Housing finance through pensions - Part 1

Know to grow
Vincent Shimutwikeni
  • 16 Hours Ago
The Namibian government has recently approved a reduction in the interest rate pension funds must apply when they provide housing loans to members. This decision has sparked national discussion, as it directly impacts the interests of members of both public and private pension funds who may want to utilise their retirement savings towards securing a home.

Pension-backed housing loans are not a new phenomenon. The Pension Funds Act No. 24 of 1956, as amended, has long made provision for such loans under Section 19(5) (a), together with Section 37 D of the Act. Most private occupational pension funds converted from the defined benefit to the defined contribution (or money purchase) structure around Namibia\'s independence and have since offered these types of loans to their members, in accordance with their fund rules.

What is new, however, is the growing national interest, and in particular, the advocacy by government employees, and the renewed commitment to implement these schemes at scale. This shift in momentum has been sparked by the recent announcement by the Government Institutions Pension Fund (GIPF) to roll out a pension-backed housing loan scheme, backed by members\' interest in the fund. For many years, the GIPF has provided funds to lending institutions, enabling them to offer loans to its members.

As with any other fund that makes provision in its rules, qualifying GIPF members will now be able to borrow up to one-third (1/3) of their pension benefit. The loan will be repayable at an interest rate of the repo rate plus 2.5%.

According to Section 19(5)(b)(iii), and regulation 43 of the Pension Funds Act, such loans may not be granted at an interest rate lower than that prescribed by regulation. Until recently, the minimum allowable rate was the repo rate plus 4%. However, with effect from 1 July 2025, the Minister of Finance has amended Regulation 43 to reduce the prescribed minimum rate to repo rate plus 2.5%, as officially published in the Government Gazette.

Two Mechanisms for Housing Loans

There are two alternative and distinct mechanisms allowed by the Pension Funds Act for funds to grant housing loans to their members:

1. Direct Housing Loans from a Pension Fund: This is when a pension fund, if its rules allow, provides a loan directly to a member from its own assets for housing-related purposes and administers the loan. The contractual relationship is between the member and the fund, and the member repays the pension fund over time, but not later than their retirement date. These loans are secured by the member pledging their pension benefits. Such loans are mostly funded from the borrower\'s investment in the fund but could also be untied. In the first case, the borrower takes the money from his fund investment and earns the housing loan interest. In the second case, the borrower\'s investment is not affected by the loan, and the fund earns the interest.

2. Pension Backed Housing Loans: In this case, the fund provides a guarantee to the lending institution (usually a bank), which provides and administers the loan to the member. The contractual relationship is between the fund and the lending institution. The member pledges their pension benefit to the fund to serve as security for the fund\'s guarantee to the lending institution. The pension fund assets or member savings are not withdrawn. The member repays the financial institution over time at an interest rate determined by the bank from time to time. The Pension Funds Act does not regulate the interest rate and is usually significantly higher than the rate under Regulation 43 of the Act.



*Vincent Shimutwikeni is the manager for legal support services at RFS Fund Administrators.**