Pension savings can get you a home loan

Dar es Salaam. Tanzanian members of social security funds who have contributed for at least ten years will soon be able to apply for home loans using their savings as collateral.

Newly published regulations require both the National Social Security Fund (NSSF) and the Public Service Social Security Fund (PSSSF) to enter into agreements with commercial banks for the provision of mortgage facilities whose repayment shall not go beyond members’ compulsory retirement age.

The regulations, which were published in the government gazette of August 17, 2018, follow the merger of five pension funds into two schemes to reduce operational costs and boost service delivery.

Mortgage is among short-term benefits to be offered by the two schemes, which cater for the public and private sectors.

“Subject to sub regulation 3 (which requires the schemes to enter agreement with commercial banks) and the procedure laid down in the operational manual of the respective schemes, a member may use part of his benefit entitlements as collateral for home mortgage,” the regulations read in part.

However, the amount to be accessed for mortgage should not exceed 50 per cent of special lumpsum (for a member contributed for a period of less than 180 months) or entitlement of pension (for a pensionable member who contributed for at least 180 months).

Conditions are that the beneficiary should be a Tanzanian member of a scheme who contributed for at least ten years, and repayment should not go beyond compulsory retirement age, according to the regulations.

Sickness benefit

Other short-term benefits include sickness and unemployment benefits.

The sickness benefit is payable to members who are sick or involved in accident other than employment injury who finished their sick leave in which an employer pays half a salary for three months before terminating the contract.

Under the sickness benefit, a scheme member is entitled to 40 per cent of the salary for a maximum of three months.

Unemployment benefit

The unemployment benefit covers members who lost their job and the fund will pay one third (33.3 per cent) of the salary for a maximum of six months per year.

The rules explain that the unemployment benefit shall not be paid for a period exceeding an aggregate of 18 months for the entire employment circle or career.

“Where the period for which a member is entitled to receive unemployment benefit expires and the member has not secured another employment within eighteen months after the date of expiration of the period of receiving unemployment benefit, he may apply to the director general to convert his contribution into supplementary scheme of his choice.

“The member whose contributions are converted may continue to contribute to the supplementary scheme subject to the trust deed or rule governing the respective scheme. Where such member’s contributions are converted to a supplementary scheme, the amount to be converted shall be special lump sum minus total amount of unemployment benefit accessed,” reads part of the regulations.