Pension Backed Loans

In terms of the Pension Funds Act and the Rules of the Fund, the Fund may provide security for a Pension Backed Lending facility, subject to applicable legislative and regulatory requirements. All loan applications are also assessed in accordance with the provisions of the National Credit Act (NCA). First National Bank (FNB) is currently the sole approved Pension Backed Lending provider to the Verso Umbrella Retirement Fund.

Participation in the Pension Backed Lending facility is optional for participating employers. Employers that wish to make the facility available to their employees must enter into an agreement with FNB. To initiate this onboarding process, the employer is required to complete a Company Profile Form and submit it together with the company's registration documents.

Each loan application is individually assessed by FNB to determine affordability and compliance with the National Credit Act, taking into account the member's financial circumstances. Where a loan application is approved, the approved loan amount is paid directly to the member. The employer is then responsible for deducting the monthly loan instalments from the member's salary and remitting these payments to FNB in accordance with the agreement.

An overview of the FNB offering is as follows:

  • The interest rate is prime less 0.75%;
  • A once-off initiation fee: R490 (incl. VAT) is payable;
  • A monthly administration fee of R23.00 (incl. VAT) is payable to FNB, and is included in the member’s monthly instalment;
  • A voluntary Risk Benefit Cover (RBC) is linked to the loan at a rate of R2.49 per R1 000 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:
  • Death – settles outstanding balance at the time of death;
  • Permanent Disability – settles outstanding balance at the time of permanent disability;
  • Temporary Disability – 12 months instalments paid;
  • Unemployed or unable to earn an income - 12 months instalments paid;
  • A minimum of R5 000 per loan applies. Currently the maximum value of a loan amount is equal to 60% of the member’s pre-taxed withdrawal benefit (vested and retirement pot only).

Please see details under the VURF Provident Fund brochure.

Please see the Pension Backed Lending Application Form under FORMS.

This arrangement is evaluated regularly by the Board of Trustees for appropriateness and adequacy.

For more information, please contact your employer or fund consultant.