Accessing Retirement Savings for Residential Mortgages: New Guidelines.

Introduction:

The National Pension Commission (PenCom) has recently approved and implemented guidelines allowing Retirement Savings Account (RSA) holders in the Contributory Pension Scheme (CPS) to access part of their RSA balance for equity contributions towards residential mortgages. This development follows the amendments introduced by the Finance Act of 2020, enabling Pension Fund Administrators (PFAs) to apply a percentage of pension assets for mortgage equity contributions.

Eligibility and Benefits:

To qualify, RSA holders must be actively employed or self-employed, with at least three years before retirement. The Guidelines stipulate a requirement of 60 months of contributions to the RSA, reflecting both employer and employee contributions.

Key Benefits Under the Guidelines:

1. Equity Contribution: Eligible employees can access up to 25% of their total RSA balance for equity contributions toward securing residential mortgages.
2. Cumulative Balances: The total RSA balance includes contributions from the Nigerian Social Insurance Trust Fund, Pre-Scheme contributions, and voluntary pension contributions (with the applicant’s consent).
3. Contingency Portion: Applicants can utilize the contingency portion of their voluntary pension contributions, allowing for the use of up to 50% of the voluntary contribution balance.
4. One-Time Access: Equity contributions for residential mortgages can only be accessed once by an RSA holder.

Procedure for Application:

1. In-Person Application: Applications must be made in person, and not by proxy.
2. Required Documents: Applicants need to fill out an Application for Mortgage Form, provided by the mortgage lender, along with a signed property offer letter verified by a CBN licensed mortgage lender with a valid Pension Clearance Certificate.
3. Approval and Remittance: Upon approval, the PFA will remit the approved equity contribution directly into the applicant’s account with the Mortgage Lender.
4. Joint Applications: Married couples can make joint applications, combining funds for a single residential mortgage. Each spouse must meet individual requirements and apply to their respective PFAs.
5. Micro Pension Contributors: Micro pension contributors meeting the 60-month contribution requirement are eligible to apply.
6. RSA Data Recapture Exercise: RSA holders registered before July 1, 2019, must update their records through the RSA data recapture exercise to apply successfully.

Potential Impact:

Prior to these Guidelines, RSA holders could not withdraw from their mandatory RSA before the age of 50, except in specific circumstances. The new era introduced by the Guidelines allows individuals to access funds for residential mortgages before retirement, providing an additional avenue for financial flexibility. This initiative is a commendable step by the government, encouraging eligible individuals to make the most of this opportunity.

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