DIRECT HOUSING LOANS
In terms of the Pensions Fund Act, Retirement Funds are allowed to lend money (up to a maximum of 25% of their Assets) to their members for the sole purpose of housing. The minimum rate of interest that can be charged on these loans is prescribed by the Income Tax Act. The Trustees are held liable to ensure that loans are used exclusively for housing, as the loans represent an investment by the Fund.
The Scheme allows for members to apply for loans for housing using their
accumulated benefits in the Fund as a guarantee against the loans. To protect all the members the Fund imposes the following Rules:
The loan must be for housing and must be accompanied by an acceptable Quotation and confirmation of affordability.
Cheques are made payable to the supplier/Housing Authority etc. In
circumstances where a member can confirm in writing that he/she
will be ensuring that the loan will be used for building or housing
purposes, the payment may be made to the member
The member must be able to afford the loan/ the monthly installment may not exceed 25% of his/her gross monthly earnings (proof will be required).
The loan is repayable over 5 to 10 years.
Only one loan will be allowed at any one time
The rate of interest charged is 15% (the current minimum allowed by law).
A monthly loan administration fee of R12,00 is charged.
Voluntary Life Assurance cover of R2.50 per thousand will be offered to cover the outstanding loan. An administration fee of R10 is charged for the operation of this Scheme.
The loan may not be more than 75% of the member’s retirement benefits accumulated in the Fund.