Number of successful applicants rise 1,271%
PFAs grant N28.9bn to 2,971 pension contributors
Bureaucracy, corruption frustrated previous scheme - Experts
By Rosemary Iwunze
Workers currently operating in the Contributory Pension Scheme, CPS, have swooped on their pension accounts for mortgage loans, apparently in preparation for living in their own houses at retirement.
Industry stakeholders have attributed the development to the huge housing deficit in the country and with the failure of the National Housing Fund, NHF, to bridge the gap over the years.
Financial Vanguard findings reveal that within the first year of the implementation of the pension mortgage scheme the number of workers using part of their retirement savings to invest in personal homes, as allowed under the scheme, rose by 1,271 per cent barely nine months after the scheme's take off.
The scheme which commenced last year is based on the 2022 National Pension Commission, PenCom's Guidelines on Accessing Retirement Savings Account, RSA, balance for the purpose of equity contribution in acquisition of residential mortgage by RSA holders.
The pension mortgage scheme was also aimed at addressing the national housing deficit estimated at 28 million housing units with estimated market value of N21 trillion as at December 2023.
Data from PenCom show that Pension Funds Administrators, PFAs, released N28.9billion to 2,971 RSA holders for equity contribution towards acquisition of residential mortgage between second quarter of 2023, Q2'23, and first quarter of 2024, Q1'24.
The breakdown show a steady rise in the numbers since Q2'23, when 90 RSA holders accessed their pension savings for residential mortgage to the tune of N986.9 million.
In Q3'23, the total number of RSA holders that accessed their pension savings for residential mortgage jumped by 628.9 per cent to 656 with total amount disbursed hitting N7.9 billion.
In Q4'23, the total number of RSA holders that accessed their pension savings for residential mortgage increased further by 51.1 per cent to 991 with the disbursement rising to N9.6 billion.
In Q1'24, the figure rose by 24.5 per cent to 1,234 while disbursement rose to N10.5 billion.
This upward trend according to experts will persist and soon the pension mortgage scheme will outperform the NHF.
Barriers to accessing NHF
The industry experts listed a number of issues that bedeviled the NHF operated by the Federal Mortgage Bank of Nigeria, FMBN.
The NHF was established by the NHF Act of 1992 to mobilise funds that will facilitate the provision of affordable housing for Nigerians. Under the extant NHF law, every Nigerian earning N3,000 or more per annum is required to contribute 2.5 percent of their monthly basic salary to the NHF.
According to experts, most public servants for whom the NHF scheme was made mandatory, argue that not only is the process of securing loans cumbersome, the requirements are also hardly met by majority of contributors thereby defeating the laudable objectives of the scheme.
President of the Nigeria Labour Congress, NLC, Joe Ajaero, in a recent presentation, argued that although the government had been consistently deducting the mandated 2.5 per cent from workers' salaries, the Federal Mortgage Bank of Nigeria had failed to inform the workers about the deposits made into their National Housing Fund accounts.
According to him, the lack of communication has created frustration among workers, who find themselves unable to effectively capitalise on the benefits that the scheme should provide.
He said: "Administrative bottlenecks in the process of accessing the mortgage scheme have created room for corruption in the system. While the Act provides for 90 days from the date of application for the loan to disbursement, the experiences by many workers are horrific as the undue delay in approving the loans forces many workers to abandon pursuit of the loan.
"Many resort to third-party agencies to fast track the loan application at unofficial fees, thus, creating perception of corruption in the process of housing loan approval and disbursement to workers who needed the funds.
"Despite the increase in the total pool in NHF, workers were still unable to get loans to get shelter," Ajaero noted.
Also speaking, Director, Centre for Pension Rights Advocacy, Mr. Ivor Takor, stated that less than 40 percent of the NHF contributors have been able to successfully obtain loan from the Fund to build their own houses.
He said: "The contributions of those who could not access loans are refunded to them on retirement. Out of frustration, some public servants have renamed the NHF 'National Housing Fraud."
Eligibility for PenCom's mortgage scheme
Under the current pension scheme the PenCom guidelines cover pension contributors in active employment, either as a salaried employee or as a self-employed person.
According to PenCom, for contributors under the Contributory Pension Scheme (CPS) to be eligible to use their RSA balance for acquisition of residential mortgages, they must have contributed for five years (60 months) cumulative of employer and employee's mandatory contributions.
Same is applicable to contributors under the Micro Pension Plan (MPP). Married couples, who individually meet the eligibility criteria, were also eligible.
PenCom puts the maximum amount that could be accessed at 25 per cent of the RSA balance.
The PenCom guideline further stated: "Where 25 per cent of RSA balance is more than equity contribution, the RSA holder can only access the amount equivalent to equity contribution required; Where 25 per cent is not sufficient for equity contribution, RSA holder may utilise Voluntary Contribution (VC) in line with the Voluntary Contribution guidelines.; Where 25 per cent is not sufficient for equity contribution, Micro Pension (MP) contributor may utilise contingency portion in line with MP guidelines; Where 25 per cent is insufficient as equity contribution, RSA holder shall deposit the difference with the mortgage lender."
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Also the guideline said, "Those exempted from the scheme, according to PenCom, include RSA holders that have less than three years to retirement; existing retirees on CPS; exempted persons under the PRA 2014 and RSA holders who do not have both employer and employee's mandatory contributions for a cumulative minimum period of 60 months. Equity contribution is not for refinancing existing mortgage, outright purchase of property and purchase of land, rather the property shall be for residential purpose only."
Speaking on the steady increase rise in the number of workers going for the pension mortgage scheme, former President, Pension Fund Operators Association of Nigeria, PenOp, and Managing Director, Stanbic IBTC Pension Managers, Mr. Olumide Oyetan, said the residential mortgage scheme will enhance contributors benefits and impact positively on the economy.
Oyetan stated: "The successful implementation of this initiative would improve people's welfare and move the country forward."
He emphasised the need for stakeholders to work together to ensure the successful implementation of the guidelines.
Also speaking, Head of Investment Department, PenCom, Ibrahim Kangiwa, said that the objective of the initiative is 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.
