Presented by:
Adedeji Ajadi, PhD, FCA, FCS, CIIA
Definition of RSA (Retirement Savings Account)
- RSA is a pension account maintained with a Pension Fund Administrator (PFA) followed by the issuance of a unique Personal Identification Number (PIN) by the National Pension Commission (PenCom).
- Monthly contributions of employer and employee are paid in the ratio 10:8% respectively, i.e. 10% Employer contribution and 8% Employee
Temporary Access to the RSA Balance
- Normally, a holder of an RSA account shall have access to his/her RSA upon retirement based on condition of service or upon attaining the age of 50 years (whichever is later) or is medically
- However, an RSA holder below the age of 50 years may, with the approval of the National Pension Commission (PenCom), withdraw an amount of money not exceeding 25% of the current balance in his/her RSA under certain conditions:
- after being out of employment (voluntary retirement, disengagement) for a period of at least four (4)
- As equity contribution for residential mortgage
Importance of Home Ownership
Equity Building:
- Investment: As homeowners make mortgage payments, they build home
- Appreciation: Real estate tends to appreciate over the long term, providing homeowners with potential capital gains when they sell their property.
Stability of Housing Costs:
- Fixed Payments: Unlike rent, which can increase annually, mortgage payments on a fixed-rate loan remain constant over the loan term, offering financial
- Tax Benefits: Homeowners may be eligible for various tax deductions, such as mortgage interest and property taxes, which can reduce their overall tax
Sense of Ownership and Pride:
- Personalization: Homeowners have the freedom to modify their homes to their liking, creating a sense of pride and personal
- Community Involvement: Homeowners are more likely to be involved in their communities and local governance, contributing to social stability and
Stability and Security:
- Long-term Residence: Owning a home provides a stable living environment, which is beneficial for family dynamics and personal well-being.
- Security: Home ownership reduces the risk of eviction that renters might face due to fluctuating rental markets or changes in landlord policies.
Economic Contribution:
- Local Economy Boost: Home ownership stimulates local economies through the purchase of goods and services related to home maintenance and improvement.
- Job Creation: The housing market supports jobs in construction, real estate, and home improvement industries.
Community Improvement:
- Property Maintenance: Homeowners are more likely to maintain and improve their properties, contributing to overall neighborhood aesthetics and property
- Reduced Crime Rates: Higher home ownership rates are often correlated with lower crime rates and improved community safety.
Retirement Asset:
- Nest Egg: Homeownership can serve as a financial safety net for retirement, as the home can be sold or borrowed against to provide funds during retirement
Generational Wealth:
- Inheritance: Homes can be passed down to future generations, providing them with financial security and a place to live.
Improved Educational Outcomes:
- Stability for Children: Stable housing is associated with better academic performance and lower dropout rates for
Health Benefits:
- Improved Mental Health: Stability and security of home ownership can contribute to lower stress levels and better mental health.
- Physical Health: Homeowners are more likely to live in better-maintained homes and neighborhoods, which can positively impact physical health.
Legal Backing for the use of 25% RSA Balance as Equity Contribution
Section 89 (2) of the Pension Reform Act (PRA) 2014 allows RSA holders to apply a percentage of their Retirement Savings Account (RSA) balances as equity contribution for residential mortgages subject to Guidelines issued by the Commission.
Eligibility Criteria: Who Can Access 25% of RSA Balance
- Contributors under the Contributory Pension Scheme for 5 years (60 months) cumulative of employer and employee’s mandatory contributions in their
- Contributors under the Micro Pension Plan – 5 years (60 months) cumulative contributions in their RSAs.
- Married Couples who individually meet the eligibility
Authorized Limits for Equity Contribution
- The maximum allowed is 25% of the RSA balance as of the date of
- Where 25% of the RSA balance is more than the equity contribution, the RSA holder can only access the amount equivalent to the equity contribution
- Where 25% is insufficient as equity contribution, the RSA holder shall deposit the difference with the Mortgage
Restriction on The Use of Equity Contribution
- The 25% Equity Contribution cannot be used for the following:
- Refinancing existing
- Outright purchase of
- Purchase of
- Non-residential
Role of Mortgage Lender
- The Mortgage Lender must:
- Be licensed by the CBN to provide residential mortgage
- Meet the minimum capital requirement as prescribed by the CBN from time to
- Be in good financial standing at all times and satisfy the minimum requirements of the CBN.
- Have a valid Pension Clearance Certificate issued by the Commission in line with the PRA,
- Comply with the provisions of Sections 2 and 4 (1) and (5) of PRA,
Institutional Stakeholders
- Pension Fund Administrators (PFAs).
- Pension Fund Custodians (PFCs).
- National Pension Commission (PenCom).
- Mortgage lenders and Commercial Banks licensed by the Central Bank of Nigeria (CBN) to provide mortgage financial service
Steps to Institutional Stakeholders
- Step 1: Applicant obtains a property offer letter from the property owner or approved agent and approaches a Mortgage
- Step 2: Applicant fills out an application for a mortgage, which is provided by the Mortgage Lender, and attaches the property offer The application form will contain minimum information such as the Full name of the RSA holder, PIN of the RSA holder, Name of the Mortgage Lender, Value of the property, etc.
- Step 3: After confirmation of the property offered by the mortgage lender, the applicant approaches his/her PFA and requests his/her RSA Statement to access the 25% of his/her RSA balance for payment of equity contribution.
