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Pag-IBIG II

Beyond Loans: The Pag-IBIG II Program As Investment And Tax Shelter

by Pag-IBIG Financing Admin

When the Pag-IBIG Fund was first conceived, it was intended to offer the following services and benefits to its members:

  • Provident Savings
  • Short Term Loans (Multi-Purpose Loan, Calamity Loans, etc)
  • Housing Loans

All of these are still available today.

Over time, Pag-IBIG has grown (both in terms of finances and membership) that it introduced other programs and services.

There was the Pag-IBIG Overseas Program, which was a special program meant to address the needs of the Overseas Filipino Workers. Then there was the Pag-IBIG II Program, which was not so popular but is nonetheless very beneficial to those who participated in the Program.

The original Pag-IBIG program is now called Pag-IBIG I to distinguish it from the other programs of Pag-IBIG especially the Pag-IBIG II Program.

Pag-IBIG I vs. Pag-IBIG II

One site visitor asked, “Is Pag-IBIG II better than Pag-IBIG I?”

First, please be aware that the two programs are different from each other and as you read along this article we’ll touch base with some of the benefits you can derive by participating in the Pag-IBIG II Program.

The following are the differences of the two:

1. Membership — In order to participate in Pag-IBIG II, the only requirement is that you have to be a member of Pag-IBIG I. There’s no other way. Think of it as placing an investment in the Fund, and it is really that – an investment program. Participating in Pag-IBIG II program is voluntary and is open to all Pag-IBIG I members only.

2. Contributions — With Pag-IBIG I, your regular monthly contribution is P 200. For employees, that is a 50-50 split, with the other half courtesy of the employer. Self-employed and self-paying members have to shoulder the whole amount. With Pag-IBIG II, the monthly investment is at least P 500; remember: no less!

3. Maturity — Pag-IBIG I will mature in 20 years. Pag-IBIG II matures in 5 years, though you have an option of extending it for another 5 years.

4. Dividend Rate — There’s that word again. Remember, your money in Pag-IBIG Fund will not earn an interest, but it will earn a dividend. The difference between the two is the difference between a savings program and an investment program.

The Management of the Pag-IBIG Fund assures those who are participating in Pag-IBIG II that their money will earn dividend that is a bit higher than their earning in Pag-IBIG I. However, there is no pre-stated rate of return, because the amount of dividend has to be decided by the board every first quarter of the year and whether you like it or not this will depend on many things among them is the performance of the Pag-IBIG Fund.

5. Access To Loans — Here is a slight downside of the Pag-IBIG II Program: You can’t loan against it. Remember that when you apply for a Pag-IBIG Multi-Purpose Loan, your loan eligibility depends on the amount of your TAV (contributions + dividend) from the Pag-IBIG Fund. You can’t use Pag-IBIG II in such kind of short-term loan.

[Further reading: The Pag-IBIG II Savings Program — our first article about the Pag-IBIG II Program.]

Think: Investment

You really should think of Pag-IBIG II as an investment program and keep the following points in mind:

  • higher dividend
  • shorter maturity term
  • guaranteed by the government
  • tax-free
  • tax shelter

Tax Shelter — Is that a Joke?

Maybe it’s true. The government is joking about the Pag-IBIG II as your tax shelter. But, don’t you think you deserve a tax break from time to time? Thanks to the Pag-IBIG Program, it becomes legally possible to avoid paying a portion of your tax.

Actually, it’s not just the Pag-IBIG II that’s tax exempt, your Pag-IBIG I is tax exempt as well. But since Pag-IBIG I contribution is normally pegged at P 200 per month, that doesn’t have a big impact on your tax due. And since there is no limit on the amount of contribution to the Pag-IBIG II, it could spell a difference on your taxable income.

In general, the simple equation helps to make the point much clearer.

