•Last week, Majority Leader Aden Duale published an omnibus law that, among others, removes a previous restriction on use of retirement benefits scheme funds to purchase homes
•Currently, the law only allows the use of up to 60 per cent of accumulated pension savings as mortgage collateral
The government needs to create balanced policies such that only a portion of retirement benefits can go into the purchase of residential homes, pension firms have said.
“We need to have a forced balance where retirees are able to have funds to sustain themselves even after the purchase of a home,” Enwealth chief executive Simon Wafubwa told the Star
He added that while the move was welcome, there was still more to be done for the proposed bill to meet its intended goal.
Last week, Majority Leader Aden Duale published an omnibus law that, among others, removes a previous restriction on use of retirement benefits scheme funds to purchase homes.
Currently, the law only allows the use of up to 60 per cent of accumulated pension savings as mortgage collateral.
Salaried Kenyans will be allowed to use part of their retirement benefits to buy residential homes if Parliament approves a new Bill into law.
“This amendment is proposed to allow for the use of a percentage of the funds for purchase of a residential house,” Duale said.
If approved, the proposed changes will omit restrictions, which prohibit schemes from using their funds to offer direct or indirect loans to any person.
Wafubwa said the proposed law needs a proper legislative framework and increased public awareness to pensioners so that they do not squander savings on buying a home, only to remain penniless after retirement.
“If we eat into our future, our future will eat us,” he said.
ICEA Lion Life Assurance chief executive Justus Mutiga reiterated this stating, "there should be a restriction such that you don’t use the whole of your savings to purchase a house.
In personal financial planning, key areas include education, housing, medical provision and income in retirement for upkeep. Any money left beyond that can be used to invest.
"If no restrictions are put in place, people may end up buying houses only to be left with no cushion in retirement," he said.
"The opening of access of funds by members is positive for the members but may have a negative impact on the country's savings rate and pension penetration which was more than 20 per cent," ICEA LION Asset Management CEO Einstein Kihanda said.
He added that many Kenyans desire to own a home and the unlocking of pension savings will boost many to achieve this desire.
If signed into law, this will come as a boost to the Government’s big four agenda, which aims to improve homeownership rates and alleviate the current housing deficit of two million units.
“Access to housing finance in Kenya remains a key challenge with mortgages remaining out of reach for the majority of the population,” Cytonn Investment said in a report. "In our view, this is a step in the right direction towards providing alternative home financing solutions."
Cytonn added that with 20 per cent of Kenya's workforce enrolled in a pension scheme, successful implementation of the bill would lead to diversification of sources of funds to be used in purchasing residential homes.
"This will, in turn, improve homeownership in the country," it added.
Data by the Kenya National Bureau of Statistics shows total assets of pension funds rose to Sh1.32 trillion as at December 2019 from Sh1.17 trillion as at December 2018.
Most assets of the fund were held in government securities, immovable assets and quoted equities which accounted for 42.5, 18.0 and 17.7 per cent of the total assets respectively, in 2019.