Economy

Bill proposes use of pension savings to secure home loans

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National Assembly Majority Leader Aden Duale. FILE PHOTO | NMG

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Summary

  • Salaried Kenyans will be allowed to use part of their retirement benefits to buy residential homes if Parliament approves a new Bill into law.
  • Leader of Majority Aden Duale has published an omnibus law that, among others, removes a previous restriction on use of retirement benefits scheme funds.
  • The changes, if approved, will remove the restriction, which prohibits schemes from using their funds to offer direct or indirect loans to any person.

Salaried Kenyans will be allowed to use part of their retirement benefits to buy residential homes if Parliament approves a new Bill into law.

Leader of Majority Aden Duale has published an omnibus law that, among others, removes a previous restriction on use of retirement benefits scheme funds.

“Previously, there was restriction on use of retirement benefit scheme funds. The law only allowed use of the scheme funds to secure a mortgage loan.

“This amendment is proposed to allow for the use of a percentage of the funds for purchase of a residential house,” says Mr Duale in a new amendment to the Retirement Benefits Act.

The changes, if approved, will remove the restriction, which prohibits schemes from using their funds to offer direct or indirect loans to any person.

The restriction reads: “No scheme funds shall be invested contrary to any guidelines prescribed for that purpose or invested with a bank, non-banking financial institution, insurance company, building society or other similar institution with a view to securing loans, including mortgages, at a preferential rate of interest or for any other consideration to the sponsor, trustees, members or the manager of such scheme.”

The law requires every scheme to have a prudent policy on the investment of the funds to maintain capital and secure market rates of return on the investment of such funds.

“The investment policy of a scheme shall be implemented subject to the provisions of any regulations the minister may, in consultation with the authority, make for that purpose.

“There shall be submitted to the chief executive officer, in respect of every scheme, a statement of all investments of the scheme fund, in such form, manner and at such intervals as may be prescribed.

The Act stipulates that the Retirement Benefits Authority (RBA) may disqualify a person who acts in contravention of the provisions of the said provision of the Act from participating in any way in the management or administration of any scheme fund.

A trustee or manager who acts in contravention of a direction under the said section of the law commits an offence and shall be liable, on conviction, to a fine not exceeding Sh500,000 or to imprisonment for a term not exceeding two years, or to both.