Housing scheme: Banks, mortgage houses scramble for N3.6trn pension fund


The National Pension Commission’s decision to grant Retirement Savings Account (RSA) holders access to 25 percent of their retirement savings to pay equity contribution for residential mortgages has triggered a scramble for a piece of the N3.6 trillion fund, Business Hallmark can report.

At the last count, 34 mortgage lenders have been approved by the Central Bank of Nigeria (CBN) to commence the implementation of the mortgage scheme.

It would be recalled that PenCom had in September 2022, released guidelines in line with the provisions of Section 89 (2) of the Pension Reform Act (PRA 2014) which allow RSA holders to utilise part of their retirement savings as equity contributions for the purpose of securing residential mortgages.

According to the pension regulator, the guidelines cover  contributors in active employment, either as a salaried employee or as a self-employed person.

The guidelines require interested RSA holders, to among other requirements, have an offer letter for their choice property duly signed by the property owner and verified by the mortgage lender.

Also, the RSA of the applicant shall have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months (five years).

Working married couples who are RSA holders are better positioned than single holders, as they are eligible to get 25 percents from their individual pension accounts, subject to individuals satisfying the eligibility requirements.

Meanwhile, while RSA holders with less than three years to retirement are not eligible, contributors under the Micro Pension Plan (MPP) are captured in the programme, provided they had made contributions for at least five years prior to the date of their applications.

Likewise, mortgage banks interested in the home mortgage scheme, are expected to fulfil strict conditions, which include obtaining licenses from the CBN; comply with the Contributory Pension Scheme (CPS) and have a valid Pension Clearance Certificate (PCC).

At the last count, 34 mortgage lenders met the requirements laid down by the CBN for them to participate in the mortgage scheme.

The lenders approved by the CBN as announced by PenCom include Abbey Mortgage Bank PLC; AG Mortgage Bank PLC; Aso Savings and Loans PLC; Brent Mortgage Bank; Centage Savings and Loans; City Code Savings; Coop Savings and Loans; Delta Trust Mortgage Bank; First Trust Mortgage and FHA Homes Limited.

Others are First Generation Homes; Gateway Mortgage Bank; Global Trust Mortgage; Haggai Mortgage Bank; Imperial Homes; Infinity Trust; Akwa Ibom and Loans Limited; Jigawa Savings, Federal Mortgage Bank of Nigeria and FHA Homes Limited.

Also on the list are Homes-Base Mortgage; Jubille-Life Mortgage Bank; Kebbi State Homes; Lagos Building and Investment; Mayfresh Mortgage Bank; MGSL Mortgage Bank Limited; Mutual Alliance Mortgage Bank; Prudential Mortgage Bank; Nigerian Police Mortgage Bank; Living Trust Platinum Mortgage Bank; Refuge Homes Savings and Loans;Resort Savings and Loans; Safetrust Mortgage Bank; STB Building Society and Union Homes.

While 19 out of the 34 mortgage banks are based in Lagos, seven are resident in Abuja, two in Akwa-Ibom and the rest are scattered across other parts of the country.

According to BH checks, the nation’s total pension fund assets rose to N14. 4 trillion at the end of September 2022, compared to N13. 6 trillion in the corresponding period of 2021.

As RSA holders will be having access to a quarter of their savings, this means that the 34 lenders will be competing for a cut of the available N3.6 trillion mortgage fund, which is 25 percent of the N14.4 trillion pension fund, among themselves.

BH reliably gathered that several of the approved mortgage banks have one form of relationship with Deposit Money Banks (DMBs), especially those operating the holding structure.

For instance, while Union Bank Plc holds controlling stake in Union Homes through its mortgage arm, STB Building Society has strong ties to United Bank for Africa (UBA) PLC.

A source in the banking industry, who craved anonymity, confided in BH that virtually all the commercial banks operating in the country are interested in the mortgage scheme, but could not subscribe to it because of  CBN’s stringent laws that forbid banks from doing businesses outside their core banking duty.

To circumvent the law, banks have been setting up as holding companies. This enable them to run other non-core banking businesses like insurance, mortgage and pension.

However, the law, which gives the banks the power to set up holdcos also grants the CBN  full oversight powers in the subsidiaries where public funds are invested.

The banking source, who spoke with our correspondent on the matter, disclosed that the management of many banks who are not currently eligible to participate in the mortgage scheme because of the strict CBN rules, are working on setting up as an holdco.

“The pension fund is huge. And there is also room for it to grow. Apart from this, it is a low hanging fruit. Any serious minded banker will be foolish not to tap into it.

“Stanbic IBTC made and is making a kill from it. GTB, Access and First Bank entered the fray very late. Most of them are regretting not coming in earlier. So, they didn’t want to lose out of this time around.

“I won’t be surprised if I see more banks rushing to consolidate into holdcos in the nearest future in order to participate in the pension bazaar”, the source noted.

Speaking on the new policy, PenCom’s Head of Investment Department, Ibrahim Kangiwa, said the objective of the initiative was to provide housing for first-time home owners and improve the standard of living of RSA holders under the CPS by facilitating their ownership of residential homes during their working life.

According to him, a contributor under the Contributory Pension Scheme must have contributed for 60 months cumulative of employer and employee’s mandatory contributions to be eligible to use his RSA balance for acquisition of residential mortgages.

The same requirement, he claimed, is applicable to  contributors under the Micro Pension Plan, as well as married couples, who individually met the eligibility criteria.

“Where 25 per cent of RSA balance is more than equity contribution, the RSA holder can only access the amount equivalent to equity contribution required.

“Where 25 per cent is not sufficient for equity contribution, RSA holder may utilise Voluntary Contribution in line with the Voluntary Contribution guidelines.

“Where 25 per cent is not sufficient for equity contribution, Micro Pension contributor may utilise contingency portion in line with MP guidelines.

“Where 25 per cent is insufficient as equity contribution, RSA holder shall deposit the difference with the mortgage lender”, Kangiwa stated.

He, however, warned that the 25 per cent equity contribution was not for refinancing existing mortgage, outright purchase of property and purchase of land, and that the property must be for residential purpose only.

Also speaking, the President, PenOp, Olumide Oyetan, harped on the need for stakeholders to work together to ensure the successful implementation the scheme.

Oyetan, who is also the managing director of Stanbic IBTC Pension Managers, said the successful implementation of the initiative would improve people’s welfare and move the country forward.

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