Educate workers on using pension to acquire houses

Workers have got the green light to withdraw part of their pension benefits to buy a house, revealing yet another attempt by the government to help millions of people achieve the elusive dream of owning homes.

Under the Retirement Benefits (Mortgage Loans) (Amendment) Regulations, 2020, a worker can access 40 percent of accrued benefits or a maximum of Sh7 million to buy their first residential house.

Pension schemes have up to next September to review the rules to allow this early access to their savings.

Although pension should ideally cushion retirees from the pain of daily bills and the pension schemes have on a number of times opposed attempts to allow early access to this wealth, owning a house while still working is necessary. Among other benefits, it makes improvements possible.

Using a huge chunk of the pension while out of work to buy a house has sunk many individuals into misery partly because of the steep cost of construction.

This regulation will, no doubt, grow home ownership. However, the goal of boosting home ownership will depend on how the schemes will advise the contributors on access and use of the money.

One of the rules that must be tightened is ensuring that the withdrawals are directed to purchasing houses, and not converted into cash, a step that is open to abuse when the haul is diverted to other uses.

Anybody withdrawing from the pool ought to have documentation that the money is enough to buy a ready-to-occupy house.

There is a need to insist that the money deliver a habitable structure.

Two, based on this, the regulations should be amended to allow those completing construction to withdraw from the pool.

It will also be important that people struggling to repay their mortgages be allowed to access a smaller portion of the pension to offset their debts as a way of easing the home ownership burden.

Finally, we urge the government and the pension schemes to start rolling out the plan instead of waiting for the September 2021 deadline. It is also the business of the two groups to educate workers on the new rules such that those opting for it do so with full information.