Opening a pension account is now required by law for all Nigerian workers. They make a nominal monthly contribution to their Retirement Savings Account (RSA) via a Pension Fund Administrator (PFA).

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Unheralded advantage of possessing an RSA is the ability to borrow from your pension funds in times of need. Wondering how that can be accomplished? This article serves as a guide for borrowing from a pension fund in Nigeria.

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A pension account with funds can be a source of assistance in times of need. Although there are disadvantages to borrowing this money, it is still preferable to procuring a loan from a financial institution.

Nigerian terms for withdrawing from your pension fund

To borrow from your pension fund prior to retirement, you must meet one of the following three requirements:

1.   You must have contributed extra or voluntary large sums to your RSA. This is the money you can withdraw prior to retirement.

2.  They also permit you to withdraw up to 25 percent of your retirement account if you are under 50 years old. This applies if you lose your employment and are unable to find another one within four months. The amount is also tax-exempt.

3.  You plan to acquire a mortgage loan. The RSA permits withdrawals of up to 25 percent of retirement funds.

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Please note that the Pension Reform Act of 2014 prohibits withdrawals from your pension account under all circumstances.

How to borrow from your pension fund in Nigeria

This depends on the Administrator of your Pension Fund. Various pension fund administrations have varying procedures and requirements for releasing your funds. However, the procedure necessitates that you present the following documents to your PFA:

Letter from your former employer terminating your employment or letter of resignation.

Last three months' pay stub for PFA.

A letter from you requesting a desired percentage of payment from your RSA balance (25% maximum). Alternatively, this could be a percentage of your voluntary lump-sum contribution.

If applicable, evidence of accrued pension rights (typically for public sector employees).

Introduce yourself with a letter from your bank or bank statement.

Birth certificate or sworn declaration of age as proof of age

Letter from your employer confirming complete payment of your RSA contributions (for private sector employees).

PenCom retiree indemnity form for public sector employees.

A form provided by your PFA and four passport photographs.

Nonetheless, if you intend to obtain a mortgage loan, you must meet the following requirements:

.  You must be actively employed as a salary earner or as a self-employed individual.

.  You must have contributed regularly to your RSA account for the past decade.

.   At the time of application, your monthly debt-to-income ratio cannot exceed 33,33 percent of your monthly income.

.    You must provide all documentation requested.

The required documentation for a Mortgage loan includes:

1 .  Letter requesting access to your RSA account

2.  A mortgage loan offer letter from a Primary Mortgage Bank (PMB) or Deposit Money Bank (DMB) with a valid license.

3.  Copies of valid documents pertaining to the property for which the mortgage loan was granted

4.  A certification letter issued by the PMB or DMB to your PFA attesting to the legitimacy of the mortgage transaction. This letter must be signed by at least two bank directors and bear an official stamp or seal.

Conclusion

Under certain conditions, RSA allows you to borrow money, albeit with restrictions. Under the correct conditions, you can borrow to acquire a property asset or meet other needs. This money can also be used to fund your business after retirement or invested in something else.