Liz Muthoni | NATION
Retirement Benefits Authority CEO Edward Odundo (right) and Strathmore
University deputy vice-chancellor, academic affairs, Izael Da Silva,
sign a memorandum of understanding on ICT system integration research on
Monday. The authority is proposing to have pension schemes give their
members loans of up to Sh100,000.
By JUSTUS ONDARI
In Summary
- Retirement Benefits Authority seeks to stop workers from withdrawing savings
Workers could soon secure cheap loans of up to
Sh100,000 from their pension schemes if a proposal by the industry
regulator is effected.
They will also not need guarantors under the
proposal by the Retirement Benefits Authority (RBA), which aims to
reduce the temptation of employees withdrawing their benefits before
retirement age.
“We need such a product because most of the
members who want to access their benefits before retirement do not need
the whole amount. They are mostly driven by a desire to settle personal
needs such as school fees and hospital bills,” RBA chief executive
Edward Odundo said on Monday.
Speaking at RBA’s Rahimtulla Tower offices after
signing a memorandum of understanding with Strathmore University to
conduct research on ICT, he said beneficiaries will service the loans
monthly through a check-off system and called on pension schemes to
design relevant guidelines for the members.
However, while the regulator maintained that such
loan products are provided for under the current regulatory framework, a
pensions consultant said the RBA Act restricts the use of scheme funds
and outlaws their use to make direct or indirect loans to any person.
“It is also not a practise elsewhere in the world
with the exception of limited assignment as security for mortgage
loans,” the executive director of the Pensions Advisory Centre, Mr Fred
Nyayieka, said.
This comes in the wake of Finance minister Uhuru
Kenyatta’s decision — effective September 30, 2010 — of allowing
employees who leave before retirement age to access up to 50 per cent of
accrued benefits in defined benefit schemes and their whole and 50 per
cent of employer contributions in defined
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