I don’t know if a blog is an adequate forum for a public service announcement, but I hope, dear readers you will help spread the word on a scam that is directed at pensioners.
The story I am about to share with you may not be news to you but it was to me. According to this CNBC article, a growing number of pensioners are being ripped off by companies offering to buy pensions for a lump sum of cash. The article points out that there are a few companies which are legitimate, but many more are not. The unscrupulous companies fail to explain the fees that the pensioner must. The fees are in reality interest payments paid up front from the cash buy-out. The companies never use the term “loan”, but that is exactly what the buy-out is. And, here is what the companies don’t explain:
But what’s missing from the sales pitch, say experts critical of the practice, are the fees that come with the cash— fees that in effect become interest rates somewhere between 25 and 100 percent. _ (Emphasis added)
Obviously these people selling their pensions for up front cash would be far better off taking out a conventional loan at their local bank.
Although I’m not surprised to hear that some retirees are desperate enough to sell their pension, it is worrisome. Sure, there are a few who are in good shape and have some special big purchase they want to make and selling one of their pensions for cash makes sense to them. That’s great! On the other hand, we know that many people did not save enough during their workings years to supplement Social Security. That’s sad!
However, I fear there are many who thought they had planned well for their retirement years and are now finding that their retirement income is not covering their monthly costs. These folks did save throughout the years and were comfortable knowing that the interest earned on their savings would be enough to supplement a pension plus Social Security and provide them a comfortable retirement. Take. for example, John Doe, who retired in 2000. All is going well and along comes the 2008 financial crisis and the housing bubble. John is grateful that his home is paid for so, although the value of his home has gone down, he is not at risk of losing his home. He and his wife are going to be fine, he thinks. But, what John didn’t count on was Ben Bernanke, the Chairman of the Federal Reserve. Mr. Bernanke introduces a policy that penalizes savers and rewards risk takers (think stock market). Suddenly, John Doe has almost no interest income on his savings. And, after four years of this Zero Interest Rate Policy (ZIRP), John has had to use the principle of his savings account to make ends meet. The last thing John needs now is to meet up with one of these scam artist offing to buy out his pension for cash.
Please, dear friends, if you know someone who is considering selling their pension for cash, ask them to think twice. Ask them to look for other alternatives.
Well, that’s what I’m thinking. What are your thoughts
Original Post: Asylum Watch