For Retirement Funds
Pension-backed lending offers an alternative way for your fund to assist members to meet their housing needs. With a pension-backed home loan, members can finance their homes by leveraging the savings they have built up in their retirement fund. With affordable monthly repayments and a repo-linked interest rate, your members could have access to housing finance that could cost less than mortgage-backed finance that does not involve bond registration, property or valuation costs. Pension-backed home loans enable you to improve member relationships and build member loyalty by offering a wider range of member benefits with minimal impact on your fund’s administration.
Section 19(5) of the Pension Funds Act allows a retirement fund to lend a member money for the purpose of buying a home or for home improvements. The member’s retirement fund assets thus serve as collateral for the home loan.
Members can borrow up to a maximum of 90% against their retirement fund assets in terms of the Pension Funds Act, but this percentage can be reduced by the rules of the retirement fund.
The retirement fund would also determine the check and control mechanisms and the conditions of the loan are governed by the Pension Funds Act (section 19 (5)). As a licenced credit provider, retirement funds comply with regulations of The National Credit Act.