Pension Advance and Release Scams

Pension advance and release scams are particularly prevalent in the U.S. and U.K. Variations on the theme are popular in other jurisdictions as well.

Someone calls you out of the blue — or you see an online ad — offering you a generous upfront lump sum “advance” on your pension. What could go wrong? You’re getting older, but not old enough to access your pension. Or maybe you’re already getting your monthly pension allowance but need a large amount of cash right away. Be careful. Such calls may signal pension advance and release scams.

Some callers may claim that you can withdraw pension funds early. Others may tell you that you can borrow on it. Some will call it a loan. Others will call it a cash advance or another positive-sounding euphemism. Some may even claim to represent a government agency. No matter what they may tell you, it’s likely to be a scam.

For the record, you can withdraw your money from a pension plan before maturation only under stringent and unusual conditions. Those depend, of course, on local regulations. One typical exception is if you have been diagnosed with a terminal disease. In certain jurisdictions, you can withdrawn cash from pensions but an extremely high tax will be levied on the amount. That’s in order to discourage you from doing so. If you do fall for this sort of scam, you will not be excused from paying the tax. In that case, be prepared to lose even more money than the amount you withdraw.

How Early Pension Release and Pension Release Scams Work

The scam may begin with an unsolicited offer to provide you with a free pension review. The caller may say you can withdraw cash from your pension even though it has not yet matured. Or the scammer will offer you a lump sum payment in exchange for signing over your future pension payments. The scammer may inform you that he can help you out by transferring your funds in a different investment that will yield far more interest. As in any legitimate financial transaction, you’ll have to pay a service fee. But it will turn out to be a significant percentage. Some victims have paid scammers up to 30 percent.

However, don’t be surprised if your new account turns out to be located at a bank or investment company located on some underpopulated island mini-state that you may never have heard of and probably could never find on a map. Such countries are ideal locations for scammers to stash other people’s cash. That’s because their financial regulatory infrastructure is minimal. In addition, they’re so isolated that victims will feel discouraged about pursuing their cases.

Outright Theft

There’s always the possibility that the scammer may just steal your funds outright and conveniently disappear. If he remains in contact, it’s probably because he feels he might be able to convince you to free up even more money down the road. In the meanwhile, he’ll inform you that your pension has now been invested high-risk opportunities. Or in overseas property that cannot be unfrozen for the foreseeable future. Either way the message is the same: You won’t get your money back.

In the U.S., the pension advance scam is typical. Early pension release scams are much more common in Britain. The reason why is that  recent reforms in the UK have provided more flexibility in accessing retirement savings. Scammers take advantage of the confusion over the new rules to defraud their victims. According to one estimate, scammers have contacted one in eight British residents aged 50 and above for this purpose. Worse yet, more than one out of every 10 who they approached believed what their pitch. Another study claims that more than 25 percent of the people who the scammers contacted actually considered accepting their offers. And 15 percent — which is to say most of them — subsequently called the scammers back.

The Typical Victim

In 2019, the Britain’s Financial Conduct Authority (FCA), together with The Pensions Regulator (TPR), studied pension scam data as part of their joint ScamSmart campaign. They found that UK residents with university degrees were 40% more likely to accept a free pension review from a company they never heard of before. Moreover, they were 21% more likely to agree to access to their pensions before maturation. These are red flags for pension advance and release scams. 

According to Action Fraud, the national fraud and cyber crime reporting centre in the United Kingdom, the average loss of British pension scam victims in 2018 was £91,000. Then analysis by the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) found that the figure was £82,000. That figure represents 22 years of contributions made by the average British pensioner.

If you think you’ve been the victim of an early pension advance or release scam, contact the fund recovery experts at MyChargeBack.