Many funds grant housing loans to members which are secured by a first mortgage or by a pledge by the member of his or her benefits in the fund. How would your board of trustees deal with an application in respect of a property situated outside Namibia?

Unfortunately, neither the Pension Funds Act nor the Namfisa guideline (Circular PI PF 03 2003) on the granting of housing loans, provide any clear guidance on the matter. Before a fund grants any loan for such property, trustees are well advised to consider the implications, as the granting of such a loan will create a precedent, where future applications may be difficult to be turned down.

Section 19(5)(c)(i) provides that a loan secured by a first mortgage may not exceed 90% of the market value of the property concerned. Section 19(5)(c)(ii) provides that a loan secured by a pledge of the member’s benefits may not exceed the market value of the property concerned. Market value is thus an important point of reference. Clearly, for property situated outside Namibia, trustees will find it difficult to formulate a policy how market value will be determined.

PF Circular 03 of 2003 suggests that a housing loan must be treated and managed by the trustees with the same care and diligence as any other investment of the fund is to be treated. Once again, if a property is situated outside Namibia, it should be substantially more difficult for trustees to comply with their fiduciary duty to protect the investment of the fund in a loan for such a property.

We therefore suggest that trustees should first formulate a policy that addresses the practical difficulties posed by loans in respect of property situated outside Namibia, before granting any loan lightly and then being confronted with a precedent.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.