Nigeria has presented a regulation allowing eligible Retirement Savings Account (RSA) holders to access a portion of their pension contributions in funding residential mortgages, as it looks for ways to improve the standard of living of RSA holders under the Contributory Pension Scheme (CPS) by facilitating their ownership of residential homes during their working life.
This is according to a press release available on the website of the National Pension Commission: Guideline on Accessing RSA Balance Towards Payment of Equity Contribution for Residential Mortgage by RSA Holders.
The scheme was established under the PRA 2014 for the payment of retirement benefits to employees to whom the scheme applies under the Act
According to PENCOM, this scheme applies to employees in active service or self-employed persons who are making monthly/periodic contributions to either RSA Funds I, II, III, V, or Active Fund VI, registered with a licensed PFA.
The scheme has a maximum authorized amount to be applied as equity contribution for a residential mortgage as 25 percent of the total RSA balance as at the date of application irrespective of the percentage of equity contribution required by the Mortgage Lender.
Where the required equity contribution is not up to 25% of the RSA balance, the RSA holder can only access an amount equivalent to the equity contribution required by the Mortgage Lender. Additionally, PENCOM stated that in a situation where the value of 25% of the RSA is lower than the equity contribution required by the Mortgage Lender, the RSA holder shall deposit the difference with the Mortgage Lender before 25% of his/her RSA balance can be applied as equity contribution.
The report from PENCOM further reveals that the RSA of the applicant should have both employer and employee’s obligatory contribution for a minimum period of 60 months before the applicant can access his/her RSA balance for equity contribution for a residential mortgage.
Married couples, who are RSA holders, shall be eligible to make a joint application, subject to individually satisfying the eligibility requirements set out in these Guidelines.
Upon receipt of the application from the Pension Fund Administration (PFA), PENCOM shall review the request and confirm that the requested amount is not more than 25% of the RSA and afterward grant approval or decline within 3 working days.
Some few exceptions
RSA Holders whose retirement period is less than 3 years as at the time of application, shall not be eligible to use a portion of their RSA balances as equity contributions for a residential mortgage.
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 mortgages.
