Under the new pension regulations, can you borrow money from your provident fund?


You can borrow money to buy a property, renovate a property, pay off a home loan, or secure a home loan. You cannot use the funds for any other purpose.

Through Meyer toy

Apr 15, 2021 9:00 a.m.

I would like to know under the new pension regulations, can we borrow money from our contingency fund?


Dear reader,

Thank you for your question regarding the new regulation of the law on pension funds.

Article 19 of the Law on Pension Funds has not been amended by the new regulation and still provides as follows:

Section 19 (5) of the Pension Fund Act authorizes the granting or guarantee of housing loans. The purpose of this section is to enable trustees to help members finance their real housing needs. In this section, you can borrow funds to buy a property, renovate a property, or pay off a mortgage. Alternatively, it can be used to secure a home loan.

You cannot use the funds for any other purpose.

The intention of a retirement fund is to provide a savings vehicle through which funds can be saved for retirement. The government offers you an income deduction of up to 27.5% for the contributions you make to the pension fund. The government wants fewer people to depend on it once they reach retirement age. For this reason, they have created retirement plans and offer huge tax savings if you invest in them.

A provident fund or any retirement fund is registered as a retirement fund with the Financial Sector Conduct Authority and the South African Revenue Service. This is a requirement of the law on pension funds to which pension funds fall.

Each pension fund has its own set of rules applicable to that fund. Your provident fund and all other pension funds are governed by the rules registered for them.

In conclusion, there has been a draft amendment to the Law on Pension Funds to allow a registered fund to provide a fund member with collateral to secure a loan, the collateral for which cannot exceed 75% of its share. in the value of the fund to support the member in times of crisis like the Covid-19 epidemic.

Each pension fund may incorporate the provision of section 19 (5) as it is in its pension fund rules.

If the provision is not provided for in the regulations of your company’s pension fund, you cannot make a home loan on your provident fund.


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