Many Nigerians are increasingly turning to their pensions for equity contribution towards acquisition of mortgage, as rising costs of home rentals have made landlord-tenant relationship unsustainable.
With the economic pressures from inflation and a challenging housing market, utilising pension funds has become a viable option for many people under the Contributory Pension Scheme (CPS) for a stable living, Chika Onwunali, managing partner at Premium Debate said.
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This trend is reflected in the quarter on quarter subscription for residential mortgage through equity contribution, according to data released by the National Pension Commission (PenCom).
Data in the second quarter of 2024 shows that 2,491 Retirement Savings Account (RSA) holders requested to access up to 25 percent of their RSA balance towards payment of equity contributions for residential mortgage, as against 1,390 that requested for approval in the first quarter of 2024.
PenCom says approvals were granted to 2,305 requests amounting to N18.0 billion, while 186 were rejected due to incorrect documentations.
“Out of the 2,305 applicants whose benefits were approved, 631 were from the private sector, while the remaining 1,674 were from the public sector”.
Onwunali said this trend reflects a broader concern about affordability and financial security, as many people find it difficult to keep up with rental prices having seen a jump of more 50 percent increase in rent in some cities in the past one year.
“By tapping into pension savings, individuals can invest in property, which not only provides shelter but also serves as a long-term asset.”
PenCom on 23rd September 2022 approved the issuance and immediate implementation of the guidelines on Accessing Retirement Savings Account (RSA) balance towards payment of Equity Contribution for Residential Mortgage.
According to PenCom, the approval for equity contribution for mortgage 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 mortgages.
Further look into the data on equity contribution for residential mortgage shows that 5,276 approvals have been granted by PenCom since inception of the scheme with N47.13 billion disbursed through mortgage finance institutions.
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The Pension Fund Operators Association of Nigeria (PenCom) in trying to enhance understanding and public knowledge about the pension mortgage guidelines have answered a lot of the questions bothering people’s minds.
1. Who is eligible? Anyone with a Retirement Savings Account (RSA) or Micro Pension Plan (MPP), provided they are in active employment or self-employed.
2. Number of years to retirement? You can apply as long as you have at least three years to retirement.
3. Couples can Apply: Married couples can apply but have to be individually eligible.
4. Maximum Applicable: The maximum that can be used is 25 percent of the total mandatory RSA balance at the date of application.
5. Voluntary Contributions: Yes, you can use some or all of the contingent portion of your voluntary contributions to shore up what is needed to make up your equity contribution for your residential mortgage.
6. Mortgage Lender to use: That is up to you to make your own choice. However, note that to qualify as a mortgage lender under this scheme, the company must be licensed by the Central Bank of Nigeria (CBN).
7. Qualifying for a mortgage loan: That is between you and your lender. Your PFA will get involved when you have an offer letter from a property owner and a licensed mortgage lender.
