…As PenCom issues new guidelines for mortgages

Ten years after it was enacted to sanitize and govern the nation’s pension sector, the Pension Reform Act (PRA) 2004 was effectively repealed by the 2014 Act. COBHAM NSA reports on what the regulatory agency, National Pension Commission (PenCom), is doing for the contributors now

Good news has come the way of contributors under the Contributory Pension Scheme (CPS) as the National Pension Commission (PenCom) plans to issue new guidelines on how to access funds for mortgages. This development is courtesy of the Pension Reform Act (PRA) 2014 signed into law on July 1, 2014 by out-going President Goodluck Jonathan. The new Act effectively repealed the 2004 Act that did not permit Pension Fund Administrators (PFAs) to directly invest pension funds in real estate. An enthralled Stakeholders’ conference on the PRA 2014 in Abuja savoured the breaking news and also got assurances from Director General of PenCom, Mrs. Chinelo Anohu-Amazu the guidelines would clearly state how contributors can easily access their funds to own houses through mortgages. According to Mrs Anohu-Amazu, “The process of issuing these guidelines is already at advanced stages and it is our expectation that as soon as it is implemented, this development would assist in bridging the housing deficit in Nigeria.” The Director General said the new Act has changed things around for good as PFAs are now empowered to explore mortgage financing with the contributed funds, adding that the development would make it possible for majority of the over six million contributors to utilise part of their funds as equity contributions for residential mortgage. She gave further insights into the new Act thus: “The most important thing is the allowances of the utilization of the retirement savings balance for the provision of a primary home. For the first time, you are now able, as a contributor, to utilise part of your balance to secure your own primary home in accordance with the guidelines to be issued by the commission.” “And I think this is fantastic in a country where we have over 15 million housing deficit; at least, those who are contributing, over six million contributors under the CPS, can now for the first time utilise the money rather than just leaving it there”, the PenCom boss said, noting that “The application of the CPS by States and Local governments has received a boost under the PRA 2014 by setting a standard which state governments are required to comply with for the benefit of their respective employees.” The Director General said the Conference was meant to assist relevant government agencies to clearly address some of the public sector challenges facing the scheme based on new provisions and developments ushered in by the PRA 2014, stressing that “The new Act clearly outlined the responsibilities of other government institutions in the implementation of the CPS and the administration of the defunct Defined Benefits Scheme. Thus, public sector challenges under the CPS, which were encountered during the past 10 years, in the areas of remittance of pension contributions, funding of the retirement benefits bond redemption fund account, duration and adequacy of monthly pensions for public servants, periodic pension review, the funding of pension entitlement for professors and political offices holders are some of the issues to be specifically addressed by relevant agencies by virtue of the PRA 2014.” Innovations in the new Act include establishment of the Pension Protection Fund as well as “The introduction of a minimum pension guarantee so that it doesn’t matter what your contributions are, you are guaranteed a base minimum to satisfy and take care of you in old age.” In his presentation, Deputy Governor, Operations, Central Bank of Nigeria (CBN), Alhaji Suleiman Barau said workers now have reasons to celebrate going by the transformation so far recorded in the nation’s pension industry. He said obvious shortcomings and the changing trends in the last 10 years made it imperative to review the 2004 Act in line with current realities. What is new in the 2014 Act? Mrs. Chinelo Anohu-Amazu: The most important thing is the provision that allows the use of your retirement savings balances for the provision of primary mortgage. For the first time as a contributor, you are now able to utilise part of your own Retirement Savings Accounts (RSAs) to secure primary mortgages in accordance with the guidelines to be issued by the commission. This is fantastic because in a place where we have over 15 million housing deficit, the over 6 million distributors under the Contributory Pension Scheme (CPS) can now utilise part of what they have saved for the purpose of owning a house. Other incentives The second thing is the introduction of the minimum pension guarantee so that it doesn’t matter what you have contributed, you are guaranteed the base minimum to satisfy you and take care of you in your old age. The informal sector The new act has extended coverage to the informal sector and this is something that the Commission is passionate about because we find out that in the 10 years of our existence, the bulk of the working population is outside of those in the formal sector. We have artisans like plumbers, electricians, carpenters and hairdressers among many others, who are their own employers but have absolutely no retirement benefit plan. Our aim is to bring them in under the aegis of this 2014 Act so that they will be provided for in their old ages. Huge funds We have a huge pool of investable funds, but the key thing is the funds are primarily to pay retirement benefits. The Commission is also insisting these funds are utilized not in static investments but in investments, especially infrastructure such as power, transportation and others that would be utilized to ameliorate the austerity measures facing the contributors. Our concern is for the funds to be invested in projects that directly affect the contributors and retirees alike.


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