Market News

Workers with multiple pensions to merge them for Co-op mortgages

COOPBank

A Co-op Bank branch in Nairobi. FILE PHOTO | NMG

alushula

Summary

  • Workers with pension contributions spread in different schemes will have to move their money into one scheme before being allowed to tap 40 percent of their entire savings for purchase of a residential home.
  • Co-operative Bank of Kenya, which recently launched a pension-backed mortgage facility, says consolidation of savings will help customers who have worked in different organisations to maximise the eligible value for buying a house.

Workers with pension contributions spread in different schemes will have to move their money into one scheme before being allowed to tap 40 percent of their entire savings for purchase of a residential home.

Co-operative Bank of Kenya #ticker:COOP, which recently launched a pension-backed mortgage facility, says consolidation of savings will help customers who have worked in different organisations to maximise the eligible value for buying a house.

“One will have to move these benefits to their current employer or an individual pension plan because they will need to have the trustees of the scheme sign certain documents to enable them access their benefits for housing,” said Lydia Muchiri, Co-op Bank head of custody sales and registrar services.

“Consolidating your benefits will ensure the process of getting current trustees and administrators is smooth and that your limit to be used on housing is higher.”

Co-op partnered with Enwealth Financial Services Limited to roll out a pension backed mortgage facility that will see the lender bridge the gap between the amount customers can tap from pension contributions and the price of house they are seeking.

The product is in line with the Retirement Benefits (Mortgage Loans) (Amendment) Regulations 2020 which allows savers to access up to 40 percent of their accrued benefits for residential house purchase provided the sum does not exceed Sh7 million.

The Co-op product allows members to source for the residential house to buy then the bank will value the house within a week. The member will then approach their scheme for a letter of undertaking—an evidence that the trustees will release part of savings for house purchase.