The new pension policy that allows contributors to use 25 percent of their Retirement Savings Account (RSA) balance to pay for residential mortgage, will drive savings and new consciousness in the contributory scheme, experts have said.
According to the experts, the desire to qualify for assessment of the mortgage will drive voluntary contributions, raise consciousness about what happens to one’s pensions, as well as enable contributors have a desired plan with their pension savings.
The expert spoke at a twitter space conversation held Tuesday with the theme: ‘The Nigerian pension industry: the new mortgage guidelines policy’, anchored by Kalu Aja, a financial education instructor.
Oguche Aguda, chief executive officer, Pension Fund Operators Association of Nigeria (PenOp), who applauded the scheme, said it has been in the pipeline since 2014, but expressed the joy that it has become implementable.
He said many people would want to access the fund for mortgage, but to qualify and to have the desired choice, contributors would have to voluntarily save into their RSA.
According to him, your voluntary contribution could be helpful to you, so that you can use the contingent portion of the fund to support your choice of mortgage.
Oguche said people should take control of their pensions, ask questions and make certain decisions that will enable them enjoy the benefits, and make sure it is working as expected.
He said that people shouldn’t say, ‘waoo’. It is my money, let me take it. Think through, Oguche said.
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According to him, understanding the implications of accessing these funds are important. You lose a job, you take 25 percent, for a mortgage, you take 25 percent, it means you are going to have a lower amount in your RSA at retirement, he said.
The policy is going to spur more financial planning for RSA holders, in knowing what decision to take. Therefore, people may require the services of financial advisers, he said.
This is also an opportunity for those who do not have formal employment, or some individuals who engage in one trade or the other to get on board the pension scheme and have the opportunity to save for a residential mortgage.
Akintola Akinbola, research and investment lead at PenOp in his contribution and responses to some of the questions by participants, said, the policy enables RSA holders to plan towards a preferred mortgage.
On whether the desire to access mortgage with pensions would have an impact on industry’s total pension assets, he said. “How many people will qualify for an equity contribution for a mortgage? In my opinion, I do not think many people will qualify to impact strongly on total assets of PFAs, Akinbola said.
“We do not expect a significant impact on the value of pension assets, rather, we think this should spur committed efforts towards savings to be able to qualify in the long run, ” he noted.
PenCom had on September 23, 2022 informed 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.
To be eligible for this, the commission says the guideline covers pension contributors in active employment, either as a salaried employee or as a self-employed person, the statement said.
Interested RSA holders (applicants) must 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 further stated 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 July 1, 2019, must have their records updated through the RSA data recapture exercise.
