Everything you need to know about Pag-ibig MP2

It’s the New Year—there’s no better time to start thinking about saving money than right now!

One of the best choices for saving money is Pag-ibig Fund’s Modified Pag-ibig II (MP2), a voluntary savings scheme for its contributors.

I have written about MP2 in previous posts but those were only a sample contribution plan and a guide on how to compute the dividend payout.

Here are the things you need to know about MP2:

Voluntary

As long as you have a Pag-ibig Fund (P1) account, you may open an MP2 account. You will make voluntary payments, which means that even if you only deposit once within five years, that is okay. If you deposit more than once in a month, that is also okay. Back in April 2024, my previous employer (Bicol University) stopped paying for my Pag-ibig because my contract with them ended after 5.88 years. In December, I changed my status in Pag-ibig from employed to self-employed and I had to pay all the missed payments from May to December so I can open another account this January.

Advantage

MP2 has higher dividend rates compared to most time deposits in banks. In 2017, the dividend rate reached 8.11 percent. When it’s time for your account to mature, you don’t have to worry about paying anything because it will be tax-free.

Maturity

Maturity refers to the time when your account is already available for withdrawals. It takes five years for an account to mature, but it doesn’t mean that you need to withdraw it after five years. You may leave it open for another two years, but the dividend rates used for those two remaining years will be the P1 rates.

Compounding

The dividend rates for MP2 are compounding, which means that the dividends you earned in one year will be included in the computation for the succeeding years. Here’s an example: You deposited P100,000 in January 2025. For the year 2025, the dividend rate is 7 percent. That means that after computation, you will have P107,000 in 2026. Let’s say that during that year, you did not deposit any amount because you had a lot of expenses. If the dividend rate for 2026 is 7 percent again, the computation will be like P107,000 plus 7 percent.

Dividends

Dividend rates in MP2 are always higher than the dividend rates in P1. They are usually announced in latter part of the first quarter of the year, or early in the second quarter of the year. This means that for the year 2025, you will know the dividend rate by March or April 2026. You don’t have to keep on thinking about this because they’ll be safe in Pag-ibig’s hands for five years anyway. Just sit there and wait for the compounding magic to happen. When I withdrew my account that I started in 2018, it was up by more than 30 percent. This doesn’t mean that this will also be your experience. You may have a higher interest rate after five years, or you may have lower. It all depends on how much you deposit in the first year. That is why this is my contribution strategy.

The dividend for the previous years were the following:

As you can see, the dividend rate has never gone below 4.58 percent and for the past five years, the average dividend rage was 6.67 percent.

Best Time To Open Account

Some people say that January is the best time to deposit because the dividend factor is 1. That is not entirely true. The best time to deposit is still whenever you have the ability to contributor. Even if you start in December, it’s still not a bad idea to miss out on the dividends from that single month.

Deposits

Each time you are going to make a deposit, the minimum is P500. If in case your will be depositing more than P100,000 you will be asked to give documents proving the source of that fund. A list of those requirements can be found below (see number 5 in the requirements listed in the photo I uploaded). Additionally, if you make a one-time deposit of P500,000 you will be asked to give that payment via personal or manager’s check.

How to Open an Account

There are two ways that you can open an account. The first is that you may visit the nearest Pag-ibig branch. The second is if you have a Virtual Pag-ibig account, you can make one from the Pag-ibig webste. Look for “MP2 Savings Enrollment” under eServices. See this screenshot of the website’s homepage. You will find it in the lower left side of the screenshot.

To open an account, you will need your MID number. For self-employed contributors, you will need to upload documents as proof of income. This makes me a little bit frustrated because Pag-ibig already knows what our sources of income were when we made P1 accounts, but I guess they don’t want to look at the documents we provided them. *shrugs*

If you want to open an account by visiting the nearest branch, you will be given an MP2 Enrollment Form. It looks like this:

You will need your MID number for this as well. Under “Preferred Dividend Payout,” you have two choice: Annually or Five-year. If you want compounding interest, you need to pick the latter. If you want to receive the payout every year, I am not sure how it works, but you will probably have an option to receive it via check or via the AUB bank account connected to your Loyalty Card.

Requirements

There are only two basic requirements in opening an MP2:

1. The completed form above.
2. A photocopy of a valid ID.

If you are a former natural born Filipino and you have reacquired your Filipino citizenship, you will be asked to provide a photocopy of your Philippine passport and Certificate of Reacquisition or Retention of Philippine Citizenship.

If you are a self-employed individual or if you are employed in a private company, you will be asked to give a proof of source of income in the form of a payslip or the latest accounts or tax declaration. The back of the MP2 Enrollment Form has a complete list of requirements for special cases:

What if you want to withdraw before maturity?

Pag-ibig allows early withdrawals, but this is only for special cases like permanent disability, when you become unemployed, when you retire, when you migrate, or when you die and a family member is going to withdraw the money. Just note that not all of the dividends will be given for accounts withdrawn before maturity. It is better to ask some from Pag-ibig regarding this matter or you can visit this website.

The dividend rate for the year is announced in March or April the next year, what if you want to withdraw before that?

If you are going to withdraw your MP2 account before the dividend rate is announced, say January or February, Pag-ibig will use the dividend rate from the previous year. This will be an advantage if the dividend rate for that year is higher than the next year so there is a bit of a gambling part in this part. Therefore, you have two options: wait it out until the dividend rate is announced, or let them compute using the dividend rate from the previous year. Personally, I don’t mind that they use the dividend rate from the previous year because I have five accounts anyway.

Hello Pag-ibig App

For someone like me who has multiple accounts, it’s just not ideal for me to use GCash or Maya to deposit my MP2 contributions. I hate paying transaction fees so what I did was to get a Pag-ibig Loyalty card, which costs P125. That is a fee that I am willing to pay because I can also use the loyalty card to get discount in partner establishments. To date, I have saved almost P200 from discounts. That is not a large amount, but I don’t eat outside that much anyway, so for me, that’s enough. I digress.

Getting a loyalty card also allows me to create an account in the Hello Pag-ibig app. From SeaBank (I use SeaBank for their free transfers; please use this link to get P50 free in SeaBank or my code: RO462893), I send money to Hello Pag-ibig and then pay my MP2 accounts from there. I have saved at least P265 from avoiding transaction fees with Hello Pag-ibig. Here’s a guide I made to avoid transaction fees.

If you have questions regarding MP2, feel free to send me questions via my email ra@ravstheworld.com or you can use the comment section below.

Happy savings, everyone!