3. Retirement Benefits (Mortgage Loans) (Amendments) Regulations, 2020

Quick link: https://kenyalaw.org/kl/fileadmin/pdfdownloads/LegalNotices/2020/LN192_2020.pdf

· The Regulations came into effect on 14 September 2020 vide Legal Notice No. 192 of 2020.

· Clause 14 of the amended Regulations allowed members of pension schemes to utilise up to 40 percent of their accumulated benefits/savings subject to a maximum of Kshs. 7 million to purchase residential houses certified as fit for occupation from an institution defined as ‘including banks, mortgage or financial institutions, building societies, microfinance institutions, the National Housing Corporation, other institutions approved by the Retirement Benefits Authority or any other entity offering a residential house for sale.’

· As per clause 15 of the Regulations, this facility was only available to pension scheme members before they reach retirement and may only be utilised once. Members who take early retirement or have attained the retirement age are inelligible.

· Notably however, the uptake for the same has been especially low due to lack of awareness of the opportunity, high mortgage interest rates, failure by various pension schemes to fast track the amendment of scheme’s trust deed and rules to accommodate and provide for these amended Regulations. Clause 22 of the Regulations required various schemes to amend their scheme rules for compliance within 12 months of date of commencement (that is by 14th September 2021).

· Accordingly, one of the support that may be accorded to the various retirement benefit schemes/scheme trustees is to update/amend their trust deed and rules (for those that may not have done so) to set out procedures and requirements that their members would follow to take advantage of this opportunity for pension backed mortgages.

· Relatedly, there should be concerted efforts given to creating further awareness among pension scheme members about the changes in the law that now allow them to purchase residential houses using their pension benefits.

· Additionally, the cap on the portion of retirement benefits that may be utilised to purchase a house at 40 percent or Seven Million Kenya Shillings may hinder purchase especially given the relatively high cost of houses particularly in urban areas.).

· Clause 19 provides that a member who wishes to purchase a residential house under the Regulations is to bear transaction costs and taxes relating to the purchase. Tax incentives for houses purchased under the Regulations can promote the use of the facility.