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Equity for mortgage to boost voluntary pension contributions – PenOp

Recent guidelines that bring into effect the use of a portion of one’s Retirement Savings Account (RSA) as equity contribution for obtaining residential mortgage will drive increased voluntary contributions and enrolment into the pension scheme.

Operators, under the umbrella body of Pension Fund Operators Association of Nigeria (PenOp), say contributors will now begin to plan towards a target RSA balance because they have a goal of owning a home.

PenOp on Wednesday said, “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.”

The body commenting on the new guidelines also noted that for those who do not have an RSA account and are working in the formal sector, they can 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). We believe this will help to grow the Micro Pension business and ensure that millions of Nigerians in the informal sector will have the opportunity to enjoy structured pensions when they retire and also benefit from the gains of the pension reform.”

“It should boost the mortgage finance and home loan sector, in addition to having a positive effect on the construction value chain and building materials sector.”

PenOp says, “We believe it will create massive jobs for artisans and blue-collar workers involved in the construction value chain and also further open up wealth management and financial planning industry, the body noted.

“Overall, we believe this policy is net positive for the pension industry and the economy as a whole. The effects are catalytic and will help to galvanize various sector of the economy.”

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According them, the pension industry over the years has played a significant role in the local debt and equity market, financing national and sub-national projects and debt programs 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 another example of the collaborative nature of the pension regulator that leads to gains for the wider economy, the statement further stated.

While commending the National Pension Commission (PenCom) for the release of the guidelines, PenOp noted that this provision, had been part of the amendments that occurred when the Pension Reform act was amended in 2014.

“We are aware that the process of actualizing this portion of the act has gone through a number of interations and stakeholder engagement and we are happy that it has finally been released.”

Whilst we realize that there might be some initial teething problems, we the pension operators are excited and are primmed to partner with the commission, RSA holders and other stakeholders to ensure that this policy actualizes the reason for why it was set up, the association said.

The homeownership ratio and first-time homebuyer statistics in Nigeria is very low and we believe that this policy will help to improve this and also provide increased benefits to RSA holders in the immediate.

This policy is very catalytic in nature and has the potential to spur growth in other sectors of the economy. It should boost the mortgage finance and home loan sector, in addition to having a positive effect on the construction value chain and building materials sector.

“We believe it will create massive jobs for artisans and blue-collar workers involved in the construction value chain and also further open up wealth management and financial planning industry.”

Pius Apere, an actuarial scientist and insurer adding his voice on the PenCom guidelines, said it would improve the standard of living of RSA holders under the CPS by facilitating their ownership of residential homes during their working life.

“Furthermore, 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.”

Apere, who is also the chairman/CEO Achor Actuarial Services Limited, said would also increase the RSA holders’ propensity to make additional voluntary contributions (AVC) to their RSA since RSA holders are allowed to utilize the contingent portion of his/her Voluntary Contribution (VC) for equity contribution.

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