The National Pension Commission has issued draft guidelines on how workers can assess and make withdrawals from their Retirement Savings Account (RSA) while still in active service.
Under the new arrangement, workers will soon be allowed to withdraw 25 per cent of the balance in their RSA as collateral for mortgage loan before they reach retirement age.
It was gathered that a date is yet to be fixed for the commencement of the new plan.
According to the draft guidelines, workers who take the option of a 25 per cent for mortgage collateral will, however, forfeit the lump sum payment and shall only be entitled to a monthly pension payment after they retire.
Section 3.5 of the draft guidelines states that an eligible RSA holder shall be allowed to access a maximum of 25 per cent of the RSA balance as equity contribution for a mortgage loan.
Section 3.4 also states that a RSA holder that has utilised a portion of the RSA balance as equity contribution for residential mortgage may not be entitled to a lump sum payment at retirement.
According to Section 89 (2) of the Pension Reform Act 2014, a Pension Fund Administrator may, subject to guidelines issued by PenCom, apply for a percentage of pension fund assets in the RSA towards the payment of equity contribution for residential mortgage by a holder of the RSA.
The guidelines also allow only contributors, who have a minimum of N6m in their RSA, to use part of it for a mortgage loan.
Specifically, Section 5.5 of the guidelines states that the mortgage loan shall be a minimum of N1.5m and a maximum of N50m.
Section 5.6 says that the mortgage loan shall be for a minimum of five years and a maximum of 20 years; while section 5.7 states that the interest rate on the mortgage loan shall be at a fixed rate for the whole duration.
The guidelines also specify that the RSA holder must be in active employment, either as a salaried employee or self-employed person. It adds that the worker must have been contributing consistently for a minimum of 10 years.
Part of the draft regulations indicates that the money can only be used to purchase either a single-family home or an apartment in a multi-unit building, which must be owner-occupied.
Section 5.3 states, “The property shall have a comprehensive insurance policy in the name of the borrower to cover the replacement or reinstatement cost of the property. The insurance policy must note the RSA fund as one of the first loss payees, to cover the equity contribution released by the PFA.”
PenCom also states, “The valuation of the property to be purchased with the mortgage loan shall be carried out by a licensed, independent valuer, who is a member in good standing with the Nigerian Institution of Estate Surveyors and Valuers.
He must also have professional indemnity insurance with an insurance company licensed and in good standing with the National Insurance Commission.”
According to the requirements, a Primary Mortgage Bank or Deposit Money Bank licensed by the Central Bank of Nigeria must grant mortgage loans to qualifying RSA holders as well as provide the required documentation to the PFAs.