Homeownership boost for low pension savers

Kisumu County Governor Anyang' Nyong'o accompanied by LAPTRUST and County Pension Fund officials at Anderson Estate in Kisumu on December 10, 2020, where they launched an affordable housing project.[Denish Ochieng,Standard]

You can now use part of your pension contributions to kickstart your dream of owning a home even with limited savings.

This is after the Co-operative Bank of Kenya unveiled a pension-backed mortgage loan facility in partnership with Enwealth Financial Services.

This is the first product that takes advantage of the recent legal changes that allow pension members to use 40 per cent of their contributions as a down payment for a house.

The Director of Corporate Institutional Banking at Co-operative Bank Jacqueline Waithaka said the product is in support of the government’s affordable housing pillar of the Big Four agenda.

“We are excited to pioneer this innovation that will enable a wider pool of Kenyans to realise their dream of owning a home,” said Waithaka. One of President Uhuru Kenyatta’s Big Four agenda is to build half a million affordable residential units by the end of next year.  

Through the Finance Act, 2021, the government amended the Retirement Benefits (Mortgage Loans) Act, Regulations Amendment, 2020 allowing members of pension schemes to utilise up to two-fifths of their accrued pension benefits as a down payment for a home.

The changes in law while beneficial to pension members with enough contributions, do not take care of a lot of Kenyans whose retirement savings are inadequate.

With the pension-backed mortgage loan facility for members of pension schemes, those whose pension contribution can’t cover the 40 per cent down payment for their preferred house will get a top-up loan from the Co-operative Bank.

Speaking at the launch of the product on Wednesday, Enwealth Simon Chief Executive Wafubwa noted that owning a home and having an adequate income at the point of retirement are the most critical pillars for a lifetime of financial well-being and dignity. “We are excited to partner with Co-op Bank to make available this innovative home-ownership solution that gives our clients access to affordable mortgages in line with the new retirement benefits regulations.”

Borrowers will enjoy an extended repayment period of up to 20 years, depending on their age.

Pension scheme members can purchase a developed property anywhere in Kenya with a ready title deed or certificate of lease, provided that the house is a residential property for their own occupation.

The application can be done by an individual pension scheme member or jointly with a spouse, thereby consolidating their pension benefits to access a higher amount.

Data from the Central Bank of Kenya (CBK) shows that there were 26,971 mortgage loans in the market as of December last year, down from 27,993 in December 2019. CBK attributed the decrease to repayments and fewer mortgage loans advanced due to the effects of Covid-19.

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