- The member applied for a pension-backed housing loan in August 2025 to finish building her family home.
- The fund turned down the application after determining her expenses were higher than her income and that her overdraft use showed negative cash flow.
- The Adjudicator found the fund needed to assess her ability to repay the loan and dismissed her complaint.
Borrowing from your pension to finance a home isn’t just about having enough retirement savings. Your monthly cash flow needs to be healthy, with your income covering your expenses and enough stability to handle the repayments.
If you regularly rely on an overdraft, especially when your expenses are more than your income, it can signal financial trouble and weaken your application for a pension-backed housing loan.
A pension fund turned down a member’s application for this kind of loan after finding her monthly expenses were more than her income and that she often used her overdraft, which showed negative cash flow. She had applied for the loan in August 2025 to finish building her family home.
The member challenged the Cape Municipal Pension Fund’s decision, saying the refusal was unfair and that the fund hadn’t properly checked if she could afford the loan according to its own rules and the National Credit Act (NCA).
Member says assessment failed to reflect her financial position
She told the fund and Alexander Forbes, the fund administrator, that she had enough pension savings, had used the overdraft to manage construction costs, and no longer had an active bond because it had been settled. She also gave proof of a good credit record, paid-off debts, an improved overdraft situation, and more financial information when asked. Even so, her application was declined again for the same reasons.
The matter was then taken to the Principal Officer, with more meetings and assessments following. The member said the affordability check by the fund administrator had several mistakes, including irregular expenses, debts that were already settled, and a wrong picture of her overdraft position.
She also questioned why some of the questions asked during the assessment were relevant, including a focus on a religious donation. She felt the repeated requests for detailed financial information were excessive and hinted at unfair treatment.
Refusal leaves family struggling to complete home
The member said the refusal and delays caused her serious personal and financial harm. Her home’s construction was delayed, costs went up, and her savings ran out. She had to rely on overdrafts, credit cards, and borrowed money to keep building and to stop the unfinished property from being damaged or vandalised.
Her family also ended up living in temporary accommodation, including a friend’s garage, which caused a lot of emotional and mental stress. She later got funding from a bank under the same NCA rules, but said this led to extra costs, more delays, and added stress.
Fund says financial position created lending risk
The fund defended its decision, saying it had assessed the application under Section 19(5) of the relevant Act, which only allows housing loans under certain conditions, as well as its own Housing Loan Policy, which sets out the rules and criteria for lending.
The fund said its assessment found that the member’s monthly expenses were higher than her income, which meant she couldn’t afford the loan. It also found she often used her overdraft, which showed negative cash flow. Looking at her marital property arrangement, the fund said the household’s finances were at higher risk.
Based on this, the fund decided that giving her the loan would be reckless lending under the NCA, which it’s not allowed to do. The fund also said that having an overdraft doesn’t automatically disqualify someone from getting a housing loan, but it is a real sign of financial risk under the NCA and needs to be considered along with the applicant’s overall household finances.
Adjudicator says fund had to test repayment ability
In his decision, Adjudicator Lebogang Mogashoa said the fund wasn’t free to approve the loan just because the member wanted to finish her home. The fund had to make sure the loan met the requirements of the relevant Act, the NCA, and the rules set by its trustees under the housing loan policy.
Adjudicator Mogashoa pointed to Clause 4.2 of the housing loan policy, which requires an affordability check before the fund can grant a housing loan. Clause 6.1.1 also says the fund must check whether a member can pay back the loan within the loan period. This includes looking at income, existing debts, repayment history, and whether the member can keep up with repayments in the future.
The adjudicator said the fund’s view was that the member’s expenses were more than her income and her bank account was in overdraft, showing negative cash flow. The fund relied on Section 80 to support its decision, saying it had a duty to avoid reckless lending when these signs were present.
The complaint was dismissed.
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