Bank Savings Account vs. Pag-IBIG MP2

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As you reach the certain age of adulting, you will realize that your wallet is not secured enough to stack up some cash for your savings and expenses. Once you are already earning and having a regular income, it is important to have something where you can entrust your hard-earned money with. While your wallet in your pocket gives you convenience and easy access to hard cash, it doesn’t guarantee safety because there is a possibility that it might get lost. It is also the same thing with keeping your money somewhere at home because thieves might come sneaking around.

Saving money could be a simple routine to those who are earning regularly, but deciding where to save or invest might be a tough one. Instead of unfolding comparisons among the best bank in the Philippines, this article will give you two better options: bank savings account and Pag-IBIG MP2 savings. Probably, it is the first time you were asked of these options, but give it a shot to know more about how interest rates work on Pag-IBIG MP2 compared to bank savings account.


Requirements and Process of Application

The requirements and process of an application for a bank savings account and Pag-IBIG MP2 are just almost the same. Today, government savings programs like Pag-IBIG MP2 and bank savings prefer their clients to enroll online before going to the nearest branch. This lessens the transaction time because clients no longer need to fill out long enrollment or application forms because their details were already recorded in the system for their initial application. 

  1. For Pag-IBIG MP2 Savings, click this link for online enrollment Modified Pag-IBIG II Enrollment (  For enrolling for a bank savings account, go to the website of your desired bank and look for their e-application.
  2. Without further ado, you will now fill out their application form. In Pag-IBIG MP2 Savings, information about desired monthly contribution and source of funds are separated from the actual enrollment form but will be generated altogether once you filled out everything. Meanwhile, in other banks, everything is already included in one application form.
  3. After verifying if all the information are correct, click SUBMIT. A verification or confirmation will be sent to the email address and/or mobile number that you entered. Further instructions will also be given. 
  4. Once enrolled, you may now go to the nearest branch with at least two valid IDs and wait for your turn to accomplish other requirements such as verification of identity and signatures. 
  5. After getting approved, you may now have your initial deposit with a minimum of P500 for Pag-IBIG Savings MP2. For a bank account, it will depend on the nature of your savings. The usual initial deposit is P500 to P10,000. 

Bank Savings Account vs. Pag-IBIG MP2 

Application for bank account savings and Pag-IBIG MP2 savings is almost the same but there are differences when it comes to your deposit, terms and conditions, and most especially the interest rate. These two have their own pros and cons, and these comparisons might help you to decide the best choice for you that will be suitable for your needs and lifestyle. A few aspects and nature of the two were highlighted and explained for you to better understand how they are actually similar and different at the same time.

  • Requirements and Procedures. As explained above, the requirements and procedures are almost the time. Both have online enrollment or you might want to manually fill out the form at the nearest branch. You need at least two valid IDs and money for an initial deposit.
  • Mode of Payment/Deposit. For a bank savings account, you need an over-the-counter deposit. Fill out a deposit slip first and wait for your turn and after the teller processed your deposit, then you are good to go.You may also deposit using online transactions such as using GCash, PayMaya, and interbank fund transfer. When it comes to Pag-IBIG MP2, you may remit through the same mode as the bank savings account. 

If you choose Pag-IBIG MP2, you must complete your one-year or five-year term to receive your savings along with the dividends, hence, you should be a regular depositor if you do not want a one-time payment for the total amount. Meanwhile, you have more freedom in a bank savings account because it is up to you when you want to deposit which means you are not obligated to deposit monthly.

  • Term/Maturity Period. A bank savings account could last for a lifetime as long as you are maintaining its required minimum amount. However, Pag-IBIG MP2 only has its five-year term and once you reached it, you have to renew your contract to get two more years to enjoy a higher dividend rate of 7% or more, depending on the performance of Pag-IBIG funds. Failure to renew it will cause your dividend to flunk to 1%. 
  • Access to Savings. As long as you have funds, you can withdraw your money anytime from your bank account savings. It can be through a mobile application, ATM or over-the-counter withdrawal. On the other hand, you can only receive your Pag-IBIG MP2 savings within a year or after its five-year term. 
  • Interest Rate. This is the most interesting aspect to consider because there is a wide margin between a bank savings account and Pag-IBIG MP2. In the regular bank savings accounts, you can only earn 0% to 1% interest rate per year. Some banks do not even reach that 1% but rather just play between .25& to .70%. Meanwhile, you can have a whopping 7% annual interest rate in Pag-IBIG MP2 savings which sometimes exceed a bit depending on the annual income of the agency. To compare how much you will earn, look at the table below.
Pag-IBIG MP2 SavingsAnnual Dividend Payoutbased on 7.5% dividend rate
Month CoveredMonthly Savings (MS)Accumulated MS Per YearCumulative SavingsAnnual Dividend PayoutTotal Accumulated Value
Jan-Dec 2021500.006,000.006,000.00243.756,000.00
Jan-Dec 2022500.006,000.0012,000.00693.7512,000.00
Jan-Dec 2023500.006,000.0018,000.001,143.7518,000.00
Jan-Dec 2024500.006,000.0024,000.001,593.7524,000.00
Jan-Dec 2025500.006,000.0030,000.002,043.7530,000.00

