Senators Investigate Practice of Pension Sales

May 20, 2013 ( – A Senate committee has asked the National Association of Attorneys General (NAAG) for more information about the practice of pension sales or advances.

Senators Tom Harkin (D-Iowa) and Lamar Alexander (R-Tennessee), the chairman and the ranking member of the Senate Health, Education, Labor, and Pensions Committee, sent the NAAG a letter asking for documentation and information about those who may have been targeted by lenders offering lump-sum payments, with potentially illegally high rates of interest repayment, in exchange for a stake in the borrower’s pension benefits. The inquiry to the NAAG is part of a bipartisan investigation into these practices.

“Pensions are the bedrock of economic security in retirement for millions and millions of middle-class families,” said Harkin. “But now, it appears that there are some financial operations trying to siphon a profit off of people’s retirement benefits. These unscrupulous companies are offering to buy pensions for a lump-sum.”

Harkin cautioned that while this may sound like a good idea to those facing financial challenges, such a practice can leave a participant worse off over the long term. He added, “I hope this bipartisan investigation will shed light on the scope of this issue and uncover the companies that are taking advantage of our nation’s pensioners.”

"There is a lot we don't know about this practice of pension purchases, and it raises concerns that investors may be preying on military veterans and retirees who are in financial difficulty, and skirting laws concerning interest rates,” said Alexander. “This is the start of our investigation into the practice."

In the letter, the senators seek the NAAG’s assistance in: 

  • Identifying the number of victims of improper and/or deceptive pension purchasing schemes;
  • Obtaining information about any enforcement actions taken;
  • Identifying which companies are offering these products;
  • Locating where they are incorporated; and
  • Identifying how these arrangements are structured.


Last week, the Securities and Exchange Commission and the Financial Industry Regulatory Authority issued an alert about the risks of participants selling their rights to an income stream or investing in someone else’s income stream (i.e., pension sales or advances). The alert, “Pension or Settlement Income Streams – What You Need to Know Before Buying or Selling Them,” urged investors who are considering an investment in pension or settlement income streams to proceed with caution (see “SEC, FINRA Issue Alert on Pension Income Streams”).

The letter from Harkin and Alexander to NAAG can be seen here.