The Pension Operators would like to commend the National Pension Commission (PENCOM) for the recent release of the guidelines that bring into effect the use of a portion of one’s Retirement Savings Account (RSA) as an equity contribution for obtaining residential mortgages.
The provision for this had been part of the amendments that occurred when the Pension Reform act was amended in 2014. We are aware that the process of actualising this portion of the act has gone through a number of iterations and stakeholder engagement and we are happy that it has finally been released.
Whilst we realise that there might be some initial teething problems, we the pension operators are excited and are primed to partner with the commission, RSA holders and other stakeholders to ensure that this policy actualises the reason why it was set up.
The homeownership ratio and first-time home buyer statistics in Nigeria are very low and we believe that this policy will help to improve this and also provide increased benefits to RSA holders in the immediate.
This policy is very catalytic in nature and has the potential to spur growth in other sectors of the economy. It should boost the mortgage finance and home loan sector, in addition to having a positive effect on the construction value chain and building materials sector.
We believe it will create massive jobs for artisans and blue colour workers involved in the construction value chain and also further open up the wealth management and financial planning industry.
RSA holders will now begin to plan towards a target RSA balance because they have a goal of owning a home.
We also believe that voluntary contributions will increase because people can use the contingent portion of their voluntary contributions as part of the equity contribution for residential mortgages. In addition, more companies will now take their contributions more seriously as will the staff of these companies.
For those who do not have an RSA account and are working in the formal sector, we urge them to commence the process in conjunction with their employers. For those in self-employment, we also encourage them to take advantage of the Micro Pension Plan (MPP).
Regarding the MPP, we are also happy that the policy extends to this is extended to self-employed individuals and those in the informal sector. We believe this will help to grow the Micro Pension business and ensure that millions of Nigerians in the informal sector will have the opportunity to enjoy structured pensions when they retire and also benefit from the gains of the pension reform.
Overall, we believe this policy is net positive for the pension industry and the economy as a whole. The effects are catalytic and will help to galvanize various sectors of the economy. The pension industry over the years has played a significant role in the local debt and equity market, financing National and Sub National projects and debt programs and financing transformational companies and projects.
The industry is primed to do more and we believe that this new policy is another milestone in the positive effect of the pension industry on the economy and also another example of the collaborative nature of the pension regulator that leads to gains for the wider economy.
Pension Fund Operators Association of Nigeria (PenOp) is an independent, non-governmental, non-political and non-profit making body. PenOp was established to promote the operations of the pension industry, provide for self-regulation and ensure that international best practices relating to the industry are observed by the operators registered in Nigeria. It is the umbrella association for all the Licensed Pension Fund Custodians, Pension Fund Administrators and Closed Pension Fund Administrators (PFCs, PFAs and CPFAs) operating in Nigeria.
Its role internally is to add value to its members across all levels; information, education, visibility, networking, strategy, product development, etc. Externally its role is to increase the awareness and visibility of the pension industry and enable external stakeholders to understand and participate in the development of this financial sub-sector wherever and whenever possible.