Pagibig Financing

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

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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.

Reader Interactions

Comments

  1. I just want to know your contact number I have some qustions to ask.
    Thank you

  2. the tax shelter makes sense… but there’s something vague about it. For us employed citizens, the taxes are withheld and based on the net salary or after all the exemptions.

    say, i participate in Pag-ibig II, how will my employer know about it and add it to my exemptions so that my applicable tax would be lower?

    is Pag-ibig II program paid thru your employer or self-remittance to Pag-ibig?

    The same goes for the increase in contribution for Pag-ibig I. Say, I’d like to increase my contribution from the measly 200 to 1000, in preparation for a future housing loan. Is it the employer’s responsibility to deduct this new amount to my salary? and in effect lessen my taxable income?

    Pag-ibig website doesn’t show this info as well.

  3. BIR RMC 27-2011 Effective July 1, 2011
    BIR no longer allows deductions from an employee’s income the HDMF Contributions beyond (in excess of) the compulsory contribution (that is 2% of P5000 max. or P100.00 only) .

    I hope that the BOT of Pag IBIG will change the P5,000.00 maximum.

  4. @angeljme,
    You can go to the hdmf office where your office remit your contributions, there’s an enrollment form, then show it to your present employer, then you can have your pag ibig 2 contributions deducted by your present employer,

  5. @Ronron:
    Thanks for your inputs. That was indeed a bad news for those who want to participate in the Pag-IBIG 2 Program. But maybe they should invest their money somewhere else.

  6. justa few questions
    1. pagibig 2 is voluntary right?
    2. if i ahve pag ibig 2 can i have it deducted from my taxable income even if i dont inform my office that i am enrolled in it?

  7. Clarification:
    BIR no longer allows (AS TAX DEDUCTIBLE) the deductions from an employee’s income the HDMF Contributions beyond (in excess of) the compulsory contribution (that is 2% of P5000 max. or P100.00 only).

    Employees may still contribute beyond P100 per month but sadly, beyond P100/month is no longer tax deductible. I hope this one is much clearer now.

  8. asko ko lang, pwede ba ako makpagloan kahit ndi ako emlpoyed?? kakaresign ko lang, kaya nakapaghulog na ako ng 30 months

  9. @reischel:
    Yes of course, but you need to show them some proof of income for your loan application to be taken seriously. That means, you can be a self-employed or run your own business.

  10. Do you mean to say that all that 1% if less than P1,500 or 2% over P1,500 monthly income is useless because the mandatory is always pegged at P100?

  11. It seems it is not a wise decision to invest in pagibig anymore due to the BIR RMC No. 27-2011 saying voluntary contributions are taxable.

  12. GOOD DAY!
    JUST WANT TO ASK IF IT IS POSSIBLE TO APPLY FOR A MULTI- PURPOSE LOAN OF ONE HUNDRED THOUSAND, I AM OFW AND MY MONTHLY CONTRIBUTION IS 600/MONTH. AND MY MONTHLY SALARY IS 35THOU/ MONTH.
    THANK YOU AND HOPE FOR YOUR POSITIVE RESPONSE

  14. GOOD day Admin!
    As of 2012, is this formula still apply for PAG-IBIG II?

    Taxable Income = Basic Pay – [ (Pag-IBIG I) + (Pag-IBIG II) + (SSS) + (Phil Health) ] + …
    (Reference; ‘BEYOND LOAN: The PAG-IBIG II Program As Investment And Tax Shelter)

    When I went to PAG-IBIG branch office last march 16,2012 to ask if pag-ibig 2 is still deducted from TAXABLE INCOME, they said NO(since last year daw). Can we clarify this issue?

  15. @dunhill:
    Yes, they are correct. Actually, it was the ruling of the BIR that changed this.

    That makes that program unattractive to Pag-IBIG members who availed of the program or even those who are still planning to participate.

    Please refer to Ronron’s comment above at #7.

  16. hi admin just wanna ask, granting i have extra funds aside from my income from work can i still invest in pagibig 2? i mean the funds i have is outside my work so i don’t worry about having the amount deducted from my income which is automatically witheld by my company.

  17. if an employee wants to increase her contribution to say 300 instead of 100, what’s gonna be the employer’s participation then? will it still be 100?

  18. @jayvee:
    That’s optional on the part of the employer. They are only required to contribute 100 per month for you.

    @mellie:
    Yes, you can do that.

    • With regards to Mellie’s question. How big is the Tax for voluntary contributions?
      Is this possible? Say I increase my contributions to 1,000.
      (employer = 100) + (employee = 1,000)
      if yes, how can I course this to our HR office?

  19. im 38yrs old na.14yrs n member ng pag ibig,nwalan nko ng work now.pde ko nb withdraw ung pagibig contributions ko?