RULES AND PROCEDURES FOR UTILIZING A PORTION OF BENEFITS TO PURCHASE A RESIDENTIAL HOUSE
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In 2020, due to the above challenge experienced, Section 38 of the Retirement Benefits Act (1997) was amended to allow pension scheme members to use part of the retirement benefits to buy residential houses.
Salient features of the regulations:
(i) Members are allowed to use whichever is lower of an amount not exceeding 40%
of their remitted accrued benefits provided such sum shall not exceed seven
million shillings for purposes of purchasing a residential house from an institution or the purchase price of the residential house which shall not exceed the market value;
(ii) A residential house shall only be a house that has been certified for occupation before the intended purchase and it can be in the urban or rural areas;
(iii) An “institution” means—
(a)a bank, mortgage or financial institution licensed under the Banking Act(Cap. 488), a building society licensed under the Building Societies Act(Cap. 489), a microfinance institution established under the Microfinance
Act, 2006 (No. 19 of 2006) the National Housing Corporation; Or
(b) any other institution, including an issuer of a tenant purchase
arrangement that is specifically approved by the Authority for the purpose of
providing facility; “member” means a member of a retirement benefits scheme, including any person who is entitled to a benefit under a retirement benefits scheme. “Scheme” means a retirement benefits scheme registered under the provisions of the Act; “scheme rules” means the trust deed and rules of the scheme.
(c) any other entity offering a residential house for sale.
(iv) Application by a member shall be in writing and the Trustees have to consider it within 90 days;
(v) Facility only available for active members;
(vi) One cannot use their benefits to clear an existing mortgage;
(vii) The Trustees shall cause the title of the house purchased to be encumbered until a member retires, dies , retires on ill-health or emigrates from Kenya permanently;
(viii) All costs relating to the purchase of the house will be borne by the member;
(ix) The scheme shall prescribe the minimum requirements to be met by members;
(x) The scheme rules shall be amended within 12 months i.e. by 14th September 2021.