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Pension schemes back new home buying plan

Tuesday May 19 2020


A housing project. Pension schemes have backed a new proposal that will allow members access up to 40 per cent of their savings to buy a home. PHOTO | FILE | NATION MEDIA GROUP 

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Pension schemes have backed a new proposal that will allow members access up to 40 per cent of their savings to buy a home.

The pension schemes, now sitting on Sh1.3 trillion as at December 31, have in the past invested billions of shillings in building commercial properties and high-end residential properties for sale, but that could change into rent-to-own properties when the 40 per cent rule sees cash released purposely for buying homes.

Pension schemes that own large tracts of land across Kenya have for years pushed for law reform allowing them to introduce tenant-purchase schemes or rent-to-own plans where members buy houses via a plan in which they save and repay mortgages via their pension schemes.


Association of Retirement Benefit Scheme chairman Simon Nyakundi said members support the new law, noting that it will encourage home ownership among members.

“Everyone needs a home and most workers’ dream is to own a house upon retirement. Enabling members to own a home early in their working life means we are preparing our members for a dignified retirement,” he said.


KIRDI Pension Scheme Trust Secretary Jackson Omamo said members look forward to owning houses as the property will be among a portfolio of their valuable assets that gain value with time.

Calling the move “very positive”, he said a house becomes part of personal portfolio as much as the money they will on they retirement.

Mr Nyakundi noted that issues revolving around vetting of members will be administrative to be handled by individual pension schemes.

Experts said the new pension scheme changes will benefit the sector with Kenyans expected to increase their savings, anticipating to use part of it to buy a house.

This is a departure from the norm where money placed in pension schemes is only released at retirement or in part when a member leaves employment midway.

Under the new proposals, pension schemes will be tasked with playing an oversight role where they will retain the property ownership documents eternally until a member retires or dies, in which case it will be released to his family.

The trustees will also conduct due diligence for any property to be bought by a member and be party to the contract to ensure no one abuses the facility aimed at benefiting the saving public.

Interviewed savers welcomed the development, saying, while pension schemes are a cheap source of money for the government, the current changes will free a portion of savings to members to buy houses.

Ken Gichinga, head of business analytics at consulting firm, Mentoria Economics, said the proposals will unlock ready cash to a struggling real estate sector where pension savers will access their savings midway to buy a house, “thereby encouraging others to save for such causes”.

“With the current employment trends where employees hold jobs for shorter periods, it is beneficial to allow employees to access their money early via home ownership,” he said.

The economist said Kenya needs an innovative policy environment that allows formulation of “financial technology around savings”, where savers will enjoy defined incentives.

“We have nearly 500 lending apps, but few saving apps, and that calls on the government to provide incentives that attract more Kenyans to save. Asian tigers built their economies on savings, not debts,” he said.