In Nigeria, all employees working in any organization have a pension account, usually it is designed that the employee send funds monthly to the pension account through a Pension Fund Administrator (PFA), known as the Retirement Savings Account (RSA).
There are several pension companies in the country and one of the benefits of having this Retirement Savings Account is the ability to borrow money from it when the need arises, however, the are procedures to do this.
Guide on How to Borrow your Pension Fund in Nigeria
You can borrow money from your pension funds when you have a dire need but there are procedures you must follow; these procedures have been established by your Pension Fund Administrator. Below are the documents required before you can borrow from your pension fund.
Letter of Termination of Appointment
Three Month Payslip
Letter requesting the payment
Evidence of accrued Pension right
Letter of Introduction from your bank
Proof of age
Letter from your employer
Pencom Retired indemnity form
Your pension Administrator’s form
Passport photograph
Letter of Termination of Appointment
One of the requirements you must have before asking the release of your pension funds from your Pension Fund Administrator (PFA) is a Letter of Termination of Appointment. You can either submit this letter or a letter of resignation instead.
Three Months Payslip
Another important document you need before you can access your pension fund is a three month payslip from your pension fund administrator. This is a must and without it, you can not access the fund.
Letter Requesting the Payment
You have to write a letter requesting a percentage not more than 25% of payment from your Retirement Savings Account (RSA) before contacting your Pension Fund Administrator for the release of the loan.
Evidence of Accrued Pension Right
If you work in a public sector, one of the requirements is proof of accrued pension rights. So before you can borrow from your pension fund ensure you have proof of accrued pension ready.
Letter of Introduction From from Your Bank
A letter of introduction from your bank is a document from your bank providing your bank statement. You can get this letter from your commercial bank where you have your salary account. This document will contain every detail of your banking actions.
Proof of Age
You must provide your birth certificate or an affidavit declaring your date of birth. This is a very important document in the process of borrowing money from your pension fund.
Letter from Your Employer
This is for private organizations, before you can borrow money from your pension fund, a letter from your present employment confirming the full reimbursement of all contributions you made to your Retirement Savings Account is needed.
Pencom Retired Indemnity Form
This is never for those working for the government. Before you can borrow money from your pension fund, a Pencom retiree form is a vital document you must have.
Pension Fund Administrator’s Form
This is a very important document you must submit before you can borrow money from your pension fund. Your pension fund administrator’s form is required with all other documents
Passport Photograph
You must provide your most recent passport. This is very important otherwise it won’t go through.
Key takeways
In Nigeria, before you can borrow money from your pension fund, there are conditions you must meet.
One of such requirements is that you must have made significant additional contribution to your Retirement Savings Account and it’s from that additional contribution you can borrow from.
Additionally, if you are under the age of 50, you are only allowed to borrow up to 25% of your retirement account fund.
Also, if you lose your source of income and you have not been able to get another source of income for months. Or if you plan to get a mortgage, your Retirement Savings Account permits you to withdraw up to 25% of your pension account.
Apart from any of this conditions mentioned above, the Pension Reform Act 2014 prohibits withdrawals from your pension account.
There are certain reasons why people borrow from their pension account and one of such reasons is when you wish to purchase a new home or build one. This might want to make you borrow from your pension fund.
Another reason could be that there is a need to grow your business or company, this can also make you borrow from financial institutions or from money-lending companies when your pension fund is not easily accessible.
At the end of the day, borrowing from your pension fund is saver that borrowing from any financial institution or money-lending companies. But this has to be a dire need because your pension is meant to give you a sense of financial security when your can no longer work as you used to because of age.