Pag-IBIG fund plans to increase contributions by 100%

The Home Development Mutual Fund, or Pag-IBIG, announced on Wednesday plans to increase by 100 percent the contributions of employees receiving more than P10,000 a month.

Jaime Fabiaña, chief executive officer of the fund, said, “Increasing our contribution rates will allow members to borrow bigger loan amounts and support the higher loan packages under Pag-IBIG’s housing finance program, while still ensuring the long-term stability of the Fund.” The fund has about 7.4 million members nationwide, according to Pag-IBIG.

In the present scheme, employees receiving at least P5,000 a month contribute to Pag-IBIG P100, an amount matched by the employer.

Those with receiving less than P5,000 monthly, contribute only P80.

Under the new proposal, those receiving at least P10,000 a month will contribute P200, and like the present setup, the employer will also contribute an equal amount to Pag-IBIG.

The planned increase in the contribution rates will rationalize the fund’s savings scheme, so that the members with higher incomes will have to save more. Fabiaña added that those who belong to the lower income bracket would not be adversely affected by the adjustment.

Under Republic Act 9679, or the Home Development Mutual Fund (HDMF) Law of 2009, the Pag-IBIG Board of Trustees can set the members’ contribution rate.

Enjoying the benefits

In the current system, a member who contributes P100 monthly to will be eligible to withdraw around P78,000 after 20 years. The amount is composed of P24,000 in personal savings, P24,000 in employer counterpart contributions, and the balance representing accumulated dividends that the contributions earned in the 20-year period.

A member who doubles his or her monthly contributions will be able to withdraw P160,000 after 20 years. And if the contributions are tripled, the member stands can to get P240,000 after two decades. Also under the proposal, Fabiaña said that members could avail of higher amounts in housing loans.

Employees who contribute P100 monthly are entitled to a P500,000 loan after a certain period. The fund’s CEO added that those who contribute P200 a month could borrow up to P900,000, and those who contribute P300 monthly, up to P1.3 million.

Fabiaña said the fund was consulting with various employee and employer groups, and the initial feedback was positive.

He also said, “Compared with other government institutions like the SSS, the GSIS and the PhilHealth which have adjusted their rates several times in the past 23 years, the fund has retained the same contribution rates since 1986.”

SSS, or Social Security System, is the state-run pension fund for private-sector employees. GSIS, or Government Service Insurance Corp., is the state pension fund for public-sector workers.

At present, Pag-IBIG members contribute only 2 percent of their monthly earnings, with the Fund Salary ceiling pegged at P5,000, he added. In effect, members, whether earning P5,000 or P50,000 a month, contribute only P100 monthly, Fabiaña explained.

Need for loans growing

He added that the proposed increase was needed to augment the fund’s housing loan disbursements, which have been growing consistently for the last eight years.

In the first seven months of the year alone, housing loan approvals reached P25.3 billion, up by 36 percent from the P18.5 billion level for the same period in 2008, Fabiaña said.

Following this trend, the fund forecast housing loan takeouts to exceed P45 billion by yearend despite the ill-effects of the global financial crisis, he added, also pointing out that this is the highest level that the fund has registered in years.

Also, the fund expected higher demands for affordable housing loans, which could reach as high as P60 billion by next year, he added.

“On a daily basis, Pag-IBIG is able to assist almost 300 members in acquiring or building their own houses,” Fabiaña said. The fund lends out about P160 million daily in housing loans. Short-term loans similarly posted significant increases annually, providing immediate financial help to more than a million Pag-IBIG members.

Daily, almost 8,000 Pag-IBIG members benefit from the fund’s short-term loan program, each receiving an average of P18,000 in loans.

In 2007, the fund also lent out P26.5 billion in multipurpose loans.
The following year, P33.3 billion in multipurpose loans was granted to members, or 26 percent higher than in 2007. As of July 2009, Pag-IBIG has already approved P22.4 billion multipurpose loans. Annualized, the fund projects total loans under the program to reach P37 billion by yearend. –Francis Earl A. Cueto, Reporter, Manila Times