New research by Fidelity has revealed that 13 percent of seniors in the UK have been targeted by scammers looking to steal pension benefits. From AOL Money:
[The scammers] promise their victims that they can free up money tied up in their pension before they hit the age of 55 – and get their hands on their 25% lump sum or more. Those who are taken in by this sort of scam will lose most – if not all – of their savings.
The way these fraudsters work is that they tell victims they can free up part of their pension, and then the rest will be invested for them – often with a guaranteed return. In order to get their hands on their cash they have to transfer their pension into the ownership of the business the scammers have established for this purpose.
Often they will receive some sort of lump sum, but then the fraudsters will disappear with the rest of it. To make matters worse, because the pension investor has accessed their pension earlier than is allowed, they will also be hit with punitive taxes from the taxman.
Pension360 has covered a similarly harmful, but mostly legal, scam that occurs in the United States. Businesses offer seniors pension “advances”, which work like payday loans. Missouri is the only state to ban the practice so far.
Photo by www.SeniorLiving.Org
Pension360 covered last week the rising business of pension advances—businesses that apply the concept of a payday advance to retirement benefits by giving retirees an option to receive their pension as a lump sum.
But Missouri recently passed a bill that outlaws the practice and gives retirees a chance to take legal action against the business that gave them their pension advance.
Today, the State Treasurer announced that the law goes into effect immediately. Reported by KFVS:
Missouri State Treasurer Clint Zweifel announced House Bill 1217 goes into effect on Thursday – meaning public retirees in Missouri are now protected from the predatory lending practice known as pension advances.
Zweifel says retired public employees who are drawn into these misleading agreements can now take legal action against the businesses offering them.
“Pension advances prey on the financially vulnerable, offering an up-front lump sum in exchange for part or all of a public pension, and they are generally accompanied by exorbitant fees and interest rates,” Treasurer Zweifel said.
“Pension advances are essentially payday loans on steroids in that the individuals taking them are borrowing against a pension instead of a paycheck. They put the individual’s retirement in jeopardy and cost them more money in the long run. Today marks a big win for consumer protection in Missouri, and I am proud of the bipartisan coalition of lawmakers who helped me make our state the first in the nation to ban this practice.”
Missouri is so far the only state to pass a law addressing pension advances.
Photo by RambergMediaImages via Flickr CC License