Question:
I am under administration and cannot get a home loan at a bank. I am still working and not looking for a new job. Can I borrow from my pension at Alexander Forbes so that I can buy my house cash? If you could please give me some infomation on it. Thanking you and hope to hear from you soon.
Answer:
Fizora,
You can take a home loan against your provident/pension fund, if your specific fund rules permit this. You need to check with your HR department. If yes, you need to follow the process as set out by your employer.
The loan will be subject to s19(5) of the Pension Funds Act. In terms of S19(5) of the Pension Funds Act, a registered fund (ie including an umbrella fund) may, if the rules permit and subject to the regulations, grant either a loan to the fund member or furnish a guarantee to another person who has extended a loan to the member. Such loans/guarantees must enable the member to either repay their existing housing loan, or take on such a loan to pay for/erect/make alterations to a residence in which the member, or their dependents, will live.
Such a loan or guarantee must be secured by a first mortgage on that property and/or by a pledge of the member's fund assets. It is quite a lengthy section in the Act, specifying the applicable conditions and regulations, and the potential size of the loan. Be aware though that not all fund rules permit such housing loans.
However, if you are under administration, your administrator will no doubt have to approve this first. Understand that your retirement fund is protected from creditor claims. By taking your money out of the fund, you are potentially exposing this money to such claims.
