We had the opportunity to conduct an exclusive interview with a group of pensioners who had decided to take advantage of the recently quashed amendment to the Retirement Benefits Act that would have allowed them early access to their savings for purposes of buying a residential house.
Each pensioner had their own unique story to tell, however, all were in agreement that the amendment was a sound decision and should be reintroduced. The primary benefits, according to the pensioners, were that:
- Early access to pension savings can help pensioners afford to purchase a home, by providing them with additional funds that they can use to make a down payment or cover other expenses related to purchasing a home. Additionally, they would be able to extend their loan term to its maximum, something they would not be able to do in their later years. Older persons are typically seen as having higher risk by mortgage lenders, especially if they are retired.
- Acquiring their residential home prior to retirement would provide them with financial security, as it would guarantee them a steady stream of income in the form of monthly rent payments if they needed to rent out the house in the future to cover any unexpected expenses.
- Allowing pensioners to access their savings before retirement would essentially help address the issue of housing affordability for pensioners who are struggling to afford a home due to fixed incomes. With the help of their savings, they may be able to afford a home that they otherwise would not have been able to purchase.
- Retirement benefits schemes are not only intended to provide income for retirees, but also to improve their overall well-being. Allowing pensioners to access their savings early for the purchase of a residential home can do just that by enabling them to buy a home that is more suitable for their needs at a time when they need it the most.
- Purchasing a residential home before retirement would enable the appreciation in value of their homes over time which would in turn result in a nice return on their investment.
- Lastly, it can have a positive impact on the housing market and the economy as a whole. If more pensioners are able to purchase homes, it can increase demand for homes and stimulate construction and renovation activity.
The pensioners were very positive in their opinions on early access to their savings. While acknowledging that the traditional purpose of pension funds has been to provide a steady stream of income during retirement, they strongly argued that regulators need to be conscious of changing lifestyles and economic realities, and explore alternative uses for pension savings.
The general consensus was that, the line of thinking that retirement benefits schemes should solely focus on providing income for retirees and that early release of pension savings is a non-core objective of these schemes, is narrow-minded and overlooks the many benefits discussed above. A retirement benefits scheme should be flexible and adaptable to the changing needs of retirees.
We will be keeping an eye on the growing movement supporting pension law reforms and advocating for the early access of pension funds for the purpose of purchasing a residential home, in order to gain a deeper understanding of this subject.