Pension-backed loans allowed – Namfisa

The pension funds regulator revealed this yesterday, dismissing rumours that the benefit would lapse under Fima.

According to the statement, even the Pension Funds Act makes provision for pension funds to directly lend members a portion of their pension fund savings to buy immovable property or to make renovations to existing immovable property.

The pension benefits can also be used as collateral.

“In addition, the Pension Funds Act allows pension funds to furnish pension-backed guarantees to persons providing housing loans to its members for the same purpose. Fima similarly provides for direct housing loans by funds to members as well as pension-backed guarantees,” said the regulator.

Recent reports from the World Bank indicate the need for about 45 000 new housing units per year because Namibia's demand for formal housing is increasing with urbanisation.

Namibia is experiencing annual urbanisation of around 3,8%, translating to 50 000 people or 13 500 new urban households, annually.

The share of the urban population is expected to increase from 52% to 60% by 2030, said the World Bank.

With the formal housing delivery not keeping pace with demand, this has resulted in rapid growth of informal settlements, and has been the call of many social activists raising solutions to use pension savings to buy houses.

Namfisa said pension fund members need to familiarise themselves with the rules and the constitution of a pension fund that they contribute to to determine whether they make provision for a particular fund to grant direct housing loans or pension-backed housing loan guarantees to members.

“The fund rules will also determine the extent of the loan or guarantee that can be furnished to members. Pension fund members are urged to read their pension fund rules and familiarise themselves with their rights and responsibilities. Should members have any queries concerning their rules, the same can be raised with their respective pension fund principal officer or trustees,” said Namfisa.

There are over 130 pension funds registered in Namibia with assets in excess of N$250 billion, whose investments have been partly absent in the housing sector despite the high housing needs.

The World Bank has recommended that there is a need to introduce innovative market-appropriate financial products for the low- and middle income housing market, and the pension backed housing is one of those items that even the Government Institutions Pension Fund has adopted.

Email: lazarus@namibian.com.na

Twitter: @Lasarus_A

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