Savings as Security? What the Uganda Retirements Benefits Regulatory Authority (Assignment of Retirements Benefits for Mortgages and Loans Regulations, 2022) mean for Ugandans

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The Uganda Retirements Benefits Regulatory Authority (Assignment of Retirements Benefits for Mortgages and Loans Regulations, 2022) that were passed by Parliament on the 25th February 2022 finally came into force on the 10th May 2022.

The much-awaited regulations were passed with the main talking points being the leeway it grants to savers in different schemes to use their accrued benefits for purposes of financing mortgages and housing loans.

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This article will discuss what this means for Ugandans and shed light on what is required of each beneficiary in case of the need to enjoy their benefits.

Introduction

The Uganda Retirements Benefits Regulatory Authority Act enacted in September 2011 established the Uganda Retirements Benefits Regulatory Authority. (URBRA).

The main functions of the Authority are among others to regulate and supervise the establishment, management, and operation of retirement benefits schemes in Uganda, in both the public and private sectors.

The Act in Section 68(2) provides that a proportion of the benefits shall be used by a member of a scheme to secure a mortgage or a loan for purchasing a residential house from any institution and on such terms as may be prescribed in regulations made under the Act.

The Act, further gives the Minister power to make regulations generally for giving effect to the provisions of this Act and for its due administration.

Consequently, the Minister of Finance and Economic Development in consultation with the Uganda Retirement Benefits Regulatory Authority board came up with the Uganda Retirements Benefits Regulatory Authority (Assignment of Retirements Benefits for Mortgages and Loans Regulations, 2022) that are meant to operationalize Sections 68(2) (a) and 91(1), (2)(j) of the Act by providing for procedures that a member shall follow to use a proportion of his or her benefits to secure a mortgage or a loan for purchasing a residential house.

Passed into law on the 25th day of February 2022, these Regulations came into force on the 10th of May 2022.

What does this mean for Ugandans?

Regulation 6 of the Regulations is to the effect that a member may enter into an agreement with an institution to use his or her accrued benefits as security for a mortgage or a loan for purchasing a residential house.

That such a member may assign (a) a maximum of 50% of his or her accrued benefits under the retirement benefits scheme at the time of the application for the facility; or (b) a portion of his or her accrued benefits equivalent to the market value of the residential house, whichever is less.

Further, a member who, prior to the commencement of these Regulations has a mortgage or a loan for purchasing a residential house, may upon application to the trustees in the manner prescribed in the scheme rules, assign his or her accrued benefits to an institution as security for the mortgage or loan.

The coming into force of these Regulations was much welcomed by a majority of Ugandans who had been waiting in anticipation. What this development means is that members in schemes who have saved for at least 10 years shall be able to apply for and if eligible obtain 50% of their savings for purposes of securing a mortgage or buying a residential house.

It is important to note that this law is clear and specific that while making applications of this nature, the purposes for which the money is being sought should be limited to either securing a mortgage or a loan for purchasing a residential house.

For that reason, regulation 6(4) mandates the trustees to review the mortgage or a loan facility offer for purchasing a residential house, referred to in the application before either granting or rejecting the same.

How does one access their savings?

The law requires that a member shall, upon obtaining a letter of offer for a facility, apply to the trustees to assign a proportion of his or her accrued benefits as security for a mortgage or a loan for purchasing a residential house.

It is important to note that prior to making an application for the accrued benefits, the member will prove by an offer letter that he or she has applied for a mortgage or loan facility from a financial institution.

Upon application by a member, the trustees shall within 7 days from the date of the application, review the eligibility of such an applicant member to determine whether he or she meets the requirements.

Whereafter, the trustees shall either reject or allow the Application.

While carrying out the review, the trustees shall ensure the following;

that the application submitted is for purposes of enabling a member to use a proportion of his or her accrued benefits as security and shall not result in a reduction of his or her retirement benefits;

the facility applied for does not exceed 50% of the accrued benefits of the member;

  • the member applying for assignment of his or her accrued benefits has executed a written commitment to pay the facility in accordance with the agreed terms and conditions of the facility;
  • the member is gainfully employed or has sufficient income which can be used to pay for the facility
  • the purpose of the mortgage or loan applied for by the member is solely for securing a mortgage or loan facility to purchase a residential house

After conducting the review, the trustees shall notify the Applicant in writing of their decision. If satisfied that the applicant has met all the requirements of the application, the trustees shall witness the deed of assignment executed between the member and the institution.

Conclusion

These developments follow the recent amendment of the National Social Security Fund Act that among other things paved way for members to access half their savings provided they are above 45 years of age and have saved with the fund for a minimum of 10 years.

This, if well managed will go further in aiding Ugandans in improving their social lives, especially during this post-Covid-19 pandemic era.

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Horace Mugabi is a lawyer at Kasirye Byaruhanga and Co Advocates

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