Pension contributor’s access to residential mortgages is rising but at a slow pace due to eligibility concerns, particularly in the private sector where irregular remittance is a big issue.
The industry stakeholders believe that many interested contributors could not apply even when they have the required amount as part payment for a mortgage because their employer-employee remittance is irregular and is against the law.
Ibrahim Kangiwa, head of Investment Department, National Pension Commission (PenCom), said for contributors under the Contributory Pension Scheme (CPS) to be eligible to use their RSA balance for the acquisition of residential mortgages, they must have contributed for five years (60 months) cumulative of employer and employee’s mandatory contributions.
He said the same thing was applicable to the contributors under the Micro Pension Plan (MPP), adding that married couples, who individually met the eligibility criteria, were also eligible.
On the authorised limit for equity contribution that qualifies a contributor, Kangiwa put the maximum allowed at 25 per cent of the RSA balance, noting, “where 25 per cent of RSA balance is more than equity contribution, the RSA holder can only access the amount equivalent to equity contribution required.
As at the end of November 2023, contributors numbering numbering 1,371 have successfully secured approval for residential mortgage financing valued at N14.83 billion. The number rose from 13 contributors approved in March with financing valued at N130.25 million, according to data released by the Pension Fund Operators Association of Nigeria (PenOp).
According to PenCom, 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 mortgages.
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.
Subsequently, the commission released a list of 34 primary mortgage banks to participate in the use of the RSAs for residential mortgages.
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% 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’s 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.
8. Hurdles to Consider: If you joined the CPS or MPP before July 1, 2019, you must have your record updated through the data recapture program.
9. Do you need a Connection: All you need to do is approach your PFA directly (not through a proxy) and determine your eligibility criteria, go through the process and make your application.
10. Those who have accessed 25% of their RSA after redundancy: Yes, you are eligible, however, your RSA must have received employer and employee contribution for a MINIMUM of 60 months (5 years) from the date of the first contribution. In any case, your PFA should let you know your eligibility.
11. Those who are retired: Existing Retirees on CPS and exempted persons under the PRA 2014 shall not be eligible to use their RSA balances for payment of equity contribution for Residential Mortgage.