Four Pag Ibig Mp2 Strategies You Need To Know


In a separate article on Pagibig-MP2, a discussion on the many benefits of the program included its tax-free income, guaranteed capital, dividend options, and small starting capital for as low as P500.

In a separate article, I’ve discussed how you can make the most out of your Pag-ibig MP2 earnings so that your net benefits can be maximized. You can check it out and then come back here. It is also worth noting MP2 historical return since 2010.

Here, the discussion is extended to include MP2 strategies. Included too are financial goals and situations where they might be appropriate to be used.

Related: Passive income through Pag-ibig MP2: How to start saving
How to make the most of Pag-ibig MP2 earnings

Strategy 1: Compounded MP2

Do you have any medium-term financial goals? A medium-term goal is to be fulfilled in three to five years.

It may require an amount that you may not be able to put up presently, and by postponing it later in the future would give you more time to save up. These goals can be any of the following:

  • Important milestones such as weddings, anniversaries, reunions, etc.
  • Leisure such as vacations abroad
  • Purchase or down-payment for a property or vehicle
  • Capital for a business or franchise
  • Child education
  • Professional development like taking student exchange or post-graduate studies

Any number of investment options are suitable for these goals such as bondsmoney markettime deposit productssavings accountlong term negotiable certificate of deposit and balanced funds.

You might have to think twice going into the more aggressive equities and index funds because of the relatively short length of time. Experts recommend that equities require at least a decade to ride through the ups and downs of the stock market.

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Pag-ibig MP2 is particularly suited for these goals too because its maturity is 5 years. If you let the dividends compound at the end of the maturity, the more that you get out of your savings.

How the compounded MP2 strategy works

  • Save monthly, yearly or one-time.
  • Let the savings stay in MP2 to mature.
  • Withdraw at the end of the 5-years.
  • Reap the benefits of compound interest!

See below a sample annual dividend pay-out for a one-time savings of P1 million.

Strategy 3: Tiered MP2

As you can see from the table above, you can actually get the dividends per year. However, there are situations where you might want bigger returns than what the dividends can offer such as:

  • child education
  • tuition and matriculation fees for your post-graduate or professional education
  • mortgage and other big expenses

The tiered MP2 strategy makes use of the fact that you are allowed to open multiple MP2 savings account.

How the tiered MP2 strategy works

  • Open one MP2 savings account each year for the next four (or more) years.
  • Start saving P500 monthly on the first year, P1,000 monthly on the second year, P1,500 on the third year, and so on.
  • On Year 5, you can withdraw the first MP2 savings.
  • On Year 6, you can withdraw the second MP2 savings, and so on…
  • You can also do yearly or one-time savings.

See below a sample estimate of your earnings and income starting Year 5 and so on if you save at least P500 monthly.

Your total savings would be ₱150,000 and at the end of the fifth year, your first Pag-IBIG MP2 account would mature and give you ₱36,266. Your four other accounts would also mature in each succeeding year respectively, giving you a total of ₱181,331.

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And if we compute your total dividend, that is going to be ₱31,331 (181,331 – 150,000), which is a cumulative growth of 20.89%.

YEARSAVINGS1ST MP22ND MP23RD MP24TH MP25TH MP2
16,0006,244   
212,00012,9566,244  
318,00020,17112,9566,244 
424,00027,92820,17112,9566,244
530,00036,26627,92820,17112,9566,244
624,000 36,26627,92820,17112,956
718,000  36,26627,92820,171
812,000   36,26627,928
96,000    36,266
Total150,00036,26636,26636,26636,26636,266

And this table shows growth of your funds if you save P1,000 monthly and that is an annual total of ₱12,000. At the end of five years, your entire savings would be ₱300,000. With the dividends and adding all the earnings from MP2, you get ₱362,661.

EARSAVINGS1ST MP22ND MP23RD MP24TH MP25TH MP2
112,00012,488   
224,00025,91212,488  
336,00040,34225,91212,488 
448,00055,85640,34225,91212,488
560,00072,53255,85640,34225,91212,488
648,000 72,53255,85640,34225,912
736,000  72,53255,85640,342
824,000   72,53255,856
912,000    72,532
Total300,00072,53272,53272,53272,53272,532

Disadvantage of tiered MP2 strategy

One possible disadvantage of the tiered MP2 strategy is the fact that you would need to increase your savings by twice the amount each succeeding year. The relief begins on Year 5 as you would have one less account to save up for.

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Strategy 4: MP2 rollover

Can Pag-ibig MP2 be used for long-term investing? Apparently, yes.

Before discussing about the strategy it is worth repeating two things. One, MP2 matures at the end of 5 years. Two, if you don’t withdraw your money, the dividend you’re going to get would be the same as Pag-ibig mandatory savings, which is relatively lower than what MP2 is offering.

So with the MP2 rollover strategy, the goal is to keep your savings in the program and let it grow as long as you want. One of the benefits of this strategy is the potential for compound earnings longer than 5 years.

How MP2 rollover strategy works

  • Open an MP2 account.
  • Save monthly, yearly or one-time.
  • At the end of 5 years, withdraw your money.
  • Open another MP2 account.
  • Put your savings back to the new MP2 account.
  • Rinse and repeat.

The only downside is that there are reports it might take quite a while before you can get back your money, some lasting for months. For the time being that you’re unable to withdraw, that can be a missed opportunity of earning passive income for your savings.

Also, some people might find it inconvenient to keep closing and opening accounts every five years. To date, an option for automatic rollover is not yet available to the investing public.

Here is a projection using the average dividend rate from 2010 to 2018 for one-time capital of ₱1,000,000. This estimate tracks the growth of the account for nine years. The total dividend will be ₱663,362.

As a reminder, past returns do not guarantee future and actual performance. For a full discussion, you can check this article on MP2 earnings since 2010.

YEARSAVINGSDIVIDENDTOTAL
11,000,00058,1671,058,167
261,5501,119,717
365,1301,184,847
468,9191,253,765
572,9271,326,693
677,1691,403,862
781,6581,485,520
886,4081,571,928
991,4341,663,362
Total1,000,000663,3621,663,362

Take-aways

  • There are four MP2 strategies: compounding, annual dividend pay-out, tiered MP2 and MP2 rollover.
  • Pick the strategy that best suits your financial goal.
  • MP2 has maturity of 5 years, making them suitable for medium-term goals and for reaping the benefit of compound interest.
  • In annual dividend pay-out, you can withdraw the dividend each year for extra income.
  • In tiered MP2 strategy, you may open and save up for one MP2 account each for the next four (or more) years. You then withdraw from each account upon maturity starting on Year 5.
  • In MP2 rollover, you can keep your savings for as long as you want by closing an account upon maturity and transferring them over to a new one.