Market Overview

Recently some commercial banks and the trustees of pension funds became concerned about the misuse of Pension Backed Lending funds by members. In terms of the Pension Fund Act, section 19(5) A as defined, the member may borrow money from a financial institution and use the Fund as security. The money may however be used for housing purposes only. Trustees are expected to take “reasonable” steps to prevent misuse. Contracting this function to Social Finance would constitute such “reasonable” steps. Members are entitled to borrow money from the pension fund before retirement. The pension fund is used as collateral security at a low rate to fund housing / home improvement ONLY.

It has been established that over 90% of Pension Backed Lending for Housing purposes was being inappropriately applied. Examples:

  • Suppliers cash cheques for cash and take 20% handling fee
  • Member has to pay to obtain a quotation at some suppliers
  • Vehicles are purchased
  • Members funds run out and they cannot complete the home as they do not obtain QS plans
  • Little education has taken place from management of companies or banks
  • Members believe it is their money and they can use it at their discretion
  • Pension Backed Lending Departments of Financial Institutions are cost centers, but they do not however check how the money is applied, as that responsibility remains with the trustees
  • Banks are not at risk
  • Trustees take full responsibility



The FSB holds the trustees personally and jointly responsible to ensure funds are used correctly. Clearly this is virtually impossible to control. We have the solution:

  • We control the process
  • We instruct the bank to pay the nominated supplier
  • We comply with the Pension Funds Act, section 19(5) A
  • We issue a certificate of compliance to the trustees


  • We will assist with education on the process
  • We will obtain suppliers for the members who they feel comfortable with
  • We can introduce members to suppliers but it is still the member’s choice who he/she wants to deal with first before we pay the suppliers
  • We will be able to protect the member reasonably by having delivery taking place
  • NO COST to the member if he uses panel suppliers
  • We ensure client satisfaction through our process. Should problems with panel suppliers occur, we will assist the client to sort out the problem before payments are made

Objectives & Solutions

  •  We take the risk away from the trustees
  • We will see that the money is used as per the PENSION FUND ACT and FSB (Financial Services Board) requirements
  • We will appoint suppliers to the panel, as all suppliers have to be accredited to the panel
  • Members will always have free choice of a supplier they would like to use
  • We do presentations down to all levels in companies
  • Suppliers need to give members sound advice on costing, quality and quantity
  • There will be no COST TO THE MEMBER, FUND OR BANK, if this process is used


  • We will ensure that all suppliers used are approved
  • Money is disbursed to nominated suppliers
  • All panel suppliers sign a service level agreement with us complying with the following:
    • Member needs to sign a satisfaction letter
    • We will provide the bank with a payment schedule


For inspections and other services, a cost will be incurred.



We were requested by a financial institution to assist in protecting the trustees and Banks from the abuse by members on the usage of Pension Backed Lending money.

As no blue print was available to protect all parties, we started to develop a product and a service that would suit all. As we move forward we will be looking at refining the product and processes even more.

Social Finance is BEE compliant.

Contact Us

Ernest Botha | Cell: 082 461 0476

Alternative Mobile | Cell: 082 302 6391

PO Box 753066 | Gardenview | 2047

Social Finance (Pty) Ltd | 97/055363/07