Lump sum or annuity? It’s a question that dogs lottery winners and parties to structured settlements, and it might now involve your client’s retirement plan.
Leslie Scism of The Wall Street Journal has been tracking the efforts of Sen. Tom Harkin, D-Iowa, chairman of the Health, Education, Labor and Pensions Committee to “take a closer look” at what Scism calls a burgeoning and controversial business in which veterans and other retirees sell some of their future pension income to investors, with an array of middlemen profiting from the transactions.
“The sale of pensions to investors in secondary markets is a worrisome new practice that deserves careful scrutiny,” Harkin (left) said, according to the paper. “In tough economic times, hard-working people are often forced to make difficult choices between immediate economic needs and their future retirement security.
“However, it is critically important that people forced to make these tough decisions have the information they need to make wise choices, and don’t fall victim to unscrupulous or illegal practices,” he said.
As with issues involving life settlements (and viatical settlements before them), legislators and regulators are increasingly concerned about the potential for the abuse of consumers by unscrupulous middlemen.
As the Journal detailed in a story earlier this month, financial middlemen have helped to set up websites with names such as BuyYourPension.com and pension4cash.com to connect with pension recipients.