Pension-backed housing: Good for youth, risky for older workers, experts warn

A newly announced scheme allowing civil servants to use their pensions as collateral for home loans could be a breakthrough for younger workers but a financial trap for older employees nearing retirement, economists have warned.“This scheme presents a potentially sustainable and financially sound mechanism for enhancing housing access,” economist Helena Mboti told Network Media Hub (NMH) yesterday. “For younger individuals, this facilitates earlier wealth accumulation and strengthens their balance sheet position.”However, Mboti cautioned that the scheme poses serious risks for older civil servants, whose depleted pension savings could leave them financially exposed after retirement.What the scheme entailsThe Pension-Backed Home Loan (PBHL) initiative was unveiled in parliament this week by finance minister Ericah Shafudah. Under the scheme, members of the Government Institutions Pension Fund (GIPF) will be able to use part of their retirement savings as collateral for housing loans.According to the cabinet decision, the loans may be used to purchase land or residential property, build or renovate homes, or settle existing housing-related debts. Importantly, this includes homes located in unproclaimed or rural areas, many of which fall outside the reach of traditional mortgage finance.The loans will be offered at the Bank of Namibia’s repo rate plus 2.5%. At current rates, this translates to a lending rate of 9.25%, below commercial banks’ prime lending rate of 10.5%.Administrative work is still being finalised by GIPF, NAMFISA and relevant ministries. Detailed application processes will be communicated to civil servants soon, according to officials.Risk and opportunityWhile the government has positioned the scheme as a tool to expand access to housing and stimulate economic activity, experts say its success will depend on how it is implemented and who takes it up.Mboti praised the initiative’s potential to address "credit market imperfections" that often lock out low- and middle-income earners from the formal housing sector.Still, she warned that pension-backed borrowing carries inherent trade-offs.“If a substantial portion of an individual's pension capital is encumbered or depleted to service a home loan, it directly compromises their post-retirement consumption capacity,” she said.This could increase elderly poverty in the long run or create added pressure on the country’s limited social safety nets, she said.She also raised concern about the scheme’s potential to distort the housing market if not managed carefully.“With increased demand, we might see upward pressure on housing prices, especially in areas with limited supply or high land servicing costs,” she added. “There are multiplier benefits, yes, but there are also systemic risks.”Affordability and educationMboti stressed that while the interest rate is relatively favourable, access alone does not guarantee sustainability. She called for robust affordability assessments, financial education, and age-based borrowing guidelines to protect individuals from over-indebtedness.“There must be safeguards. Financial literacy campaigns are essential to help people understand the implications for their retirement,” she said.She added that borrowers must fully grasp the “intertemporal trade-offs”—the idea that today’s homeownership could come at the cost of future security.Political lensIn a telephone interview with political analyst Dr Ndumba Kamwanyah yesterday, he applauded the initiative as a step toward addressing Namibia’s deep housing inequalities but also warning of pitfalls if not carefully regulated.“Housing is a basic right, and using pensions as collateral gives people a chance they never had before,”. “This is especially significant for civil servants in rural and underdeveloped areas.”Kamwanyah said the scheme was “not perfect, but progress,” and highlighted activist and politician Job Amupanda’s long-standing advocacy for such reforms.However, he cautioned that poorly implemented lending could leave many Namibians at risk.“If people borrow too much, they might reach retirement with little or no pension left,” he said. “There’s also the risk of default especially if interest rates go up or people lose their jobs.”He warned that while the scheme may stimulate construction and job creation, it could also drive up property prices and increase pressure on the GIPF’s sustainability.“Strict borrowing limits, clear rules, and independent financial advice will be key,” Kamwanyah added. “The goal must be to give homes, not take away retirement security.”

Pension-backed housing: Good for youth, risky for older workers, experts warn

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Namibian Sun 2025-07-01

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Pension-backed housing: Good for youth, risky for older workers, experts warn

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Namibian Sun 2025-07-01

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