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RETIREMENT: Savers to be able to get housing loans

URBRA CEO Nsubuga (left) and Finance Minister Kasaija talk to the press Tuesday. COURTESY PHOTO

Kampala, Uganda | THE INDEPENDENT | Members of different retirement schemes will be allowed to use part of their savings as collateral to obtain loans.

According to the regulation, members saving in retirement schemes licensed by the Uganda Retirement Benefits Regulatory Authority (URBRA), will be allowed to secure mortgages and loans using 50%  of their savings. The loan will be tied to the construction of cost-effective houses and purchasing land for construction and renovation of a house.

The Minister of Finance, Planning and Economic Development Matia Kasaija on Tuesday launched the Uganda Retirement Benefits Regulatory Authority (Assignment of Retirement Benefits for Mortgages and Loans) Regulations, 2022. The regulations enable savers to assign  up to 50% of their accrued retirement savings to mortgages and housing loans.

Kasaija acknowledged the importance of decent housing and accommodation, in the socio-economic transformation of the country. He said that they realized that when members receive their savings in a lump sum, they spend up to two-thirds of the savings to construct their homes, which may not get completed

The Minister of Finance, in February 2022, issued the new regulations with the key objective of ensuring that retirees have decent shelter and enjoy dignity in retirement. The provision for mortgage or housing loan is provided for in the URBRA Act, 2011. According to Section 68, 2 (a), a prescribed proportion of a member’s benefits may be assigned and used to secure a mortgage or a loan for purchasing a residential house.

“Housing is one of the basic human needs that have a profound impact on the health and welfare of an individual,”  Kasaija said, adding that older persons are among those that are most adversely affected by the housing crisis in Uganda. As people grow older, they spend between 60% to 90% of their time at home; they cannot work and they need a warm and secure environment. But as they grow older, their homes also get more dilapidated and need constant maintenance.

Living with the fear that they could retire without a decent place of abode, many Ugandans have always pressed government to allow them use their savings as collateral for housing loans and mortgages. Research shows that when members receive their lumpsum payout of retirement benefits, they spend up to two-thirds of the package constructing retirement homes. They tend to use up their benefits, sometimes without even completing the construction. This leaves them with neither cash nor shelter.

Martin Anthony Nsubuga, the CEO of URBRA, affirmed that the regulations would contribute to the betterment of the housing situation in Uganda and relieve the pressure on retirement benefits, but cautioned that this was not about premature access to retirement benefits.

“Accrued retirement benefits shall only be used as collateral for securing a mortgage or housing loan,” he clarified, adding that under the provisions, a member would be able to: acquire land on which a residential house has been erected; erect a residential house on land in respect of which, the member has right ownership; and carry out alterations or repairs to a residential house owned by the member,”  Nsubuga said.

The regulation will benefit the three million members who are saving in the different retirement benefits schemes in the country. He also said that the interest rate will not be high because they have discussed this with different banks.

Apart from the prospect of decent housing, members will also enjoy their benefits without necessarily drawing down.  Nsubuga urged all savers and trustees to know their rights and responsibilities to ensure the smooth operationalization of the regulations. He further reassured all stakeholders that the regulations had the force of law, having been signed by the Minister and duly published in the Uganda Gazette

According to the regulation, a member of the retirement benefits scheme is eligible for the loan if they have saved for not less than ten years. However, a member who has left employment or a member who has attained the retirement age of 60 years is not eligible for the loan scheme.

There are 64 retirement benefits schemes licensed by the Uganda URBRA as of January 2022.

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