New law to enable pension contributors access mortgage using RSA balance

Nigeria is about  to reach another milestone in its pension industry as the National Pension Commission (PenCom) finalises a set of guidelines that would allow pension fund contributors access primary mortgages using their Retirement Savings Account (RSA) balances.

Chinelo Anohu-Amazu, director general, PenCom, announced this on Wednesday in Abuja at a conference which discussed the new provisions and developments ushered in by the 2014 Pension Reform Act endorsed by President Goodluck Jonathan last July.

A major provision introduced by the new Act is to allow contributors seeking to own residential homes to apply part of their RSA balance as equity contributions for residential mortgage, subject to the guidelines to be issued by the commission.

This is happening for the first time in Nigerian history and according to Anohu-Amazu, this remains the most important provision in the new law.

“For the first time this is happening and it is fantastic because in a place where we have over 15 million housing deficit, the over 6 million contributors under the contributory pension will now be able to utilise part of what they have saved,” she stated.

The second important provision, according to Anohu-Amazu, is the introduction of the minimum pension guarantee which assures that no matter what the RSA holder has contributed, he is guaranteed the basic minimum to satisfy and take care of him at old age.

The new Pension Act repealed the PRA 2004 which among other things provided for the establishment of the Contributory Pension Scheme, uniform standards for pension administration as well as the National Pension Commission as the sole regulator and supervisor of pension matters in Nigeria.

But it also introduced some provisions which, experts said, looked promising in the new era. Such include an upward review of the minimum pension contribution by the employee and employer from 15 to 18 percent and has empowered PenCom to enforce sanctions and penalties against infractions. The Act has equally extended coverage for the informal sector which Anohu-Amazu said the commission is passionate about, having discovered that in the ten years of PenCom existence, the bulk of the working population remains outside of those in the formal sector.

“We have the plumber, the electrician, the hairdressers, who have absolutely no retirement benefit plan. But our aim is to bring them in under the aegis of this 2014 Act so that they will be provided for in their old age.”

She said PenCom has huge investable funds, but have been there primarily to pay retirement benefits but PenCom is now trying to insist that those funds are also deployed for investments in infrastructure such as power, transportation which would be utilised to ameliorate the austerity measure facing contributors.

“This means that the funds will now be invested in projects that affect the contributors directly as well as retires alike.”