Retirement Benefits Amended Act Allows Home Purchases At 40% of Pension Contributions

Following the amendments to the 1997 Retirement Benefits Act, Kenyans will be allowed to use up to 40 percent of their pension contribution in residential home purchases, says the Retirement Benefits Authority.

The new draft regulations termed as the Retirement Benefits (Mortgage Loans) (Amendment) Regulations, 2020 sets the course for the use of pension funds for homeownership.

“In a defined contribution scheme, an amount not exceeding forty percent of the member’s accrued benefit, subject to a maximum of Ksh.7 million,” reads part of the regulations.

Pension fund trustees will be allowed to offer members with the option to deploy the partly funds as either a guarantee to access a mortgage or utilize their benefits for the purchase but not both.

Further, scheme members are only allowed to access the benefit as a one-off while the service is locked out to members already receiving pension earnings and those who have attained retirement age.

According to the authority, trustees from the different pension schemes will consider applications relating to the utilization of the benefits by members and review their consistency with the retirement act and scheme rules.

Previously, pension schemes have been prohibited from employing funds to offer direct or indirect loans to members.

The amendment seeks to support homeownership in the country by reducing financial constrains.

The Housing and Urban Development ministry has backed the changes to intensify home purchases under the affordable housing agenda.