In accordance with Section 89 (2) of the Pension Reform Act 2014 (PRA 2014), the National Pension Commission (PenCom) released guidelines on the utilisation of Retirement Savings Account (RSA) balances as equity contributions for residential mortgages.
The objective of the initiative is to address the housing deficit and enhance the quality of life for RSA holders participating in the Contributory Pension Scheme (CPS) by facilitating their ownership of residential homes during their working life among others.
Eligibility Criteria
RSA Holders
The Guidelines cover pension contributors currently engaged in active employment, including both salaried employees and self-employed individuals. Prospective RSA holders (applicants) are required to fulfil the following criteria:
The RSA holder must possess an Offer Letter for the property, appropriately signed by the property owner and authenticated by the Mortgage Lender.
For the purpose of equity contribution towards the residential mortgage, the RSA holder or applicant should have accumulated both mandatory contributions from the employer and the employee over a combined minimum span of 60 months (equivalent to five years) prior to the application.
The applicant has the option to apply the available portion of their Voluntary Contribution (VC) as equity contribution, adhering to the Voluntary Contribution Guidelines within the Contributory Pension Scheme (CPS).
In calculating the 25% equity contribution, contributions from the NSITF and Pre-Scheme for an active RSA contributor could be considered as part of the RSA balance.
A Micro Pension Contributor is eligible to utilize their RSA balance to contribute towards a residential mortgage, provided they have made contributions for a minimum of 60 months (five years) prior to their application, as outlined by the Guidelines for Micro Pension Plan.
The applicant has the choice to employ the applicable portion of their contribution as specified by the Guidelines for Micro Pension Plan.
RSA Holders who accessed their RSA balances due to employment termination before these Guidelines were introduced can access their RSAs for equity contribution, given that their RSAs received both employer and employee contributions for a minimum of 60 months from the initial contribution date.
RSA holders who have used 25% of their RSA balance for residential mortgage equity contribution will be qualified for a 25% payment from their RSA in case of job loss, following the provisions of Section 7(2) of the PRA 2014.
Current retirees under the CPS and individuals exempted under the PRA 2014 will not have the eligibility to utilize their RSA balances for residential mortgage equity contributions.
Married RSA holders are permitted to submit a joint application, provided they both satisfy the eligibility criteria as outlined in the Guidelines individually.
RSA holders with fewer than 3 years until retirement are not qualified to utilize a segment of their RSA balances as an equity contribution for residential mortgages.
Mortgage Lenders:
To qualify as a Mortgage Lender for this purpose, the company must be licensed by the Central Bank of Nigeria (CBN), comply with the Contributory Pension Scheme (CPS) and have a valid Pension Clearance Certificate (PCC).
The Mortgage Lender must possess a valid license granted by the Central Bank of Nigeria, adhere to the guidelines of the Contributory Pension Scheme, and hold an active Pension Clearance Certificate in accordance with PenCom's directives.
The Mortgage Lender is required to maintain a sound financial position consistently and must fulfil the specified minimum prerequisites set by the CBN. These prerequisites encompass standardized underwriting practices within the industry, effective assets and liabilities management policies, a clearly defined foreclosure procedure, adequate liquidity, sufficient capital reserves, overall asset quality, sustained profitability, and any other prerequisites mandated by the CBN periodically.
Additionally, the Mortgage Lender must conform to the regulations outlined in Sections 2, 4(1), and 4(5) of the Pension Reform Act, 2014.
The names of Mortgage Lenders that fulfil the eligibility criteria established by these Guidelines will be publicly disclosed on the Commission's website biannually or upon the issuance of any new licenses by the CBN.
Maximum Amount Allowed
The highest permissible amount that can be released as equity contribution for a residential mortgage is 25% of the overall RSA balance as of the application date, regardless of the equity contribution percentage stipulated by the Mortgage Lender.
In cases where an RSA holder has previously accessed their RSA balance for residential mortgage and an additional 25% due to job loss, they are entitled to access a lump sum upon retirement as outlined in section 7(1a) of the PRA, 2014. This is subject to guidelines set forth by the Commission.
If the value of 25% of the RSA balance exceeds the required equity contribution amount, the RSA holder can only access a sum equal to the equity contribution mandated by the Mortgage Lender.
In situations where the value of 25% of the RSA balance is lower than the equity contribution required by the Mortgage Lender, the RSA holder is obligated to deposit the disparity with the Mortgage Lender before 25% of their RSA balance can be employed as an equity contribution.
The RSA holders who fulfil the above-specified prerequisites are eligible to apply up to 25% of their RSA balances as equity for residential mortgages. This initiative aims to enhance the quality of life for RSA holders participating in the Contributory Pension Scheme (CPS) by assisting them in acquiring residential properties during their active employment years, among other objectives.
Comments