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Workers stopped from using savings to purchase houses – Business Daily

Justice Linnet Ndolo dismissed the application by Mr Samora Sikalieh saying his position as the chairman is contested and the matter was pending in court. PHOTO | POOL
The High Court has stopped workers from accessing up to Sh7 million or a maximum of 40 percent of their retirement savings to buy their first residential houses, dealing a blow to the plan aimed at boosting home ownership.
Justice Anthony Ndung’u found changes to the law that allowed early access to pension savings for home ownership was not subjected to public participation in breach of the Constitution.
The change was introduced through the Tax Laws Amendment Act 2020, which came into effect on April 25, 2020.
The clause allowing contributors to access 40 percent of their savings ahead of retirement was expected to free tens of billions of shillings for home ownership given that Kenya’s pension schemes control more than Sh1 trillion spread across property, cash, shares and government bonds.
“The amendment of Section 38 (1A) of the Retirement Benefits Act (1997) was an amendment impacting heavily the utilisation of funds in pension schemes. It, thus, would call for a robust process of stakeholder engagement and public participation,” said the judge.
“The introduction of the amendment at the committee stage denied the players in the industry, stakeholders and members of pension schemes the opportunity to contribute to the content of the envisaged law.”
Despite its promise to boost home ownership and unlock money in the sluggish economy, the early withdrawal also posed the risk of deepening old-age poverty in a country where retirement contributions offer pensioners an average of 34 percent of their incomes during working years, compared to the desired target of between 75 to 80 percent.
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Joseph Muongi

Financial.co.ke was founded by Mr. Joseph Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance. He's also the lead financial consultant.