Retirees to access new mortgage plan with 40% of pension

Retirees, currently allowed by law to use 40 percent of pension to buy homes are now eligible for a new mortgage product launched Thursday in the Kenyan market. 

The retirees' mortgage plan by Cooperative Bank and Enwealth is expected to enable the over three million members of pension schemes in Kenya, who otherwise would have found it difficult to raise enough funds to buy a home.

In a joint statement, the two firms said the facility will enjoy an extended repayment period of up to 20 years, subject to the retirement age of the borrower.

''The new mortgage is the first such facility in the market and has been made possible the Retirement Benefits (Mortgage Loans) Act, Regulations Amendment 2020 that now allows members of pension schemes to utilise up to 40 per cent of their accrued pension benefits as down-payment to buy a home,'' the statement read in part. 

With this facility, a pension scheme member can purchase a developed property anywhere in Kenya with a ready title deed or certificate of the lease, provided that the house is a residential property for the member’s 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.

The product is expected to perhaps help reverse trends in the country's pension sector, with studies showing that 60 percent of retirees die within the first five years home with 22 percent homeless. 

An Ipsos Kenya survey in 2018 further revealed that although the retirement age in Kenya currently at 65 years, most retirees especially those in the informal sector hit that age with no secure retirement package in place.

Kenya made an amendment to the pension law last year as part of President Uhuru Kenyatta's agenda on housing. The country intended to build 500,000 units every year to quench the 2 million housing unit deficit. 

Speaking during the launch event held at the Co-op Bank Property Hub, director of corporate Institutional Banking at Co-op Bank, Jacqueline Waithaka termed the product as a game-changer.

She said the product is a deliberate response by the bank 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 realize their dream of owning a home," she said.

Enwealth Financial Services CEO Simon Wafubwa said 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", he said.