Considering An Investment? Check Out Pag-IBIG Fund’s MP2 Savings Program – Financial Expert

Filipinos who are looking for an investment can consider Pag-IBIG Fund’s Modified Pag-IBIG 2 (MP2) Savings program as well as government bonds, according to a financial expert.

In an interview on “Agenda” over One News on Monday, April 17, Social Enterprise Development Partnerships Inc. (SEDPI) founder Vince Rapisura said MP2 Savings is most ideal for education, but can also be used as business capital or retirement fund, among others.

MP2 Savings is a special savings facility with a five-year maturity for members who wish to save more and earn higher dividends alongside their regular savings.

“They [investors] open an account every year for five years then when their child will go to college, they’ll have an account which will mature and that would be the budget for the child’s education for that year,” he said.

Rapisura explained that the program cannot be used for emergency purposes as unlike time deposit, MP2 Savings may take up to a month to be pre-terminated.

Rapisura noted that the MP2 Savings is tax-free, being a government program. This means that investors will receive the full dividend rates set by Pag-IBIG.

Pag-IBIG’s dividend rates come from 70 percent of its annual income, and are credited proportionately to its members’ savings similar to interest. In 2017, the program reached its highest dividend rate at 8.11 percent, while its lowest was at 4.58 in 2013.

Rapisura said even the smallest funds will be grown with the same dividend rate for MP2 Savings, unlike in banks where interest rates are only high when huge amounts are invested.

“If you have about P500, you get the same dividend rate in Pag-IBIG…For commercial banks, the more funds you place in a time deposit, that’s only the time when interest grows. For MP2, it’s democratized and not based on how rich you are,” he said.

For a five-year period, Rapisura estimated that a P1-million investment would have a one to three percent per annum interest rate in a commercial bank, while it would get a six percent per annum rate if placed in MP2 Savings.

“I think this is a very good way to challenge the banks to improve their financial products. If MP2 can do it, why can’t they,” Rapisura said.

In cases of pre-termination, Rapisura said that while banks process faster, investors will still earn 50 percent of the dividend rate under the MP2 Savings program.

Aside from MP2 Savings, Rapisura said the retail treasury bond and retail dollar bond could also be good investments.

“[Investors] would really go for bonds now because the stock market is not really performing well and because interest rate from the central bank [Bangko Sentral ng Pilipinas] is high, the interest rate on bonds would also be high so it’s a good investment right now,” Rapisura pointed out.

Retail dollar bonds offer a five to 10-year term with fixed interest, while treasury bonds are a medium to long term investment which can go from a year, to five years and a varying interest rate depending on the Bureau of Treasury.

For its 29th tranche last February, treasury bonds were offered at a 6.1 per annum interest rate, with a total takeaway of 4.9 percent following the 20 percent withholding tax. It had a five and a half year maturity rate.

Unlike the retail dollar bond which requires a minimum P15,000 investment retail treasury bonds can be bought for as low as P5,000.

However, the retail dollar bonds can also be used to invest in more stable currencies, which according to Rapsuria, diversifies an investment portfolio – a basic principle in investment.

He said it is because of this diversity that makes bonds a worthwhile investment, as stronger currencies can also preserve the purchasing power of one’s money.

As a last piece of advice, Rapsuria expressed his preference to have time deposits in rural banks. According to him, they offer higher interest rates, along with deposits being tax free if placed for more than five years.

On his “Usapang Pera” video series on YouTube, this was one of Rapisura’s top seven investments for 2022.

“I'm really for funds and financial institutions that would really develop and support the development of micro enterprises and rural banks do that…[They] offer higher interest rates than commercial banks. If you place time deposits greater than five years, so five years plus one day, the withholding tax coming from the government will also be waived so tax-free na ‘yan,” he said.