“Leveraging Pension Savings: How Nigeria’s Pension Reform Act Enables Homeownership Through RSA Equity Contributions”

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Director-General, PenCom, Mrs-Aisha-Dahir-Umar


In 2014, the Pension Reform Act (PRA 2014) introduced a groundbreaking provision aimed at alleviating Nigeria’s housing deficit by allowing pension contributors to utilize their Retirement Savings Account (RSA) balances for equity contributions in residential mortgages. This visionary initiative acknowledges the significant housing challenges faced by Nigerian workers and seeks to empower them to own homes while still active in service.

Since its inception, this provision has been instrumental in enabling numerous workers to realize their dream of homeownership. The National Pension Commission (PenCom) issued guidelines outlining the process for accessing up to 25 percent of RSA balances for residential mortgage equity payments. The implementation of these guidelines in 2023 has seen significant uptake, with 2,104 RSA holders accessing a total of N21.81 billion for this purpose by January 31, 2024, a testament to the effectiveness of the Contributory Pension Scheme (CPS).

Here’s a detailed look at the application process, equity payment approval process, and implementation challenges:

Eligibility and Mortgage Application Process: To be eligible, RSA holders must have both employer and employee mandatory contributions for at least 60 months prior to the application. Those with less than three years to retirement are ineligible. Applicants secure a property offer letter and apply for a mortgage loan from a licensed Mortgage Lender, who conducts due diligence on the property. The applicant then requests their RSA statement from their Pension Fund Administrator (PFA) and forwards it to the Mortgage Lender.

Payment Approval Process: Applicants complete an application form for 25% of their RSA balance and provide an indemnity to their PFA, which forwards successful applications to PenCom for approval. Upon approval, the PFA issues a payment instruction to its Pension Fund Custodian (PFC) to remit the approved amount to the Mortgage Lender.

Implementation Challenges: Strict adherence to guidelines is crucial. Challenges include limitations on fund usage, requirements for supplementary contributions, and attestation letters for RSA holders in organizations without defined retirement ages. Mortgage Lenders must possess a valid Pension Clearance Certificate for smoother processing.

In nutshell: The successful implementation of these guidelines demonstrates the innovative potential of the CPS in addressing participants’ needs. PenCom remains committed to effectively regulating Nigeria’s pension industry, ensuring continued progress towards homeownership and financial security for all.

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