Retirement Benefits Authority

Treasury Ukur Yatani has published the Retirement Benefits (Mortgage Loans) Amendment Regulations 2020 that allows members of retirement benefits schemes to utilize a portion of their accrued benefits to purchase a residential house.

The regulations provide that every scheme shall provide the minimum requirements to be met by members, for an application submitted under these Regulations including the procedure to be followed in relation to purchase of the house. Applications will be processed within 60 days and members notified.

Data by the Kenya National Bureau of Statistics shows 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.

Asset managers have cautioned against allowing unrestricted access to pension funds for homeownership saying that such a move would defeat the purpose of saving for retirement.

“If we eat into our future, our future will eat us,” Enwealth CEO Simon Wafubwa told the Star, pointing to the need for homeowners to also have residual funds in retirement.

However, the concerns have been addressed by making amendments to the effect that the proportion of funds available for the purchase of a residential house in both defined contribution schemes and benefit schemes shall be no more than 40 per cent of members’ funds or a maximum of Ksh. 7 million, whichever is lower.

In addition, the amount may cover the purchase price including transaction costs and applicable taxes where such a purchase price does not exceed market value.

“Trustees shall at any particular time only allow a member an option to either be issued with a guarantee to secure a mortgage loan or to utilize their benefits to purchase a house but not both,” says the regulations.

Titles to houses purchased under the schemes shall not be transferable unless a member dies, retires, becomes incapacitated or emigrates from Kenya to another country.

The Retirement Benefits Authority has published a notice calling on interested stakeholders to forward their written submissions for consideration on or before 13th May 2020.

RBA CEO Nzomo Mutuku said the amendments will go along way towards increasing homeownership in the country as envisaged in the housing pillar of the government’s Big 4 Agenda.

Read; Why your pension benefits could soon afford you a mortgage