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SECTION 90 BENEFITS - HOUSING
Section 90 is the relevant section of the Act that
allows the members to apply for early withdrawal.
Generally a member, or in the case of a deceased member,
his Nominee, may withdraw their contributions for the
following reasons:
· Housing
· Unemployment
· Death
· Disability
· Emigration
· Retirement
HOUSING ADVANCE SCHEME
The Housing Advance Scheme is a benefit that is offered
to members who qualify, to withdraw a part of their
contributions to assist them to purchase or build their
homes. There are number of rules under the Superannuation
(General Provisions) Act that governs this Scheme.
1. Qualifying Criteria:
Before any member can participate in this Scheme, he/she
must pass the qualifying criteria.
The criteria is:-
(a) If you are applying for the First Time then:
· You must have been a member of Approved Superannuation
Fund or other ASF for a minimum of five (5) years (s.90(4)).
(b) If you are applying for the Second or Subsequent
Time then:
· The home financed by the advance is sold and
the first advance had already been repaid in full (s.90(4)(f));
or
· The application is for maintenance and renovation
to the existing house, provided the application falls
within the Exception to the Rule.
2. Limitation on Benefit:
Having qualified to participate in the Housing Advance
Scheme, the extent of the benefit is limited in three
respects:-
(a) The advance will only be approved if you intend
to use it only for the purpose of
· Purchasing or constructing a home (s.90(4)(a));
and
· The home is or will be your principal place
of residence (s.90(4)(a)).
(b) The amount you are entitled to receive is limited
to a maximum of 100% of your own contribution. This excludes your employer contribution and accummulated interest.
(c) If you are applying for the second or subsequent
time, the amount you are entitled to receive shall not
exceed the amount you received in the first advance
(s.90(4)(f)).
3. Exception to the Rule:
There are exceptions to the general rule that the advance
can only be granted for the purpose of purchasing or
constructing your principal place of residence. These
exceptions as approved by the ASPNG are:
(a) In relation to an existing principal place of residence,
the advance can only be granted for the purpose of purchasing
:-
· Solar panels
· Power Generators
· Stove
· Refrigerator
(b) Advance can also be granted to meet the cost of
substantial renovation or improvements to an existing
principal place of residence for a value exceeding K1,000.00
(c) If your principal place of residence is been constructed
in the village then a nominal amount of up to K600.00
can be granted to pay for village labour and transportation
cost of housing materials.
4. Conditions for Advance.
A number of conditions govern the payment of the advance
to you and the repayment of that advance back to the
Fund. Those conditions are:
(a) Proof of Title:
Before the advance is paid, you will be required to
produce evidence of ownership of the land or house.
If you are building your house or making renovation
to your existing house situated on:
· State Land:
You will be required to produce a copy of the Title
as evidence of your ownership of the land or house;
or
· Customary Land:
You will be required to complete and produce a “ Clan
Land Usage Agreement ” form as evidence of your customary
right to build on that land.
(b) Payment of Advance:
· If an additional loan is required then the
advance will be paid directly to the Bank to form a
loan from that Bank to the member (s.90(4)(i)(i))
· If the house is been purchased then payment
will be made directly to the person selling the house
(s.90(4)(i)(ii))
· If the house is been constructed then payment
will be made directly to the builder or the supplier
of building materials (s.90(4)(i)(ii))
· Under no circumstances will the advance be
paid directly to the member (s.90(4)(i))
(c) Repayment of Advance:
· You shall increase your rate of contribution
by a further 2% until you have fully repaid the advance
(s.90(4)(c))
· If at any time you sell your house, then you
must from the proceeds of the sale, repay the outstanding
balance of the advance to Approved Superannuation Fund
or if you have transferred to another ASF then to that
other ASF (s.90(4)(d)).
(d) Completion of Repayment:
The member can only stop repaying the advance in two
ways:
· Completed repaying the advance in full; or
· Ceased to be a member of Approved Superannuation
Fund (s.90(4)(d)).
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PRUDENTIAL STANDARDS
FOR HOUSING ADVANCE -APPROVED SUPERANNUATION FUNDS
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1. STATEMENT of POLICY
Section 90 (as amended) of the Superannuation Act allows
a member to withdraw 60% of their total contributions
as a housing advance after contributing to an approved
superannuation fund for 5 years or more. The Act specifically
states that the housing advance must be utilized for
a member’s principal place of residence
The Housing Guidelines enables a housing advance to
be used for purchasing a new home, constructing / building
a home, purchasing titled land on which to construct
a home or to carry out repairs or improvements to a
home already owned by the member. It also allows the
purchase of specific items deemed a necessity as part
of owning or building a home.
