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Wednesday, February 1, 2023

How To Use Your Pension For Mortgage

The National Pension Commission recently approved guidelines for RSA holders to access their retirement savings account balance for the payment of equity contributions for residential mortgages.

The approval was granted in accordance with Section 89 (2) of the Pension Reform Act 2014, which allows RSA holders to use a portion of their RSA balance to pay down equity on a residential mortgage.

PenCom, on the other hand, stipulated conditions for accessing the funds. One important requirement is that the applicant be actively employed, either as a salaried employee or as a self-employed individual.

It stated that applications for equity contributions for residential mortgages must be made in person, not through a proxy.

How to apply

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Anyone who is interested in the process can approach his PFA for more information. The PFA will print the statement of account and calculate the 25%.

Speaking with Journalists, the Spokesperson, PenCom, Abdulqadir Dahiru, said, “Then when you have that, you can now go back to your mortgage lender, get a letter of offer of your property, go through their own due diligence to agree for them to finance because the pension is only giving you 25 per cent; 75 per cent will still be financed by somebody.

“That person must provide you with an offer letter for a loan that he is willing to finance you with, and this is the required equity contribution. “So if you have that equity contribution with that letter of offer, which has been validated by the mortgage lender, that is when you can approach your PFA to request for your 25 per cent.”

The maximum amount permitted
According to PenCom, the maximum amount that can be withdrawn is 25% of the total mandatory RSA balance as of the date of application, regardless of the value of the equity contribution required by the mortgage lender.

If 25% of a contributor’s RSA balance is insufficient for payment as an equity contribution, RSA holders may use the contingency portion of their voluntary contributions (if any).

Consent form

If a person accessed a portion of the funds prior to retirement, for example, by leaving paid employment before reaching retirement age, he will still receive a lump sum at retirement. He can still receive a portion of the mortgage funds if he meets the guidelines’ specific conditions, but he must sign a consent form to get it.

Dahiru said, “If you have taken 25 per cent for temporary loss of job and then you get employment again, and you continue contributing and you come to collect for a mortgage, you will sign a consent to say that I’m fully aware that this money I want to withdraw to finance a house will affect the amount I may likely take when I retire, I understand and whatever.

“So, basically you are indemnifying the PFA that you understand so that at the point of retirement, if your benefit is lower compared to your colleagues you will not complain.”

Mortgage lender

To qualify as a mortgage lender for the purpose, the company must be licensed by the Central Bank of Nigeria, comply with the Contributory Pension Scheme and have valid Pension Clearance Certificate, according to PenCom’s guidelines.


According to PenCom, a worker must have an offer letter for the property duly signed by the property owner and verified by the mortgage lender. The RSA of the applicant must have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months (five years). A contributor under the Micro Pension Plan is also eligible, provided he/she has made contributions for at least 60 months (five years) prior to the date of his/her application.

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Age limit

RSA holders that have less than three years to retirement are not eligible.

Dahiru explained, “If I am an employee and working in an organisation where the retirement age is 55 years, if I am 50, or 51 years, I can access because I have five years or more than three years to retire. But once I get to 52 that, means I have three years which I cannot access.”

According to PenCom’s guidelines, married couples, who are RSA holders, are eligible to make a joint application, subject to individually satisfying the eligibility requirements.

Data recapturing

RSA holders, if registered before 1 July 2019, must have their records updated through the RSA data recapture exercise.

Dahiru said, “But it’s very important that RSA holders have done their recapture. When you have not done your data recapturing, we can’t process it.”

Insufficient 25 percent contribution

The PenCom spokesperson said, “Where the 25 per cent the mortgage lender is asking for is equal to the 25 per cent of your RSA, definitely we will process. But if what mortgage lender is asking for is higher than what you can get from your PFA, you will have to look for the difference and pay and show evidence to your PFA.

“For instance, if your mortgage lender is looking for N2.5m and the mortgage is N10m, and the mortgage lender says bring 25 per cent as equity contribution, and your own 25 per cent in your RSA is only N1.5m, you will have to look for that difference of N1m and pay; then come with it with your offer letter for the property and the evidence that I have paid, then your PFA will give you the balance of N1.5m which is your 25 per cent.”

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