The Pension Reform Act 2014 on Access to Mortgage observed
in Section
89 subsection 2 of the Act noted that a Pension Fund Administrator (PFA) may
subject to guidelines issued by the National Pension Commission, apply a
percentage of the pension assets in a Retirement Savings Account (RSA) towards
the payment of equity contribution for a residential mortgage by a RSA holder.
In
an article on Sunday punch, of 30th August 2015, captioned “Workers to access 25% pension savings
for mortgage …to forfeit lump sum payment at retirement” Nike Popoola
noted that “The guidelines 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”
Continuing
she noted Section 5.6 says that the mortgage loan shall be for a minimum of
five years and a maximum of 20 years; section 5.7 states that the interest rate on
the mortgage loan shall be at a fixed rate for the whole duration.” that 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.”
The
importance of housing can be seen in its place in the 1999 constitution of the
Federal Republic of Nigeria. S.16 (I) (d) provides as one of the fundamental objectives
and directive principles of the Nigeria state policy, the provisions of
suitable and adequate shelter for all citizens, the same was made in the 1979
constitution (Nigeria constitution 1979, 1999 and FMBN 2006)
Continuing
the FMBN bulletin 2006 stated that FMBN Act 1993 and the Mortgage Institutions
Act 1989 all fell short of desired impact on housing and Mortgage industry. The
National Housing Policy 2002 according to FMBN is to ensure that all Nigerians own
or have access to decent, safe and sanitary housing accommodation at affordable
cost and secure tenures. But this is not been achieved, as NHF has been
involved in the refund of contributions which cannot afford enough blocks talk
less of building houses.
Therefore
there is that urgent need for infrastructural development, a case of housing as
most retirees are faced with the great task of building their own houses. In an
article on 15 costly mistakes pensioners make, Odunze (2014) in the
verynewsinfo.com highlighted that one of the pension mistakes is using
retirement money to build a house after retirement. It should be noted that
building houses after retirement aggravates the retiree health as the
retirement money is not enough to erect a house coupled with the ignorance of
the retirees who thought that they will be paid everything in the retirement
savings account balance only to hear the bitter truth of the provisions of the
Pension Reform Act 2004 for 25 percent, according section 4 subsection (!)
paragraphs (a) (b) (c)and Section 4 subsection 2 of the PRA 2004 and section 7 subsection (1)
paragraphs,(a)(b) and (C) of the PRA 2014.
And so the need for such housing development
cannot be over-emphasized as in all investments instruments, it is investment in
housing that appreciates astronomically. In an article in the Telegraph
Newspaper of London, Richard Dyson noted in article captioned “ £1,250bn
and rising , how buyer to let is overtaking Pension” that “The value of
property owned by Britain’s growing army of buy-to-let investors is fast
approaching the value of the entire workforce’s pension savings built up over
decades of employment. At £1.25 trillion
– £1,250bn – the value of the flats and houses owned by almost two million
small-time landlords is catching up on the £1.6 trillion total amassed in workers’
pension schemes.“
In a
recent announcement in 2015 in Lagos, the nation’s commercial nerve centre;
while announcing attending a pension forum organized in conjunction with
stakeholders in Nigeria Labour Congress , NLC and the National Pension
Commission ,PenCom, the Acting Director General of National Pension Commission,
Chinelo Aholu stated that the pension assets has hit 4.6 Trillion and still
counting. That provides enough investment outlay for infrastructural
development in housing.
The
Former Governor of the Central Bank, Mr. Sanusi had canvassed for the use of
the fund for infrastructure development. In an article in Punch 2011 captioned
”Safeguarding Pension Funds” it reported
that the Central Bank Governor has canvassed for the use of the pension fund in
rescuing the decayed infrastructure , however the paper was quick to add “but
this should be discouraged because of the underlying factors of mismanagement”
continuing it stated that as “plausible as this idea may seem to have, are
problems of corruption, inflated contracts and abandoned projects which may
threaten investments in such areas. The paper concluded that it is necessary to
“avoid a situation where money may not be available when pensioners are ready
to collect their life savings” All these stems from fear of the unknown which I
don’t blame them because corruption had at one time or the other affected, the
smooth running of some laudable government policies.
Be as
it may , it is a good proposition but do we because of fear of corruption allow
the retire to suffer in using the
pension to start building a house and the risk of inflation on the said fund,
bearing in mind that the majority of the retirees still use the retiree fund to
build houses. The result is more abandoned project as most retirees are in the
last phases of their circle of existence and may not be able to complete such
projects.
In most
developed countries in Europe and America, pension fund are being used for
infrastructural development especially in the area of housing. But what they do
here is that they build houses for lease and rent, and some are used for
outright sale. They discovered that of all investment in life, it is real
estate that has the highest rate of return. As a house that was bought in 2012
for 5 million cannot be sold for the same amount even within a period of 3
months. As both land and building appreciates over a period of time. Jerry Lewis, the owner Macdonald, once stated
that he is getting his wealth through real estate and not through the
restaurant.
Since
the masses are afraid of corruption ravaging the fund, if it used for infrastructural
development, they can work out the following:
The
retirement saving balance can be used to access mortgage under strict
compliance
The
commission in conjunction with PFA and PFC can embark on massive housing
project with part of the fund as a way of ensuring housing for all.
Let us remember
and bear in mind the words of Richard Dyson that “ while traditional pension
saving is complex and unpopular with many, the phenomenon of buying-to-let is
now growing at its fastest rate ever, spurred by rising rents and house prices
and cheap mortgages.” Will the pensioners be able to afford the rising prices
of houses and rents knowing quite alright that if they know they can’t afford
it at their point of retirement they make resort corruption during their
working life. And that is why we give
kudos to the legislators who amended the amended PRA 2004 that gave rise to PRA
2014.
There
is need for increase in the contribution for individual RSA holders in the form
of additional voluntary contribution. The need for such outlay becomes
imperative as majority of RSA holders, have account balances that is far below the
minimum balance of 6million , the minimum benchmark for mortgage access.
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