Taxable Income = Basic Pay – [ (Pag-IBIG I) + (Pag-IBIG II) + (SSS) + (Phil Health) ] + …

The Home Development Mutual Fund Law of 2009 stated in its Rule IX, Section 12:

Pag-IBIG Contributions are Excluded from the Computation of the Gross Income. Pursuant to Section 32 (B)(7)(f) of the National Internal Revenue Code of 1997, as amended, Pag-IBIG Contributions are excluded from the computation of the gross income and shall be exempt from taxation.

In other words, one of the ways you can reduce your tax payment is by investing in Pag-IBIG II.

Patriotism aside, remember that tax avoidance is legal while tax evasion is illegal. And you should not confuse the two.

“Beyond Loans: The Pag-IBIG II Program As Investment And Tax Shelter” is written by Carlos Velasco.

Filed Under: Pag-IBIG Savings And Investments Tagged With: Dividend, Investment, Multi-Purpose Loan, Pag-IBIG II, Pag-IBIG Overseas Program, POP

The Pag-IBIG II Savings Program

by Pag-IBIG Financing Admin

Pag-IBIG Fund is not just about Housing Loans, though this is the most popular benefit offered by the institution to its members. Once you become a member of the Pag-IBIG Fund, you also participate in its Savings Program where you get yearly dividends and which you can claim upon maturity of your membership.

There are actually three types of Savings Programs under Pag-IBIG, namely:

The Pag-IBIG I (P1) Program

This is the most popular Savings program and one that recently become mandatory for all Filipino employees based in the Philippines. So far on this website, we have focused our discussions on Pag-IBIG I and Pag-IBIG Overseas Programs and there are a lot more topics to be covered in the coming days.

The minimum monthly contribution to the Pag-IBIG I program is only PhP 200 (combined employee-employer contribution.)

Pag-IBIG Overseas Program (POP)

This savings program is applicable to overseas Filipino workers (OFW) and Filipino immigrants abroad. Minimum monthly contribution to the Pag-IBIG Overseas Program is only USD 5; actual contribution will be converted to Philippine Peso upon payment.

Overseas Filipinos should learn more about the Pag-IBIG Overseas Program and take advantage of it.

Pag-IBIG II (P2) Program

This is the lesser known Savings program of Pag-IBIG Fund, maybe because it is non-mandatory. It was first introduced in 1989 for members who want to avail of larger amount for housing loan. That is, large loan must have bigger contributions. But a lot of changes has been made since then. Today, Pag-IBIG II is much similar to P1 and POP, but with much higher dividend. The minimum month contribution to the program is PhP 500 only; this is on top of your contributions to P1 and/or POP.

Q & A: Other Important Information On Pag-IBIG II Program

1. Can I participate on Pag-IBIG II if I am already a member of Pag-IBIG I or POP?

Yes, and it is also open to POP members. You have to file a separate application to do this. Remember that this is an additional contribution of at least PhP 500 per month. This of this as a savings program with a higher yield, more than anything else.

And one more thing, to participate in this program, you must be an active member of either P1 or POP.

2. Can I apply for a loan under Pag-IBIG II?

No, Pag-IBIG II is purely a Savings Program.

3. Can I withdraw my savings anytime?

Members of Pag-IBIG Fund can withdraw their total accumulated value (TAV) upon maturity of their membership only, but there are exceptions:

  • total disability or insanity
  • separation from service for health reasons
  • death

The Total Accumulated Value is your total contributions plus its dividends.

The term of this investment is five (5) years. That is, by the end of five years, you will get your TAV.

4. What are the other benefits of investing in this program?

  • higher dividend compared to Pag-IBIG I
  • your dividend is tax-free
  • your investment is guaranteed by the government

5. How much exactly is the dividend?

Remember that you are investing in a mutual fund and your dividend depends on many factors. But so far, on the average, P1 so offers 5.5% per annum and P2 is something around the 6.5% figure. That is still comparably larger than your usual regular savings account with a bank.

~~~

The Pag-IBIG II Savings Program is written by Carlos Velasco.

Filed Under: Pag-IBIG Savings And Investments Tagged With: mutual fund, Pag-IBIG I, Pag-IBIG II, Pag-IBIG Overseas Program, POP, TAV, Total Accumulated Value

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