Yes, SSF is bit problematic. Okay, more than a bit !
See my other blogs on Social Security and Labor here:
1. Will I be taxed on my Social Security Benefits?
2. Confusions surrounding Social Security Fund (SSF)
3. Contributory and Non Contributory Retirement Plan
4. Bonus to Employees from Annual Profit
Honestly, I think “Social Security Plan” was introduced without even generally taking our view. The government were already onto our incomes taking to the tune of 36% and this social security taxes on income and now after the management of our savings/retirement funds. When government is after you, it gives a full blown migraine or at least a mild headache.
Makes you want to enter into a consultancy agreement and scrap the employment arrangement. Get rid from the SSF liabilities and final withholding employment tax liabilities.
SSF Investment Procedure 2077 had been introduced which among others has the provision of providing loans to the participants. Not all the loan products has been devised completely. Recently Contributor Loan Directive, 2079 has been introduced which goes into more detail on the product loan products introduced by the Investment Procedure in 2077. Some of them have been discussed below:
Home Loan
Purpose of Loan
• Construction of home
• Purchase of home
• Purchasing residential unit
• Adding new storey or repair of the house owned
Amount of Loan should be minimum of:
• Value of Collateral
• NPR 7,500,000 (A)
• Remuneration income of future 15 years (B)
• Remuneration income of future years until the participants reaches 60 years of age (C)
• (Minimum of NPR 10,000,000 or A or B or C) – Loan Amounts other than Participant Special Loan
Conditions to be fulfilled by Participant
• Contribution has been made for 36 months (3 years)
• At least 2 years is remaining before the retirement age
• Not Blacklisted
• Collateral
• Loan servicing capacity
• Commitment from Employer for servicing participant’s loan from regular employment income
Modality of Disbursement
• The first disbursement will be an amount not exceeding 25% and subsequent disbursement will not exceed the progress report provided by the valuator
• The disbursement amount for purchase of house will be 100% at first instance
Modality of Disbursement and Repayment
• The first disbursement will be an amount not exceeding 25% and subsequent
• Repayment period shall not exceed the minimum of (i) 20 years (ii) time remaining until compulsory retirement (iii) 6 years if the contributor stops contributing to the fund
Education Loan
Purpose of Loan
Higher education (Nepal or Abroad) of: • Oneself • Spouse • Children (But not exceeding 2)
Amount of Loan should be minimum of:
• Value of Collateral
• NPR 3,500,000
• Actual expense to be borne for the education
• (Minimum of NPR 10,000,000 or A or B or C) – Amounts other than Participant Special Loan
Conditions to be fulfilled by Participant
• Contribution has been made for 36 months (3 years)
• At least 2 years is remaining before the retirement age
• Not Blacklisted
• Collateral
• Loan servicing capacity
• Commitment from Employer for servicing participant’s loan from regular employment income
Modality of Disbursement and Repayment
• The disbursement will be 100% in full or over four instalment as per the need of the borrower
• Repayment period shall not exceed the minimum of (i) 15 years (ii) time remaining until compulsory retirement (iii) 6 years if the contributor stops contributing to the fund
Participant Special Loan
Purpose of Loan
Not Yet Specified
Amount of Loan should be minimum of:
• 80% of the amount in Retirement Scheme
Conditions to be fulfilled by Participant
• Contribution has been made for 36 months (3 years)
• At least 2 years is remaining before the retirement age
• Commitment from Employer for servicing participant’s loan
Social Loan
Purpose of Loan
Social Functions
Amount of Loan should be minimum of:
Minimum of:
• Value of Collateral
• (Minimum of NPR 10,000,000 or A or B or C) – Amounts other than Participant Special Loan
Conditions to be fulfilled by Participant
• Not Blacklisted
• Collateral
• Loan servicing capacity
• Commitment from Employer for servicing participant’s loan
• Only applicable in loans swapped from other retirement funds merging with SSF
Conclusion and Caveats
We can expect that the Participant Special Loan program will be the most favourable program because there is one addtional conditions that is required to be fulfilled by the participants of the SSF who is also contributing to Old Age Scheme. The condition is that SSF Investment Procedure 2077 Section 13(Kha) states that a minimum contribution of 3 years should have been made by the participant to be eligible to receive loans under the loan products above. This certainly means that the the person who has been contributing to Old Age Scheme will receive concessional lending rates and probably some relief in Collateral and Servicing Capacity maintenance so that the cost of the loan will be lower to these participants. However, it is only a speculation at this point. Will update this post as clarity is put by SSF.