TDCI Securities Division Warns Tennesseans of Pension Scams

Tuesday, April 05, 2016 | 10:53am

NASHVILLE – The Tennessee Department of Commerce & Insurance’s (TDCI) Securities Division reminds Tennesseans to be cautious if approached with an offer that targets their pension plan.

A pension is a type of retirement plan, usually tax-exempt, in which an employee makes contributions toward a pool of funds set aside for an employee’s future benefit. The pool of funds is invested on the employee’s behalf, allowing the employee to receive benefits upon retirement.

The scam involves investors who provide funds to make cash advances and pensioners who are willing to turn over future pension payments in exchange for an immediate lump sum cash payment.

“Pension advance scams can have devastating financial consequences,” said TDCI Assistant Commissioner for Securities Frank Borger-Gilligan. “We always encourage Tennesseans to research before making investment decisions. Know the risks to keep scam artists from carrying away your nest egg.”

The TDCI Securities Division offers the following information from the North American Securities Administrators Association (NASAA) to prevent pension advance scams:

Investors: Questions to Ask Before You Invest


  • Did you do a regulatory check on the background of the principal officers of the company offering the investment?  Background information is available from the Tennessee Securities Division, other state or provincial securities regulators, BrokerCheck, IAPD, or even the Internet.                                                             
  • Is the transaction legal? Some pension rights cannot be transferred. As with the case cited above, federal law prohibits the assignment of U.S. government pensions and disability benefits. Check out the source of the pension funds in which you will be investing.
  • Can you afford to lose the money? These are risky investments. You should not invest more than you can afford to lose.
  • Can you get your money if you need it? Many of these investments are illiquid and you may not have access to your money.

Retirees: Questions to Ask Before You Sell Your Rights

  • How financially secure is the company offering to buy your entitlement and is the company registered to offer the product? Check the background of the principals before entering into the agreement.


  • How does the company make its money? The company typically takes commissions and other fees that may result in the cash payout being lower than the future benefits you are assigning. Do these costs outweigh the convenience of a lump-sum payment?


  • Do you know what restrictions, if any, apply to your ability to assign your pension benefits? Check with your pension administrator to determine what restrictions apply. The transaction could be illegal and therefore void.


  • Does the company require you to purchase life insurance naming it as the beneficiary? If so, you should consider this increased cost when considering whether the payout is worth it.
  • Did you consider the tax consequences? The lump-sum payment you receive may be taxable as income.

Bottom line: Before making any decisions with your money, ask questions, do your homework and contact the Tennessee Securities Division at 1-800-863-9117 or visit our website to get free investor education materials.

Also, be sure to visit NASAA’s Serve Our Seniors website at for more information for senior investors.