Mandatory Retirement Savings Account (RSA) Now Accessible before Retirement


The National Pension Commission (PenCom) recently issued and approved the immediate implementation of the Guidelines on Accessing RSA Balance For Payment of Equity Contribution of Residential Mortgage by RSA Holders (Guidelines). The Guidelines were issued pursuant to Section 89(2) of the Pension Reform Act 2014 (PRA), which provides that “a Pension Fund Administrator may, subject to guidelines issued by the Commission, apply a percentage of the pension assets in the retirement savings account towards payment of equity contribution for payment of residential mortgage by a holder of Retirement Savings Account”.

The objective of the Guidelines is to provide access to equity finance for RSA holders in the Contributory Pension Scheme (CPS) such that they utilize part of their RSA balance for the payment of equity contribution towards securing a residential mortgage upon meeting the prescribed eligibility criteria.

Benefits provided under the Guidelines are reserved for RSA account holders who are in active service or are self-employed[1] and who have at least three years before retirement. In addition, to enjoy benefits conferred under the Guidelines, an applicant’s RSA account must reflect contributions made by both applicant and employer for at least 60 months.

Benefits conferred under the Guidelines:

As high as 25% of total RSA balance as at the date of application is available as equity contribution for employees seeking to secure residential mortgages. In arriving at the total RSA balance, Nigerian Social Insurance Trust Fund balance, Pre-Scheme contributions, and voluntary pension contributions may be cumulated and added to the mandatory RSA balance upon obtaining the consent of an applicant.

Where the value of equity contribution required by an applicant is less than the value of 25% of the applicant’s total RSA balance, the applicant would be entitled to access only the value of the equity contribution required by the mortgage lender regardless of the 25% authorized limit. However, where the required equity contribution is higher than the value of 25% of the total RSA balance, the applicant would be required to deposit the difference with the mortgage lender before the requisite portion of his RSA balance can be applied as equity contribution.[2]

An applicant may also utilize the contingency portion of his voluntary pension contributions (if any), in accordance with the provisions of the Voluntary Contribution Guidelines, which allows an RSA holder to utilize from the contingency portion of the voluntary contributions – i.e.  50% of the voluntary contribution balance.[3]

It is important to note that the equity contribution for residential mortgages provided under the Guidelines can only be accessed once by an RSA holder. This, however, does not take away form the right of RSA Holders who had accessed their RSA balances due to loss of employment prior to the issuance of the Guidelines to access their RSAs for equity contribution, provided they satisfy the 60-month requirement. Likewise, RSA holders that have utilised 25% of their RSA balance for equity contribution for residential mortgage are eligible for payment of 25% of their RSA for loss of job in line with the provision of Section 7(2) of PRA 2014.

However, existing retirees on CPS and exempted persons under the PRA 2014 are not eligible to use their RSA balances for payment of equity contribution for Residential Mortgage.

Procedure for Application:

Application for equity contribution for residential mortgage may only be made in person and not by proxy. The application is made by filling an Application for Mortgage Form (to be provided by the mortgage lender) together with the property offer letter duly signed by the property owner and verified by a CBN licensed mortgage lender holding a valid Pension Clearance Certificate. Upon approval of an application, a PFA will remit the approved equity contribution into the applicant’s account with the Mortgage Lender.

A joint application may be made by married couples, who wish to access their RSAs and combine the funds as equity for a single residential mortgage. In such cases, husband and wife must individually satisfy application requirements and must each make an application to his/her respective Pension Fund Administrators. Upon approval of the application, the PFA of each applicant will issue a payment instruction to its Pension Fund Custodian to remit the approved amount to the applicant’s account with the Mortgage Lender within two working days.

Applications may be made by micro pension contributors who meet the 60-month contribution requirement.

RSA holders who registered before 1 July 2019 are required to update their records through the RSA data recapture exercise in order to successfully apply.

How Much Can the Guidelines Achieve?

Prior to approval of the Guidelines, an employee could not make withdrawals from his mandatory RSA before attaining the age of 50 except in cases of mandatory retirement, compulsory retirement, retirement on medical grounds, or temporary loss of employment/disengagement[4]. Although an employee holding a mandatory RSA could, once every two years, make withdrawals from the contingency portion of the voluntary contributions made into the RSA – i.e.  50% of the voluntary contribution balance.[5] While foreigners and retirees who made voluntary contributions into RSAs could make withdrawals once every 2 years from the total of their voluntary contribution balance.[6]

The advent of the Guidelines has ushered in a new era where, in addition to the above, individuals can make withdrawals from their mandatory RSA before retirement for the purpose of making an equity contribution to fund a personal residential mortgage. This initiative of the Government is a laudable one and we encourage eligible persons to take advantage of it.

Please do not treat the foregoing as tax advice as it is only an expression of our Tax Information Service. All enquiries should please be directed to our TaxThursday Desk at; +234 700 TAXAIDE or any of our following personnel:

     Adeola Adefuye Associate  
           Bidemi Olumide Partner  

[1] 1.5.1, Guidelines

[2] 2.0, Guidelines

[3] 3.13, Guidelines on Voluntary Contribution Under the Contributory Pension Scheme

[4] 2.1.1, Revised Regulations on the Administration of Retirement and Terminal Benefits, Section 16(1)&(2) Pension Reform Act

[5] 3.13, Guidelines on Voluntary Contribution Under the Contributory Pension Scheme

[6] Ibid., 3.14

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