With over N15trillion needed to bridge housing deficit in the country, it behooves on stakeholders to unite in bridging this gap.
So, when PenCom, a fortnight ago, announced the implementation of guidelines on accessing Retirement Savings account (RSA) balance for payment of equity contribution for residential mortgage by pension contributors, it signal a new dawn in the history of the new pension scheme.
The vice president, Professor Yemi Osinbajo had earlier estimated the country’s present housing deficit at a staggering 20 million houses, which experts said would require over N15 trillion to fix.
In 2019, however, PenCom initiated a discussion with the Central Bank of Nigeria(CBN), mortgage institutions, among other relevant stakeholders, to fine-tune a guideline that will regulate this initiative.
The guideline is expected to facilitate access to home ownership by pension contributors as well as bridge the housing deficit in the country.
Section 89 (2) of the Pension Reform Act (PRA) 2014 had provided that a Pension Fund Administrator(PFA) may, subject to guidelines issued by PenCom, apply a percentage of pension fund assets in the retirement savings account towards payment of equity contribution for payment of residential mortgage by an RSA holder.
But the modality and implementation of applying this provision can only be triggered by a new regulation on how to use one’s contribution for mortgage, of which its implementation commenced two weeks ago.
The Mortgage
Implementation Guideline
With the pension fund asset at N14.5trillion, the Retirement Savings account (RSA) holders can now secure their dream residential houses, using the balance in their pension accounts.
PenCom, in a statement made available to NATIONAL ECONOMY, announced the implementation of guidelines on accessing Retirement Savings account (RSA) balance for payment of equity contribution for residential mortgage by pension contributors.
PenCom added that, the approval was in line with Section 89 (2) of the Pension Reform Act (PRA) 2014, which allows RSA holders to use a portion of their RSA balance towards payment of equity for residential mortgage.
In the guidelines highlighted, it said, the plan covers pension contributors in active employment, either as a salaried employee or as a self-employed person.
It noted that interested RSA holders (applicants) must meet certain conditions’ such as: “Have an offer letter for the property duly signed by the property owner and verified by the mortgage lender; the RSA of the applicant shall have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months (five years); a contributor under the Micro Pension Plan (MPP) is also eligible, provided he/she has made contributions for at least 60 months (five years) prior to the date of his/her application, and so on,
Others include; “ RSA holders that have less than three years to retirement are not eligible; married couples, who are RSA holders, are eligible to make a joint application, subject to individually satisfying the eligibility requirements; RSA holders, if registered before 1 July 2019, must have their records updated through the RSA data recapture exercise and application for equity contribution for residential mortgage shall be in person and not by proxy.”
The pension sector regulator maintained that the maximum amount to be withdrawn shall be 25 per cent of the total mandatory RSA balance as at the date of application, irrespective of the value of equity contribution required by the mortgage lender.
It stated that, where 25 per cent of a contributor’s RSA balance is not sufficient for payment as equity contribution, RSA holders may utilise the contingency portion of their voluntary contributions (if any).
PenCom submitted that to qualify as a mortgage lender for this purpose, the company must be licensed by the Central Bank of Nigeria (CBN), comply with the Contributory Pension Scheme (CPS) and have valid Pension Clearance Certificate (PCC).
The Commission said it shall publish names of the eligible mortgage lenders on its website.
To this end, PenCom called on interested RSA holders to contact their PFAs for more information and guidance.
Implications Of The Guidelines
Pension operators, under the auspices of the Pension Fund Operators Association of Nigeria(PenOp), said, the recent permission granted to RSA holders to use certain portion of their pension contribution for mortgage, will reduce housing deficit in the country.
The operators, through the chief executive officer, PenOp, Mr. Oguche Agudah, noted that, this policy has the potential to spur growth in other sectors of the economy, while boosting mortgage finance and home loan sector, in addition to having a positive effect on the construction value chain and building materials sector.
While applauding PenCom for the recent release of the guidelines that brings into effect the use of a portion of one’s Retirement Savings Account (RSA) as equity contribution for obtaining residential mortgages, he added that, “we believe it will create massive jobs for artisans and blue color workers involved in the construction value chain and also further open up wealth management and financial planning industry.”
To this end, the association said, RSA holders will now begin to plan towards a target RSA balance because they have a goal of owning a home.
“We also believe that voluntary contributions will increase because people can use the contingent portion of their voluntary contributions as part of the equity contribution for residential mortgages. In addition, more companies will now take their contributions more seriously as will staffs of these companies.
“For those who do not have an RSA account and are working in the formal sector, we urge them to commence the process in conjunction with their employers. For those in self-employment, we also encourage them to take advantage of the Micro Pension Plan (MPP),” PenOp pointed out.
Believing this policy is net positive for the pension industry and the economy as a whole, Agudah added that, the effects are catalytic and will help to galvanise various sector of the economy.
The pension industry, over the years, the association noted, has played a significant role in the local debt and equity market, financing National and Sub National projects and debt programmes and financed transformational companies and projects.
“The industry is primmed to do more and we believe that this new policy is another milestone in the positive effect of the pension industry on the economy and also another example of the collaborative nature of the pension regulator that leads to gains for the wider economy,” the group stated.
On his part, chairman/CEO, Achor Actuarial Services Limited, Dr. Pius Apere, said, the payment of equity contribution for residential mortgage would provide a financial peace of mind to RSA holders because; the necessary funds required to buy a house are readily available and that owning a residential property would mean no payment of rent and hence an increase in disposable income to maintain a certain standard of living after retirement.
The RSA holders, he stressed, will no longer be paying off the mortgage with RSA balance at retirement.
“The residential property is a physical asset that would appreciate in value over time leading to value for money at the point of sales to RSA holder or retiree. This is particularly important for a RSA holder and/or retiree who own a residential home and need long term care immediately or in the future. Such a RSA holder or retiree can make retrospective payments of the cost of long term care by using an equity release which unlocks the value built up in the home as a tax free lump sum. The cost is usually repaid when the RSA holder or retiree moves into long term care home or dies,” he pointed out.
While believing the PenCom Guidelines would improve the standard of living of RSA holders under the CPS by facilitating their ownership of residential homes during their working life, he added that, the property might also be used by a retiree as a collateral to obtain bank loans to set up business ventures in retirement to generate income with the aim to maintaining the same standards of living prior to retirement.
To him, “the utilisation of RSA balance for the payment of equity contribution towards securing a residential mortgage by RSA holder has a unique selling proposition leading to deepening financial inclusion in the pension industry. The foregoing would also enable Retirees to have adequate retirement incomes with decent standard of living.”