2. GUIDELINES
2.1 PURCHASING A HOME
· Documents required are a letter of offer from
a vendor or vendor’s agent and a reciprocating acceptance
of offer from the member. Evidence of property ownership
i.e title deed must also be produced.
· Cheque is payable to the vendor (if amount
is sufficient for out right purchase) or to the bank
or an approved financial institution under the Banks
& Financial Institution Act if it is to be used
as equity financing. This is conditional upon the bank
or financial institution confirming approval of a housing
loan to settle the property.
A cheque will not be paid to a vendor’s agent (e.g.
a real estate agent) for a deposit on a house without
proof of secured funding in place to complete the purchase.
2.2 CONSTRUCTING A HOUSE
· Member must own the land by of customary ownership
or as a state leaseholder.
· Construction of a future principal place of
residence on customary land while living away from the
village in employer provided or rented accommodation
is allowed
· Improvements / renovations to or completion
of an existing principal place of residence on customary
land while living away from the village in another province.
(Note: Includes members who have obtain previous advances
(under former legislation and yet to complete their
homes)
· Improvements / renovations: - amounts from
K1000 .00 and above will constitute substantial improvements
with detailed break ups of the material purchases or
building services to be provided.
2.3 HOUSE BUILDING/ HOME IMPROVEMENT
/ RENOVATIONS BY A CONTRACTOR / BUILDER
Subject to the maximum entitlement being sufficient
to cover the request for housing advance, payment may
be structured in a series of payments as follows;
· Cheque(s) paid direct to the supplier(s) for
payment of the building materials,
· One cheque being 50 % upfront payment to the
builder for labour costs
· Balance of 50 % paid at the completion of the
work.
It will be up to the member to decide if retention
(usually 5 – 10 %) of total construction costs is to
be allowed to cover defects liability period. At the
expiry of this defects liability period the retention
balance is released to the builder. (The intention of
this guideline is to protect the interest of the member
and keep the builders / contractors honest). This intent
must be clearly stated by the member at lodgment of
application.
A company search is to be carried out on each contractor
to determine if the company is legitimate and that the
member does not own or have a controlling interest in
it.
2.4. OTHER ALLOWABLE ITEMS
· A Housing Advance may be used to purchase
a stove, a fridge, solar panels or a generator; water
tank & water pump for a member’s house.
· Housing advance can also cover labour and transportation
costs up to the value of K600.00 (in cases where member
is building on customary land.)
2.5 CALCULATION OF HOUSING ADVANCE
ENTITLEMENT
Calculation of housing advance is a maximum of 60 %
member’s entitlements (this is members contribution,
employer contribution and accumulated interest) and
payable net of tax.
2.6. REPAYMENT OF HOUSING ADVANCE
Section 90 (as amended) requires a housing advance
to be repaid (restored to the level prior to withdrawal)
by increasing rate of members’ contribution by an additional
2 % of gross salary.
Members must show proof of increased rate of contribution
(minimum 2%) prior to receipt of housing advance payment.
Only principal amount withdrawn excluding interest
is to be repaid.
2.7. AUDIT & INSPECTION
OF USE OF HOUSING ADVANCE
Where an advance has been sanctioned for constructing
a house or carrying out substantial repairs and maintenance
an inspection must carried on the property before work
commences and after work is completed. (The member,
as part of the approval process should supply photos).
Where an advance is discovered to be have been misused
the member will be required to repay the advance at
an increased rate of contribution above 2 % and will
not be entitled to another advance for their the rest
of their active working life.
3. REMARKS
These guidelines ensure there is no unfair advantage
to any one ASF due to misinterpretation of the intent
of Section 90 (amended) of the Superannuation Act. It
is acknowledged that individual funds will be responsible
for managing their own housing advance schemes but within
the above parameters.
Whilst the guidelines will form the basis of Bank of
Papua New Guinea’s prudential standards and the Superannuation
Act accompanying regulations the Association of Superannuation
Funds PNG will review the guidelines from time to time
when necessary.
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