Why some pension contributors won’t qualify for mortgage
Iyabo Ajai, who works with a private radio station in Lagos, was excited when the news of the guidelines that allow pension contributors access residential mortgage with a portion of the balance in their Retirement Savings Account (RSA) broke last weekend.
For her, the dream of getting her own residential apartment through a mortgage will be a reality since she has accumulated some good amount of money in her pension savings account.
Iyabo had calculated that she could afford to buy a room and parlour self-contained apartment in a choice area in Lagos since she has accumulated a good amount of money so far.
But unfortunately, she will be disappointed because she does not meet the eligibility criteria set out in the guidelines released by the National Pension Commission (PenCom).
The reason is that Iyabo has some unremitted contributions from her employer, and so could not qualify to access the fund for residential mortgage.
Part of the PenCom guidelines state that for eligibility, 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.”
Therefore, if her contribution has not been regular for a period of five years, that is, the employer and employee portions remitted as and when due, she would not be benefitting from the new development.
And like Iyabo, many RSA holders, whose salaries are deducted monthly and not remitted as and when due, will suffer similar fate.
Meanwhile, efforts to strengthen pension remittances by employers of labour have continued to gain traction, as recovery agents since inception have pulled in N22.13 billion.
According to data from PenCom, from the commencement of the recovery exercise in June 2012 to 30 June 2022, a total of N22.13 billion, consisting of principal contributions (N11.441 billion and penalties N10.690 billion) was recovered from defaulting employers.
The second-quarter report of PenCom reveals that following the issuance of demand notices to defaulting employers whose pension liabilities were established by the recovery agents, the sum of N721,120,251.46, representing principal contribution (N517,654,905.94) and penalty (N211,465,345.52), was recovered from 20 defaulting employers during the quarter under review.
At the same time, seven defaulting employers have been recommended for appropriate legal action, after all administrative steps taken to make them comply failed.
Section 11 (6) of the Pension Act 2014 states that any employer who fails to remit the contributions within the time prescribed shall, in addition to making the remittance already due, be liable to a penalty to be stipulated by the commission.
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The penalty, according to the pension law, shall not be less than 2 percent of the total contribution that remains unpaid for each month, or part of each month that the default continues, and the amount of the penalty shall be recoverable as a debt owing to the employee’s retirement savings account, as the case may be.
Aisha Dahir-Umar, director-general of PenCom, during the 2022 Stanbic IBTC Pension Managers Employers’ Forum in Lagos, called on employers to make prompt remittance of their workers’ pension deductions.
Dahir-Umar, represented by Babatunde Alayande, head, South West Zonal Office of PenCom, said for pensions to be smart in order to equip employees for a better future, employers are expected by Pension Reform Act to ensure the remittance of pension contributions of employees into their RSAs within seven days of salary payment.
“Pension contributions are expected to be remitted into the RSAs of employees within seven days of salary payment,” he said.
According to her, for pension to be smart, employers are also expected to open nominal RSAs for employees who have refused to open their own RSAs and once the nominal RSA is opened on behalf of such employee, the employer is expected to commence pension contribution remittance into that nominal RSA until the employee opens his RSA.
According to the commission, 12,760 applications were received from private sector organisations for the issuance of Pension Clearance Certificates (PCCs) during the second quarter of 2022.
“Out of this number, PCCs were issued to 10,085 organisations, while 2,675 applications were being processed.”
The records showed that the 4,025 organisations had remitted a total sum of N43,778,899,890.04 into the RSAs of their employees, totalling 141,701.
The contributions remitted to individual RSAs in Q2 2022 stood at N238.75 billion, and out of this total, the public sector accounted for N136.79 billion or 57.29 percent, while the private sector contributed N101.96 billion or 42.71 percent.
The cumulative pension contributions from inception to the end of the second quarter of 2022 amounted to N8.01 trillion, which is an increase from N7.77 trillion as at the end of Q1 2022.
The aggregate pension contributions of the public sector increased from N4.02 trillion in Q1 2022 to N4.15 trillion as at the end of Q2 2022. Similarly, the aggregate pension contributions of the private sector also increased from N3.76 trillion in Q1 2022 to N3.86 trillion as at the end of Q2 2022.