends on top of their Pag-IBIG Regular Savings. 

At the end of each 5-year term, members receive their accumulated savings plus any dividends earned… tax-free. 

Why should you care?

The Pag-IBIG MP2 has these four advantages:

1. High dividend yield

Very rarely will you see an investment vehicle that offers dividend yields as high as this. 

The Pag-IBIG Fund sets aside at least 70% of its annual net income for its members as dividends.

In 2024, the Pag-IBIG MP2 set a record high annual dividend rate of 7.1%. This means that for every PHP 100 you saved, you earn PHP 7.1 in dividends.

To put this into context, San Miguel Corporation (SMC), notably known for their quarterly dividend payout, declares PHP 0.35 cash dividends per common share. If you’d invested in SMC last year, your annual dividend rate would be less than 2%.

2. Tax-free

The earnings and dividends received from this program are tax-exempt. 

To put this into perspective, the interest earned on your regular savings account is subject to 20% tax. So not only is your interest earned in a regular savings account 10x smaller than what you would earn with Pag-IBIG MP2, but you’ll also be taxed.

3. Guaranteed earnings

Unlike the stock market, this government-backed program offers guaranteed earnings–meaning you don’t have to risk facing volatility in your investment portfolio.

4. High flexibility

You can start saving with as little as PHP 500, or go as high as you like, since there’s no maximum limit. You have the flexibility to save regularly or just make a one-time deposit.

If you decide to withdraw your MP2 savings before the 5-year maturity, there’s no penalty. But keep in mind, you may only receive 50% of the dividends, or possibly none, depending on your program.

Let’s play out scenarios

Note: Choosing the Annual Dividend Payout means you’ll receive your earned dividends every year. The Compound Savings Option retains your dividends in the fund and continues earning more for you over time.

Scenario A: You choose to save PHP 1000 every month. This is what you will earn after 5 years.

Scenario B: You have a million peso lying somewhere, and you choose to save it in an MP2. This is what your money will earn in 5 years.

ACTIONABLE TIPS FOR YOU

Enrolling For Pag-IBIG MP2

The Pag-IBIG MP2 Online Application process is rather simple; just follow these steps:

1. Visit the Pag-IBIG MP2 enrollment page. 

2. Provide your information and click “Submit”

3. Choose your preferred options for your:

   1. Dividend Payout

   2. Payment Mode

   3. Source of Funds

4. Save your completed enrollment form and take note of your 12-digit MP2 Savings Account Number. 

You can fund your account through any of the following modes of payment:

• Salary Deduction - If your employer is in the Pag-IBIG MP2 Salary Deduction Program, you can have them deposit directly to your account.

• OTC Payment - You can deposit to your account by visiting any Pag-IBIG branch or accredited payment center.

• Digital Wallets - Online digital wallets will also have payment channels, including GCash, Coins.ph, and Maya.

• Online Banking - Some banks offer Pag-IBIG MP2 payment services through their online apps. 

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