The guidelines released by the National Pension Commission (PenCom) that allows pension contributors access to residential mortgage with the balance in their Retirement Savings Account (RSA) have been described as massive and revolutionary.
According to stakeholders in the industry, this is a major development in the economic and social history of the Nigerian workforce and pensioners.
PenCom had, in a statement on Friday, informed all stakeholders and the general public, particularly RSA holders, that the commission has approved the issuance and immediate implementation of the Guidelines on Accessing RSA Balance towards Payment of Equity Contribution for Residential Mortgage by RSA Holders.
According to the commission, the approval is in line with Section 89 (2) of the Pension Reform Act 2014 (PRA 2014), which allows RSA holders to use a portion of their RSA balance towards payment of equity for residential mortgage.
Oguche Agudah, chief executive officer of Pension Fund Operators Association of Nigeria, said: “I’ve always maintained that the Pension Reform Act is one of the most important pieces of legislation in Nigeria’s economic and social history.
He said the journey had taken another positive twist with the recent release of the guidelines that enable RSA holders to use a portion of the savings they have built up over the years as an equity contribution for residential mortgage loans.
“This is monumental and should be celebrated. It’s taken months and years of engagements with various stakeholders.”
Agudah said the initial and direct impact is that more Nigerians would be able to own their own homes through this process. “The home ownership and first-time buyer home statistics in Nigeria is very low and one of the lowest in the world, and this should help to reverse this trend.”
He said this would also increase revenue for federal and state governments.
“This is what happens when well-thought-out, visionary and all-encompassing legislation is made.”
He, therefore, urged individuals who have been consistent with their pension payments to take advantage of this opportunity and those companies that have not to make good on contributions as it would benefit them and their employees in the long run.
While commending PenCom for leading the change and being committed to seeing this through, he said credit must be given to those who conceived, framed and fought for it to come to fruition.
“I’m not sure they would have envisaged the significant amount of ripple effect that this Act would have on the economy and our social life,” Ogudah said.
Paddy Ezeala, promoter and chief executive officer of Development Agenda, described the development as revolutionary.
According to him, many RSA holders have complained about the inaccessibility of their contributions at critical moments, but while not advocating for the equation of RSAs with savings accounts in banks, it is good to support RSA holders to own houses.
Ezeala said accommodation has become one of the critical challenges of retirees in Nigeria, adding, “So for me, this is a welcome development.”
Glory Etaduovie, managing partner at KGB Limited, said it is a very important step to continue to add value to contributors.
He said: “Access to long-term funds is difficult. Pension often takes care of this for the government and corporate bodies better than the banks. It is now time for contributors. The process needs to be defined clearly for ease of access to genuine cases to avoid abuses.
Read also: Contributors can now access mortgage with pension savings
“This is likely to open the door for other viable ancillary services to contributors. The long-term wait until retirement may seem a bit too long, especially where there are peculiar challenges.”
According to him, the more the contributors feel PenCom’s action and initiatives, the more they believe in pension. Viable corporate bodies are already massively benefitting, he said.
To be eligible for this, the commission said the guidelines cover pension contributors in active employment, either as a salaried employee or as a self-employed person.
It said: “Interested RSA holders (applicants) must meet the following conditions: 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; while RSA holders that have less than three years to retirement are not eligible.”
The guidelines state that married couples, who are RSA holders, are eligible to make a joint application, subject to individually satisfying the eligibility requirements; while RSA holders, if registered before 1 July 2019, must have their records updated through the RSA data recapture exercise.
“Application for equity contribution for residential mortgage shall be in person and not by proxy.”
On maximum withdrawal percentage, the guidelines also say the maximum amount to be withdrawn shall be 25 percent of the total mandatory RSA balance as at the date of application, irrespective of the value of equity contribution required by the mortgage lender.
“Where 25 percent 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).”
To qualify as a mortgage lender for this purpose, the company must be licensed by the Central Bank of Nigeria, comply with the Contributory Pension Scheme and have valid Pension Clearance Certificate.
The guidelines state that the commission shall publish names of the eligible mortgage lenders on its website, hereby, invites interested RSA holders to contact their pension fund administrators for more information and guidance.
