Pensioners are allowed to draw pensions for mortgages and medical bills
Parliament has agreed to the new amendments to the Retirement Fund Act that will allow pension fund members to access funds from their pensions to get loans and also use part of the pension as security for mortgage loans.
Presenting the Bill to be read for the second time in parliament yesterday (Tuesday), Minister of Finance and Economic Development Peggy Serame explained that the new amendments were meant to align the country’s Retirement Fund Act with modern international standards and best practice in the management of pension funds to protect the benefits of the members.
“The review process encompassed: consultations with stakeholders, taking into consideration recommendations and adopting where applicable; the harmonization of laws around the Southern Africa Development Community (SADC) by the Committee of Insurance, Securities and Non-Banking Financial Authorities (CISNA); and the International Organization of Pension Supervisors (IOPS) model laws, as well as other emerging and anticipated developments.”
She stated that under the newly amended Act, a board of funds will be established to assure corporate governance as well as to prevent money laundering and financing of terrorism in accordance with the Financial Intelligence Act.
“Clause 52 provides for improved encashment of residual funds in cases where a deferred member has: (a) defaulted on any loan other than mortgage owed-the amount which can be accessed to pay for loans is increased from the current one third to 100% of the pension, provided the pension can cover the whole amount of the loan; (b) defaulted on mortgage loans owed. This is a new provision that allows access to deferred pension to repay mortgage loans for principal homes,” Serame elaborated.
Clause 52 also provides a provision for pension fund members to access their deferred pension to pay for medical bills in case of terminal ailments. The new amendments also come with changes to some related laws, such as the Income Tax Act (Superannuation Funds) Regulations, 2001; and Pension Prudential Rules.
“To increase the amount of pension commutable at retirement from the current one third to a maximum of 50%; Dissolution or full distribution of the pension estate of a deceased member by paying total benefits in cash to all beneficiaries or nominees.” The dissolution of the pension estate will assist in clearing any jointly secured debts in the case of a surviving spouse.
The commutable amount when moving from one pension fund to another will also be increased from P5 000 or 25% to P25 000 or 25%, whichever is greater. In addition there will be an increase in the minimum threshold to be encashed in full at retirement from the current pension of P5, 000 per annum to P20, 000 per annum.
The Pension Prudential Rules has been reviewed, to allow an increase in the limit of funds which can be invested locally by Pension Funds from the current minimum of 30% to a minimum of 50%. She explained that the rationale behind this is to make funds held by Pension Funds available for developmental purposes in Botswana, contribute towards boosting the local economy and to create the much needed sustainable jobs.