Pension industry set to address Nigeria’s housing deficits

There are strong indications that a resolution to allow holders of Retirement Savings Accounts (RSA) under the Contributory Pension Scheme (CPS) to use their contributions as a guarantee for accessing housing loans will turn out as the magic wand in checking against housing deficits in Nigeria.

The issue of housing deficit in Nigeria has been linked to the absence of mortgages with lender institutions finding it difficult to finance the building and ownership of houses for the average Nigerian in the face of the absence of well-structured arrangements guarantying repayments.

But the National Pension Commission (PenCom) has come up with an arrangement where holders if RSA can be encouraged to put aside a certain percentage of their retirement savings towards the acquisition of residential houses while at the same time allowing for funds that will be applied as pension.

Although the scheme is still evolving, PenCom and the Pension Operators Association of Nigeria (PenOp) have highlighted the requirements for the Retirement Savings Account holders to access their equity contributions for the acquisition of residential mortgages.

Details of the scheme were unveiled at the weekend in Lagos at a seminar organized by PenOp for financial journalists. The seminar had the theme: “Pension: an opportunity to own your own home, an x-ray of the new RSA plan on home ownership.”

Presenting the theme paper, the Head of Investment Department, PenCom, Ibrahim Kangiwa, said for contributors under the Contributory Pension Scheme (CPS) to be eligible to use their RSA balance for the acquisition of residential mortgages, they must have contributed for five years (60 months) cumulative of employer and employee’s mandatory contributions.

He said the same thing was applicable to the contributors under the Micro Pension Plan (MPP), adding that married couples, who individually met the eligibility criteria, were also eligible.

On the authorized limit for equity contribution that qualifies a contributor, Kangiwa put the maximum allowed at 25 percent of the RSA balance, noting that “where 25 percent of RSA balance is more than equity contribution, the RSA holder can only access the amount equivalent to equity contribution required.

“Where 25 percent is not sufficient for equity contribution, RSA holder may utilize Voluntary Contribution (VC) in line with the Voluntary Contribution guidelines.

“Where 25 percent is not sufficient for equity contribution, Micro Pension (MP) contributor may utilize contingency portion in line with MP guidelines.

“Where 25 percent is insufficient as equity contribution, the RSA holder shall deposit the difference with the mortgage lender,” Kangiwa explained.

Those exempted from this initiative, according to Kangiwa, include RSA holders that have less than three years to retire; existing retirees on CPS; exempted persons under the PRA 2014 and RSA holders who do not have both employer and employee mandatory contributions for a cumulative minimum period of 60 months.

He said that equity contribution was not for refinancing an existing mortgage, outright purchase of property, and purchase of land, noting that the property shall be for residential purposes only.

Kangiwa said the objective of the initiative was to provide housing for first-time homeowners and improve the standard of living of RSA holders under the CPS by facilitating their ownership of residential homes during their working life.

Earlier in his remarks, the President, PenOp/Managing Director, Stanbic IBTC Pension Managers, Olumide Oyetan, emphasized the need for stakeholders to work together to ensure the successful implementation of the guidelines.

He said the successful implementation of this initiative would improve people’s welfare and move the country forward.

For a better society

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