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Pension for mortgage gains traction as financing hits N15bn

Find out why these 5 mortgage banks are preferred destinations for home loans

Pension contributors numbering 1,371 have successfully secured approval for residential mortgage financing valued at N14.83 billion as at the end of November.

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).

PenOp said the industry remains steadfast in prioritising the well-being of contributors.

The National Pension Commission (PenCom) had on September 23, 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.

Read also: Pension for mortgage makes progress with 187 equity subscribers

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 mortgages.

“The recent initiative allowing contributors to utilise 25 percent of their RSA contributions for mortgages after five years of consistent contributions underscores the industry’s commitment to facilitating early homeownership,” PenOp said.

Adoption jumps to 1,371 contributors from 13 in March

It said the surge in approval of applicants from 13 to 1,371 within a short period following this development is a testament to its positive impact, encouraging more RSA holders to actively participate in and join the Contributory Pension Scheme (CPS).

“The total of N14.83 billion was facilitated to enable applicants to realise their dream of homeownership in November, marking a significant increase from the N130.25 million disbursed in March,” it said.

Agudah Oguche, executive secretary/CEO of PenOp, said the association, in trying to enhance understanding and public knowledge about the pension mortgage guidelines, has answered many of the questions bothering people’s minds.

Ibrahim Kangiwa, head of the Investment Department at PenCom, had said for contributors under the 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, are also eligible.

On the authorised limit for equity contribution that qualifies a contributor, Kangiwa put the maximum allowed at 25 percent of the RSA balance, saying that “where 25 percent of RSA balance is more than equity contribution, the RSA holder can only access the amount equivalent to equity contribution required”.

He said: “Where 25 percent is not sufficient for equity contribution, RSA holders may utilise Voluntary Contribution in line with the Voluntary Contribution guidelines.

“Where 25 percent is not sufficient for equity contribution, Micro Pension (MP) contributors may utilise contingency portion in line with MP guidelines. Where 25 percent is insufficient as equity contribution, the RSA holder shall deposit the difference with the mortgage lender.”

Read also: Retirees and pension for mortgage

Those exempted from this initiative, according to Kangiwa, include RSA holders that have less than three years to retire; existing retirees on CPS; exempted persons under the PRA 2014 and RSA holders who do not have both employer and employee mandatory contributions for a cumulative minimum period of 60 months.

He said that equity contribution was not for refinancing an existing mortgage, outright purchase of property and purchase of land, noting that the property shall be for residential purposes only.

Kangiwa said the objective of the initiative was to provide housing for first-time homeowners and improve the standard of living of RSA holders under the CPS by facilitating their ownership of residential homes during their working life.