The Chairman/Chief Executive Officer, Achor Actuarial Services Limited, Dr Pius Apere, has said the utilisation of Retirement Savings Account balance for the payment of equity contribution towards securing a residential mortgage by holders will enable retirees to have adequate retirement incomes with decent standard of living and deepen financial inclusion in the pension industry.
Apere, who is an actuarial scientist and chartered insurer, said this in his report titled, ‘Payment of equity contribution for residential mortgage from RSA balance in CPS and welfare of Nigerian pensioners’.
He also said many RSA holders would not be qualified to access the authorised limit for equity contribution because they had limited personal savings to meet the deposit payment required to access the funds.
Apere said, “The payment of equity contribution for residential mortgage would provide a financial peace of mind to RSA holders because the necessary funds required to buy a house are readily available. Owning a residential property would mean no payment of rent and hence an increase in disposable income to maintain a certain standard of living after retirement. They will no longer be paying off the mortgage with RSA balance at retirement.”
He noted that PenCom’s guidelines on equity contribution for residential mortgage issued recently was in line with Section 89 (2) of PRA 2014, allowing RSA holders to utilise 25 per cent of their RSA balance for the payment of equity contribution towards securing a residential mortgage.
According to him, it would create unique selling proposition, leading to deepening financial inclusion in the Nigerian pension industry.
He explained that it would facilitate ownership of residential homes during the workers’ working life and the property might also be used as a collateral to obtain bank loans to set up business ventures in retirement to generate income with the aim to maintaining the same standards of living prior to retirement.
Speaking on the challenges contributors might encounter, he said Section 2 of PenCom guidelines specified an authorised limit for the equity contribution.
He said, “It is obvious that many RSA holders, particularly micro pension contributors, may not have other personal savings else or other investment options in place (e.g. equities, fixed interest securities etc.) which would generate income to meet their short-term or long-term financial needs prior to retirement.
“Thus, these RSA holders would not be qualified to access the authorised limit for equity contribution because of their inability to source for external funds to finance the deposit payment specified in section 2.3 of PenCom guidelines.
“In the same vein, many other RSA holders who are only able to borrow external funds or have limited personal savings to meet the deposit payment required in section 2.3 of PenCom guidelines are likely to default in their mortgage repayments, leading to repossession of the property by the mortgage lenders which means a total loss of capital borrowed.”
He also observed that high demand would lead to limited funds available for investments towards providing adequate and sustainable retirement incomes for RSA holders.