RBA caps use of pension funds in home purchases at 40% of contributions

Kenyans will be allowed to deploy up to 40 percent of their pension contribution in residential home purchases, new draft regulations show.

The regulations termed as the Retirement Benefits (Mortgage Loans) (Amendment) Regulations, 2020 sets the course for the utilisation of pension funds for home ownership following ammendments to the 1997, Retirement Benefits Act.

“In a defined contribution scheme, an amount not exceeding forty per cent of the member’s accrued benefit, subject to a maximum of Ksh.7 million,” reads part of the regulations.

Pension fund trustees will be allowed to offer members with the option to deploy the partly funds as either a guarantee to access a mortgage or utilize their benefits for the purchase but not both.

Further, scheme members are only allowed to access the benefit as a one off while the service is locked out to members already receiving pension earnings and those who have attained retirement age.

Trustees from the different pension schemes will consider applications relating to the utilization of the benefits by members and review their consistency with the retirement act and scheme rules.

Pension schemes have previously been prohibited from employing funds to offer direct on indirect loans to members.

The ammendment seeks to prop up home ownership in the country by reducing financial constrains to home ownership.

The Housing and Urban Development ministry have backed the changes to intensify home purchases under the affordable housing agenda.