The National Pension Commission (PenCom) has announced the guidelines for workers to use their retirement savings to obtain home loans. PenCom issued guidelines last year on accessing retirement savings account (RSA) balances towards payment of equity contributions for a residential mortgage, and the recent statement aims to explain the process for employees to own residential homes before exiting active employment.

According to the commission, a significant challenge for most employees is their inability to provide equity contribution to access a mortgage loan to own a house. The Pension Reform Act 2014 (PRA 2014) provides a solution to this challenge by allowing RSA holders to use part of their retirement savings as equity contributions for residential mortgages.

The processes required for accessing RSA balances for payment of equity contributions are as follows: obtaining an offer letter, requesting an RSA statement, issuance of mortgage offer letter, verification by mortgage lender, review of application by PenCom, and remittance of approved amount to the mortgage lender.

The first step for an interested applicant is to obtain an offer letter for the property from the owner or approved agent and approach a mortgage lender to fill out an application form. The mortgage lender must review the application form and verify the genuineness of the property offer.

After the property offer letter is confirmed, applicants are required to approach their pension fund administrator (PFA) and request their RSA statement to access 25% of their RSA balance for payment of equity contribution. Couples are allowed to apply jointly if they both meet the eligibility criteria, and each party shall apply to their respective PFAs with copies of the verified property offer letter.

Upon receiving the RSA statement, the mortgage lender verifies if 25% of the applicant’s RSA balance will be sufficient as an equity contribution. If it is insufficient, the mortgage lender requests the payment of supplementary equity contribution from the applicant.

After confirmation of the additional equity contribution payment and meeting other requirements, the mortgage lender shall offer a mortgage loan to the applicant. Within two working days of issuing the mortgage offer letter to the applicant, the mortgage lender must forward to the applicant’s PFA copies of the mortgage offer letter, the mortgage application form, and the verified property offer letter.

PenCom reviews all applications submitted by PFAs and approves or rejects them. Where the commission declines to approve an application, it communicates the reason(s) for its decision to the PFA. Upon receiving the commission’s approval, the PFA is required to issue payment instruction to its pension fund custodian (PFC) to remit the approved amount to the mortgage lender within two working days.

PenCom emphasizes that PFAs are obligated to ensure that all applications for equity contribution by RSA holders meet the guidelines’ requirements. This move by PenCom is expected to help more employees access home loans, which will lead to an increase in homeownership in the country.