Treasury Cabinet Secretary UKur Yattani has this week gazetted the Retirement Benefits Mortgage Loans Amendment Regulations, 2020 which gives members of pension schemes permission to use up to 40 percent of their accumulated savings on a house purchase.
The new rules mean members can access funds up to or a maximum of Ksh. 7 million from their pension plans to buy a house.
Unlike the old regulations which only allowed pension deposits (up to 60 percent) to be used only as collateral for mortgage, the new law allows members to actually use cash from their pension savings in home purchase.
However, upon retirement, members will no longer be eligible to use the funds.
“A member who is paid a pension by the scheme, or who has taken early retirement, or has attained retirement age shall not be eligible to utilize a portion of the member’s retirement benefits to purchasing a residential house,” says the regulations.
Members who are in more than one pension scheme are allowed to combine benefits under the law, with spouses who are in different pension schemes also allowed to combine their benefits to buy a home.
According to the Kenya National Bureau of Statistics (KNBS) FinAccess Report of 2019, there were 3.01 million registered members of pension schemes as at December last year.
If just 1 percent (30,000) of the members made use of the new regulations for house purchase in a given year at the maximum limit (Ksh. 7M), that would release Ksh. 210 billion into the housing market.
As such, it is likely the move is expected to increase demand and subsequently, prices of property, as far as eligible are willing to utilize the provision.
Data from KNBS shows that pension funds control Ksh. 1.32 trillion worth of assets under management as at December, 2019 mostly held in government securities, immovable assets and quoted equities which accounted for 42.5, 18, and 17.7 percent of the total assets respectively in 2019.