In Nigeria, all employees are currently required to have a pension account. This account is called the Retirement Savings Account (RSA) in which the employees contribute money through a Pension Fund Administrator (PFA). One of the advantages of having this Retirement Savings Account is that employees can borrow from their pension funds whenever the need arises. In an event of unforeseen circumstances and unplanned occurrences, you can borrow from your pension fund. In this article, you would learn the processes involved in borrowing from your pension fund in Nigeria.
If you want to borrow from your pension fund, it all depends on the procedure required by your Pension Fund Administrator as different administrations have their requirements. The documents needed before you can borrow are as follows:
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Letter of Termination of Appointment
One of the criteria needed before you approach your Pension Fund Administrator (PFA) to release your pension fund to you as a loan is having a letter of termination of employment given to you by your previous employer. You could also substitute this letter of termination of appointment with a letter of resignation if that is the case.
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Three Month’s Payslip
Another requirement you need before you request to borrow from your pension fund is a three months payslip from your Pension Fund Administrator (PFA). You must have this payslip before you demand the loan.
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A Letter Requesting The Payment
Before approaching your Pension Fund Administrator for the loan, one of the requirements needed is a written letter from you requesting a percentage of not more than 25 percent of payment from your Retirement Savings Account (RSA). Note that this payment you are requesting could also be part of your contribution.
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Evidence of Accrued Pension Rights
If you work in the public sector, you would need evidence of accrued pension rights as one of the requirements if needed. Just ensure you keep it handy before approaching your Pension Fund Administrator.
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Letter of Introduction from Your Bank
After you must have prepared the other documents, the next document you need is a letter of introduction from your bank containing your bank statement. This letter would be gotten directly from the commercial bank you bank with. The bank statement contains all banking activities.
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Proof of Age
Another important document you need to get before approaching your Pension Fund Administrator is a document that shows your date of birth, that is your birth certificate or a sworn declaration of age. This is a very important criterion.
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Letter from Your Employer
If you want to borrow money from your pension fund you also need a letter from your current employer which confirms the full remittance of all you made for your Retirement Savings Account (RSA). Don’t forget that this letter from the employer is only needed for employees of private organisations.
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PenCom Retiree Indemnity Form
If you work for the government and you wish to borrow money from your pension fund, an important document you need to have is a PenCom retiree indemnity form. It is an important criterion.
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Form from Your Pension Fund Administrator
You would also need a form that your Pension Fund Administrator would give. This form is a very important requirement needed before you can borrow from your pension fund.
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Passport Photographs
Most importantly, you need to go with your recent passport photographs as it is one of the requirements needed before you can borrow from your pension fund.
If you want to borrow from your pension fund in Nigeria before retirement, there are certain criteria you need to fulfill. There are about three of them. You can fulfill at least one of them. One of the conditions for borrowing from your pension fund is that you must have an additional large sum of contribution into your Retirement Savings Account. Do not forget that it is only from this additional contribution that you can borrow. Also, if you are not up to 50 years of age, you are allowed to borrow a maximum of 25 percent of your retirement account fund. This criterion stands if you lose your means of livelihood and have not gotten another within the range of four months. Lastly, if you intend to get a mortgage loan, your Retirement Savings Account allows you to withdraw not more than 25 percent of your pension account. Aside from the above conditions for borrowing from your pension fund, the Pension Reform Act of 2014 forbids the withdrawal from your pension account.
There are many reasons why people borrow from their pension fund. One of the reasons is when the person wants to buy a new house or even build one from scratch. When this happens you might see the need to borrow from your pension fund. Another reason is when you see the need to expand your business. When this fund is not easily accessible, people tend to want to borrow from financial institutions or money-lending companies. They can even go as far as getting money from their savings. It is better to borrow money from your pension savings account than to borrow from conventional financial institutions or even dip from your savings. When people are faced with situations that require finances beyond their control, there is every tendency that they have to borrow money. Just don’t forget that it is safer to borrow from your pension savings account.