As per the Pension Funds Act the Rules of the Funds provide for the Funds to stand surety for a housing loan subject to certain regulatory restrictions. Any loan application considered will also have to prescribe with the requirements of the National Credit Act. Currently First National Bank (FNB) is VURF’s only pension backed home loan provider.
Each participating employer can elect whether they want this facility to be made available to their members. If elected, a tri-party agreement will be entered into between the Fund, the administrator and the employer by completing the FNB Smart Housing Plan Application Form and supplying the requested information before it is implemented. Every individual home loan application is evaluated by FNB, for compliance with the National Credit Act, in conjunction with the member’s financial position. If the application is approved by FNB, the loan amount is paid to the member and the employer deducts the monthly instalments directly from the member’s monthly salary.
An overview of the FNB offering is as follows:
- The interest rate is prime less 0.75 percent;
- A once-off administration processing fee is payable to Verso Financial Services (Pty) Ltd of R120 (incl. VAT) per loan at inception;
- A monthly administration fee of R11.50 (incl. VAT) is payable to FNB, and is included in the member’s monthly instalment;
- A compulsory Risk Benefit Cover (RBC) is linked to the loan at a rate of R2.49 per R1000 cover. The RBC “preserves” the member’s benefits for the beneficiaries at death, as well as “financially” assisting members during certain life events. The RBC covers the following (see master policy document for more detailed information):
- Death – cover equal to original loan amount, any excess amount is paid out;
- Permanent Disability – cover equal to death benefit;
- Temporary Disability – 3 months home loan instalments;
- Dread Disease and Loss of Limbs – see master policy document for detail;
- Retrenchment Benefit – 6 months home loan instalments.
- A minimum loan of R5000 per loan applies. Currently the maximum value of a loan amount is equal to 60 Percent of the member’s pre-taxed withdrawal benefit.
This arrangement is evaluated regularly by the Board of Trustees for appropriateness and adequacy.
For more information please contact your employer or fund consultant.