Are you thinking of selling your pension or structured settlement for a lump-sum payment? Have you been contacted by a salesperson soliciting a “pension income program” or “factored structured settlement”? If so the following information may be of importance to you.
Selling your pension or settlement income-stream may sound enticing during financially hard times. However, the report warns that lump-sum offering is often significantly lower than the total you would receive if you continued with periodic payments. In addition, selling your pension or settlement may
involve extremely high transaction fees, tax consequences, and in many cases you may be required to take out a life insurance policy in case you die before the company you sold your income stream to has received all payments.
Before you purchase a pension or settlement income-stream product, the Investor Alert warns ,that these types of products are often pitched using word like “guaranteed and “safe.” However, you should be aware that these products are risky, illiquid and may involve commissions of 7% or higher.
In addition, pension or settlement income-stream products are not always structured as securities and therefore would not have to register with the SEC or state security regulators. “ As such, reliable information about these products may be difficult to find an resolving disputes should an
investment go sour may also be difficult.”
Interestingly, a number of state security regulators have begun to investigate pension and settlement income-stream products. The states of Massachusetts and New York have opened an inquiry into multiple firms that are offering lump-sum payments for pensions, according to Investment News.
Massachusetts Securities Division is investigating how these firms conduct business and how they are marketing the lump-sum offers. New York security regulators have similar concerns and are “looking into possible fraud, misrepresentation and violation of usury laws.
The Investor Alert is available in full, here.