Compare tax-free MP2 against a PSE index investment over your horizon.
Higher after-tax ending value
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MP2, tax-free
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Stocks, after STT
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A safe government fund against the open market
This is one of the most common forks for a Filipino saver who has built a little surplus. Park it in Pag-IBIG MP2, a five-year savings program whose dividends are tax-free and whose capital is government-backed, or put it into a Philippine Stock Exchange index and accept market risk for a shot at a higher return. The calculator grows the same yearly contribution at two rates you choose, then makes the comparison honest on one specific point that catches people out, tax. It is not a forecast. It is a like-for-like projection that strips out the tax advantage of MP2 so you can see what the gap really is before risk enters the picture.
How the two paths are grown and taxed
Both columns use the same engine. Each year your contribution is added to the running balance and the whole balance grows by the rate for that path, contributions treated as made at the start of the year. The difference is at the end. MP2 dividends are tax-free, so its ending balance is what you keep. The stock path grows gross, and then the calculator applies the stock transaction tax on the sale, modelled at 0.6 percent of the proceeds, because selling listed shares on the exchange triggers that levy in place of capital gains tax. That single deduction is the tax wedge the tool isolates. The MP2 dividend rate and the stock return are assumptions you set, and the 0.6 percent rate is the figure modelled here, so confirm the current stock transaction tax with the Bureau of Internal Revenue (BIR) and the latest MP2 dividend history with Pag-IBIG.
PHP 60,000 a year for ten years, side by side
Contribute PHP 60,000 a year for 10 years. Set MP2 at a 7 percent dividend and the stock index at a 9 percent return, the calculator's default assumptions. Using the rates this calculator applies, the two paths land like this.
| Path | Before tax | After tax (PHP) |
|---|
The stock path wins by roughly PHP 100,640 here, but notice the transaction tax only shaved about PHP 5,962 off the gross. On listed shares the tax wedge is small. The far bigger driver of the gap is the two-point difference in return, which is precisely the part that is not guaranteed.
The risk gap the numbers cannot show
The single most important caveat is that the two columns are not equally certain. MP2's 7 percent in the example is a smoothed, historically steady dividend on a capital-protected fund. The 9 percent on stocks is an average that, in any given year, could be a sharp loss. A decade that includes a bad final year can leave the stock path below MP2 right when you need to withdraw. The honest read of this tool is not "stocks win." It is "stocks need to out-earn MP2 by enough to justify the volatility, and here is how big that earned premium would be." A practical approach many Filipinos take is to hold both, filling MP2 for the safe, tax-free core and using equities for the growth tilt on top. A useful way to stress-test the decision is to lower the stock return in the tool toward the MP2 rate and watch the lead shrink or flip, which shows you how much of the stock advantage depends on the optimistic return holding up over the whole horizon.
Does MP2 really pay nothing in tax?
Correct, MP2 dividends are tax-free, which is a large part of its appeal and why the calculator leaves its ending balance untouched. The trade-off is the five-year lock-in before maturity, though dividends can be compounded or paid out along the way. Verify the current treatment and any early-withdrawal terms with Pag-IBIG.
Is the 0.6 percent the only cost of investing in stocks?
No. The tool models only the stock transaction tax on the sale. In reality a broker also charges commissions, clearing and exchange fees, and value-added tax on the commission, on both buying and selling. Those are usually small per trade but they do reduce the real-world stock outcome a little further, so treat the after-tax figure here as slightly optimistic for the equity path.