Pensioners can now have access up to Sh7 million or a maximum of 40 percent of their retirement benefits to buy their homes after the Treasury Cabinet Secretary Ukur Yatani signed the amendments.
Pension schemes have been given until August 14, 2021, to amend their regulations to allow their members to have early access to their savings for their residential house purchase.
The amendments will boost homeownership in a market where most people in the formal sector are unable to raise the deposit or afford the mortgage payments.
“A member may utilize a portion of the member’s accrued benefits to purchasing a residential house from an institution,” reads part of The Retirement Benefits (Mortgage Loans) (Amendment) Regulations, 2020.
“The portion available to a member for the purchase of a residential house at the time of the application shall be … an amount not exceeding forty percent of the member’s accrued benefits: Provided that such sum shall not exceed seven million shillings.”
Trustees of various retirement schemes will come up with rules that one has to follow before being allowed to access their pension for a home purchase.
The trusted will also ensure that the intended houses to be bought are priced at market value and their ownership will only be transferred under special circumstances such as the death of the member. This is aimed at preventing the abuse of the incentive.
The title of the house will be with the trustees to prevent the transfer, except in special circumstances outlined in the law.
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Buying a house using the pension money will only be allowed once while those who have taken mortgages will not be allowed to offset their outstanding debt using the pension resources.
Couples can pool their savings and boost their ability to buy a home.
“Where a member and the member’s spouse are both members of the same scheme or different schemes, the trustees shall prescribe in the scheme rules how the member and the member’s spouse may combine their accrued benefits and utilize the total amount for the purchase of a residential house,” said the regulations.
The transaction and tax costs of buying the house will be left on the hands of the member.