To get the MP2 divided, use this formula to compute it: dividend rate x average monthly balance. Now, to get your average monthly balance, get your cumulative savings for the year and divide the total sum by 12 (which is the number of months in a year). The dividend rate will vary per year depending on the annual income of the Pag-IBIG Fund. The annual dividend payout option yields a lower total dividend than the compound savings but this gives opportunities to people who need annual income such as for the much-awaited celebrations, annual trips, or yearly investment for a growing business.

Pag-IBIG MP2 SavingsCompound Savings (5-year term)based on 7.5% dividend rate
Month CoveredMonthly Savings (MS)Accumulated MS Per YearCumulative SavingsAnnual Dividend PayoutTotal Accumulated Value
Jan-Dec 2021500.006,000.006,000.00243.756,243.75
Jan-Dec 2022500.006,000.0012,243.75712.0312,955.78
Jan-Dec 2023500.006,000.0018,955.781,214.5320,171.21
Jan-Dec 2024500.006,000.0026,171.211,756.5927,927.81
Jan-Dec 2025500.006,000.0033,927.812,338.3436,266.14

Compound savings are for those who have a medium-term goal wherein they will be able to withdraw their savings after five years. This option is best for those who are planning to have their wedding, education fund, dream foreign trip, or for business capital. Upon application, you will decide whether you want to go for an annual payout or complete the five-year term which gains much higher total dividend. Take not that we only computed the minimum monthly savings, what more if you will be able to deposit much higher amount monthly.

Regular Bank Saving (5 years)based on 1% interest rate
Month CoveredMonthly Savings (MS)Accumulated MS Per YearCumulative SavingsInterest Per Annum
Jan-Dec 2021500.006,000.006,000.0048.00
Jan-Dec 2022500.006,000.0012,000.0096.00
Jan-Dec 2023500.006,000.0018,000.00144.00
Jan-Dec 2024500.006,000.0024,000.00192.00
Jan-Dec 2025500.006,000.0030,000.00240.00

Whether you choose annual dividend payout or compound savings in Pag-IBIG MP2, you are at the great edge compared to entrusting your savings to regular banks. With a monthly deposit of P500 yearly in five years, you cannot even reach a thousand in a bank savings account. Why that low? It is because aside from a very low interest rate annually, you have to deduct a 20% withholding tax rate. Even worse is that you cannot get even a centavo at all because some banks require a minimum deposit yearly for you to avail interest rate. So, how was the interest rate computed in the table?

P6,000 (total savings) x 0.01 (converted 1% interest rate) = P60

P60 – 20% tax = P48

            To deduct the tax, get the 20% of P60 which is 12 and subtract it to P60 which gives you P48. This also means that higher savings means higher deduction. To be honest, the total gain from bank savings account is extremely low compared to Pag-IBIG MP2. 

Should I Go with Bank Savings Account or Pag-IBIG MP2 Savings?

 When it comes to choosing between a bank savings account and Pag-IBIG MP2 savings, this question is for you to answer. Just make sure to choose whichever will fit your needs. If you want short-term savings with higher dividends, go for Pag-IBIG MP2 savings. It is the better choice to secure for college education, future business investments, building your dream house, family trips, and big celebrations. This is a wise option if you are saving up for planned expenditure. You will not be able to withdraw your money anytime you want to which is great if you really want a disciplined saving habit.

Meanwhile, opening a bank savings account would be a better decision if you are aiming for lifetime savings. Unlike Pag-IBIG MP2, you do not have to renew your bank account every five years, but the gain here is way much lower than the other one. Also, you can withdraw cash anytime through ATM withdrawal. It is harder to resist the temptation if you have the means to withdraw money from your savings account. 

 If you want to get the benefits of the two, you may open both Pag-IBIG MP2 and a bank savings account. You could deposit to your bank account the higher savings that you will gain from Pag-IBIG MP2 annually or every five years. 


It is time to step up towards financial maturity. Say goodbye to your piggy bank and say hello to a savings account that will help you better track your earnings and expenses. A savings account will not just secure your money but will also make it grow depending on the annual interest rate. Aside from having your money secured, it is growing as well which could increase your savings in the long run. No matter how low the rate is, it is still better than none at all.

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