Pension Advance and Release Scams

You’re getting older, but not old enough to access your pension. Or maybe you’re already getting your monthly pension allowance, but you need a large amount of cash right away. As luck would have it, 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?

Pension advance scams are particularly prevalent in the U.S. and U.K., with certain variations on the theme more popular in different jurisdictions. Some callers may claim that you can withdraw pension funds early while others may tell you that you can borrow on it. Some will call it a loan, others 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For the record, money may be withdrawn from a pension plan before maturation only under stringent and unusual conditions, and those depend, of course, on local regulations. One typical exception is if you have been diagnosed with a terminal disease. In certain jurisdictions, money can be withdrawn from pensions but an extremely high tax will be levied on the amount in order to discourage you from doing so.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, so be prepared to lose even more money than the amount you withdraw.

How Early Pension Release and Pension Review Scams Work

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

Don’t be surprised, however, 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 because their financial regulatory infrastructure is minimal, and they’re so isolated that victims will be discouraged from pursuing their cases.

The scammer may just steal your funds outright at that point and then 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 later on. In the meanwhile, he’ll inform you that your pension has now been invested high-risk opportunities or overseas property that cannot be unfrozen for the foreseeable future.

In the U.S., the pension advance scam is typical, whereas early pension release scams are especially common in Britain, where recent reforms 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, one in eight British residents aged 50 and above have been approached by fraudsters for this purpose, and more than one out of every 10 who were approached believed what they were pitched. Another study claims that more than 25% of those contacted were tempted to accept the offer and some 15% subsequently contacted the scammers.

According to Action Fraud, the National Fraud & Cyber Crime Reporting Centre in the United Kingdom, the average amount swindled out of British pension scam victims in 2018 was £91,000.

If you think you have been victimized by an early pension release scam, consult with our fund recovery experts at MyChargeBack.