We categorize majority of the labor force in the Philippines either minimum wage earners or contractual workers, which often gives Filipinos a difficult time to save. But the situation may be different for regular workers who earn higher than minimum wage earners.
Your investment choice should be based on a financial goal you want to achieve within a certain period. According to financial experts, short-term plans, for instance, may cover a child’s 7th birthday, a wedding plan or your wife’s pregnancy soon. Now, if you wish to get a new car, settle a housing down payment or save for your children’s tuition fees, try to keep some of your current earnings as part of your medium-term goal.
The MP2 Program and other Possible Investments
There are different investment schemes being offered on the market, which may mislead or confuse ordinary Filipinos with complicated contract terms. Here’s a quick overview of some popular short-term investments available today:
1. Modified Pag-IBIG II (MP2)
The Modified Pag-IBIG II (MP2) is an interesting investment portfolio where both earnings and contributions are government-guaranteed, meaning you won’t lose any of your hard-earned money. This savings scheme is open to all Pag-IBIG I (P1) members who may need a short-term savings plan for the next five years. The annual dividend rate for MP2 has grown between 4.5% and 8.2% based on investment trends for the last eight years.
2. SSS PESO Fund
The SSS Personal Equity and Savings Option (PESO) Fund is a voluntary savings program offered to all active SSS members. Just like the MP2 program, its earnings and dividend rates are government-guaranteed and free of withholding taxes. The SSS PESO Fund earnings have ranged between 1.85% and 3.75%, which is still better than private banks.
3. Time deposits
A time deposit is a perfect choice for beginners who prefer not to take risks but want a higher interest rate than a conventional savings account. This conservative investment can earn between 0.8% and 4.0% per annum depending on investment performance, which is better than private banks. Read more [here]
4. Money Market fund
Money market fund is the best option for traditional investors who prefer a better investment option than regular time deposits. It’s usually invested in short-term, risk-free debt instruments like government treasury bills, certificate of deposits and corporate bonds. The return of investment (ROI) for money market funds may range between 1.3% and 2.75% per annum. Read more [here]
5. Treasury bills (T-Bills)
A treasury bill is another risk-free investment established to help the government raise funds for its national debt. It has a face value of a fixed amount (increments of Php10,000 to Php500,000), usually sold to the public at a lower value than indicated on the T-bill. The annual interest rate for T-bills has ranged between 0.8% and 2.85% according to BSP Treasury Bill data from 2012 to 2018. Read more [here]
You can check the table below to compare the difference between these investment schemes.
|Investment Type||Annual Interest rate|
|MP2||4.5% to 8.2%|
|SSS PESO Fund||1.8% to 3.75%|
|Time deposit||0.8% to 4.0%|
|Money market fund||1.3% to 2.75%|
|T-Bills||0.8% to 2.8%|
It seems that MP2 is an ideal investment portfolio for moderate income-earners of today’s Filipino generation. It would be beneficial to consider both P1 and MP2 as savings options for your retirement.