Housing is a national priority. Unfortunately national policies and national laws often are not supportive of each other. In the past pension funds were a popular avenue for member’s obtaining funding for the purchase or expansion or alteration of their dwelling. Recently the Pension Funds Act was amended as referred to in Benchtest 09.2014. This amendment read together with the Income Tax Act, presents a significant risk to funds that do still offer loans or loan guarantees to its members, of not being able to recover the full outstanding amount from a member’s benefit.

Unfortunately, banks who still finance loans secured by a pension fund guarantee, and who were approached to assist their pension fund clients in mitigating the risk created by our laws and referred to in the first paragraph, simply refused to affect any changes to their contracts and documentation for this purpose.

As the result funds are reconsidering their involvement in affording members access to financing for housing loans and many will no doubt phase out housing loans as a benefit for members. We foresee that pension funds will no longer offer housing loan benefits in the medium term and funds are in fact well advised not to grant housing loans any longer.

One may ask, why does the Pension Funds Act create an avenue for members accessing their benefits for housing purposes while this would result in funds shouldering a significant risk of being unable to recover an outstanding housing loan balance?

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.