Pension-backed Housing Loan

OMEGS members have access to a pension-backed housing loan facility offered by Standard Bank.

What does this mean for me?

  • You are able to take out a loan from Standard Bank to be used specifically for housing purposes relating to your primary residence. For example, you could use the loan to buy a house, build, or do renovations or home improvements. There are strict criteria to ensure the loan is used for housing purposes ONLY. Standard Bank will consider all of the usual credit affordability requirements to ensure that you can afford to repay the loan.
  • The surety for the loan will be backed by a portion of your OMEGS member account balance (i.e. your retirement fund money). This means that, if you were to stop paying your loan repayments, Standard Bank could or will claim the outstanding amount from your retirement fund savings.
  • You would have to settle your pension-backed housing loan if you leave Old Mutual’s employment. If you aren’t able to quickly refinance the loan at this point (e.g. with a normal bond from a bank), this might mean that a large portion of your retirement fund savings is used to settle the loan. This could be very detrimental, because you may have to pay tax on this amount, and you will be giving up some of your hard-earned retirement savings.

How big is the loan?

  • The minimum loan amount is R5 000.
  • The maximum pension-backed loan amount is dependent on:
    • Your ability to repay your loan as guided by the National Credit Act;
    • How much you have saved in your retirement fund (OMEGS) when you take out the loan;
    • The tax payable if you were to withdraw from the retirement fund; and
    • The maximum pension backed housing loan benefit permitted by the bank and Old Mutual SuperFund.
      • For members younger than 51, this is 70% of the after-tax* amount you would receive from the retirement fund as a withdrawal benefit if you resigned (estimated as 44.8% of your Member Account Balance).
      • For members 51 and older, this is 25% of the after-tax* amount you would receive from the retirement fund as a withdrawal benefit if you resigned (estimated as 16.0% of your Member Account Balance).

* The bank uses the maximum tax rate applicable to retirement fund withdrawals (36%) for this calculation

How does the Standard Bank Pension-Backed Housing Loan compare against a normal bond from a bank?

A pension-backed housing loan has some advantages and some disadvantages relative to a normal bond from a bank. The table below summarises some of the differences.

FactorStandard Bank Pension Backed Housing Loan for OMEGS membersOrdinary bond from your bank
Interest RatePrime-1%Depends on the value of the loan and the bank’s risk assessment. Typically Prime+0.5% to Prime+1.5%.
Period of the loanMaximum of 30 years or your normal retirement age (61), whichever is soonerTypically 20 to 30 years.
Initial costsLoan initiation fee of R495Bond initiation and registration costs charged by the bank, the attorneys and the Deeds Office.
Monthly costsAdministration fee of R25.95 per monthDepends on the bank.
RepaymentsRepayments are deducted directly from your salary and paid over to Standard BankRepayments are usually a debit order from  your bank account.
What happens when you change jobs?You would have to settle your pension-backed housing loan if you leave Old Mutual’s employment. If you aren’t able to quickly refinance the loan, this might mean that a large portion of your retirement fund savings are used to settle the loan.
This could be very detrimental, because you may have to pay tax on this amount, and you will be giving up some of your hard-earned retirement savings.
Your bond can continue even if you change jobs.

How to apply?

The following documents are to be submitted:

  • Fully completed Standard Bank Pension Backed Lending form
  • South African ID / Passport document
  • Consent letter from spouse if married in community of property
  • Proof of residential address not older than three months
  • 3 consecutive pay slips (if you earn commission – last 6 consecutive pay slips)
  • Recent 3-month bank statement
  • Latest retirement fund member benefit statement
  • Building quotations or
  • Full offer to Purchase if buying a Home or Land

Additional income:

  • Rental: Lease agreement not expiring in the next 6 months required.
  • Business: Financial statements
  • Other: Any other contract that will not expire in the next 6 months.

In order for the application not to be delayed, please ensure all information and documentation is complete when applying.

Kindly email all documents to the following details: Sue-Wayne.VanDerMerwe@standardbank.co.za

For more enquiries please call the contact centre on 086 100 9429

Frequently asked questions

Why does OMEGS not offer a pension-backed housing loan from Nedbank?

Currently Nedbank does not offer new pension-backed loans in the market.

At present, there are only two banks (Standard Bank and First National Bank) which are open to new business for pension-backed loans. We are currently exploring the option to make pension-backed loans from FNB available to OMEGS members.

Why is the maximum loan amount limited?

The bank wants to protect itself against the risk of any loss. The loan amount is therefore limited to the amount that the bank and Old Mutual SuperFund thinks would be available under a “worst case scenario”.

The following factors are considered:

Your OMEGS Member Account Balance can fluctuate as investment markets move up and down. If you defaulted on your loan repayments, tax would be payable on the amount used to settle your outstanding loan.