- In a joint application, each party will need to apply to their respective PFAs with copies of the verified property offer
- Step 4: The PFA issues a duly endorsed RSA statement to the applicant, which the applicant forwards to his/her Mortgage Lender and updates the record on Applications for Equity Contribution for Residential Mortgage upon issuing the RSA Statement to the RSA
- Step 5: The Mortgage Lender verifies if 25% of the applicant’s RSA balance will be sufficient as an equity
- Where 25% of the RSA balance is sufficient as equity contribution, the Mortgage Lender issues a mortgage offer letter to the applicant
- Where 25% of the RSA balance is not sufficient, the Mortgage Lender requests for the payment of supplementary equity contribution from the applicant(s).
- Step 6: The Mortgage Lender issues a mortgage offer to the applicant after confirming payment of supplementary equity contribution.
- Step 7: The Mortgage Lender forwards a copy of the mortgage offer letter and the additional information to the applicant(s) PFA within two working days of the issuance of the mortgage offer letter to the
- Step 8: The applicant may after two working days of receiving his/her mortgage offer letter, approach his/her PFA to request for payment of his/her Equity Contribution for Residential
- Step 9: The applicant shall obtain and fill out an Application Form, with indemnity to the PFA, for the payment of his/her Equity Contribution for the Residential In a joint application, each party shall apply to their respective PFAs with a copy of the mortgage offer letter.
- Step 10: The PFA reviews the application form and the supporting documents received from the Mortgage Lender for completeness using a checklist of requirements within two working
- Step 11: Upon successful completion of the documentation review, the PFA updates the applicant’s Mandate File within two working If any exceptions or discrepancies are identified during the documentation review, the PFA shall communicate the exceptions to the Mortgage Lender within two working days of identifying such exceptions.
- Step 12: The PFA computes and validates that the requested amount is not more than 25% of his/her RSA Balance.
- Step 13: The PFA processes the application and forwards same to the National Pension Commission (PenCom) within two working days of successful documentation review and awaits the approval of equity contribution and and notification.
Approvals Granted So Far
- The implementation of PenCom’s guidelines in 2023 has played a pivotal role in enabling numerous workers to achieve their dream of
- From its inception until January 31, 2024, a total of 2,104 RSA holders accessed N21.81 billion from their RSA balances to contribute towards residential mortgage equity payments
FAQ
(1) What is the objective of the pension-backed mortgage?
The guideline was developed by the National Pension Commission (PenCom) to:
- Enable Retirement Savings Account (RSA) holders to access part of their RSA balance and use it as an equity contribution toward securing a residential mortgage.
- It is also focused on bridging the deficit in housing as well as improving the standards of living of RSA holders under the CPS by facilitating their ownership of residential homes during their working
(2) What is the minimum/maximum amount from my RSA balance that can be used as equity contributions for the mortgage?
- The maximum amount to be withdrawn for equity contribution for the residential mortgage should not be more than 25% of the total RSA balance as of the date of application, irrespective of the percentage of equity contribution required by the mortgage
- Where 25% of the RSA balance is more than the required equity contribution, the RSA holder can only access an amount equivalent to the equity contribution required by the mortgage
- Where the 25% is less than the equity required, the RSA holder must have deposited the difference with the mortgage lender with evidence before applying for the 25%. Please note that this supplementary fund cannot be withdrawn during the application process
(3)Are there some mandatory requirements to access the pension-backed mortgage?
- Yes, an RSA holder who wishes to apply for a pension-backed mortgage must have:
- Completed the Data Recapture
- Must have both employer and employee’s mandatory contributions for a cumulative period of 5 years (60 months).
(4) If I have utilized 25% of my RSA savings for equity contributions for a residential mortgage, can I still access 25% of my remaining balance in a situation where there is a job loss?
- RSA holders that have utilized 25% of their RSA savings for equity contribution for a residential mortgage are eligible for payment of 25% of their RSA for temporary job loss, provided that such withdrawal is made after four months of cessation of employment, and the RSA holder has not secured another
- The RSA holder will, however, execute a consent form with his/her PFA before accessing 25% of the remaining RSA balance
(5) Are there particular Mortgage Lenders (Mortgage Banks and Commercial Banks licensed by the Central Bank of Nigeria that have residential and commercial mortgage lending as a permissible activity) that I can initiate the mortgage with?
- You can only engage with institutions licensed by the CBN to provide residential mortgages and have met the eligibility criteria as prescribed by the CBN from time to
- The National Pension Commission shall also liaise with the CBN on an annual basis to determine the Mortgage Lenders that meet the requirements of the Guidelines, and the names of same shall be published on the PenCom website annually
(6) Can someone who has accessed 25% of their RSA balance still secure the 25% equity contribution towards a mortgage?
Yes. However, the RSA holder will be required to execute a consent form with his/her PFA before accessing his/her RSA balance for the residential mortgage, having accessed 25% of his/her RSA balance earlier due to temporary job loss.
(7) As a retiree under the Contributory Pension Scheme, can I access the pension-
backed mortgage?
No. Existing Retirees on CPS and exempted persons under the PRA 2014 will not be eligible to participate in the equity contribution from RSA for Residential Mortgage.
Business Opportunities For Mortgage Banks
- The National Pension Commission (PenCom) says total pension fund assets increased to 22 trillion in May 2024.
- Between May 2023 and 2024, RSA accounts increased by 356,795 to 10,351,624.
- Assume 20% of existing RSA accounts meet the eligibility criteria (active and have contributed for 5 years) = 2,070,324.
- Assume only 30% of the above qualify ultimately for a mortgage loan = 621,097 potential customers.
- Assuming we have 30 qualified mortgage banks = 20,703 potential customers per MB.
- MBs need to be more aggressive in marketing this product.
- We need to use technology
- We need well-trained staff to exploit the huge opportunities