Action 9: Loans in exchange for pension not a good deal

by: Jason Stoogenke Updated:


CHARLOTTE, N.C. - You need cash fast.  Some businesses will give you money up front if you give them your pension.
They're called "pension advance" companies.  They tend to go after former public servants, like police, firefighters, teachers, and military, because those people have pensions and often need extra cash. They offer money immediately. 
In exchange, you have to sign over all or part of your pension for years to come, usually five to 10 years.  In many cases, it adds up to far more than the loan amount itself. 
Pension advances aren't illegal, but, financial advisor Paul Durso, the Federal Trade Commission, and the Securities and Exchange Commission urge you not to use them.
“From every angle I’ve looked at it, I don't see possibly how it could be a good deal," said Durso.  "The more I learn about them, the more I scratch my head and wonder who in the world would actually do a pension advance."
Durso said if you need money fast, first ask your creditors if they'll cut you some slack. Many will work with you. 
If that doesn't work, ask a credit union for a loan.  Durso said don't give up your pension. 
Lisa Kessler retired from the U.S. Air Force and gets a pension payment every month. She said  no pension advance company has targeted her.  And it's a good thing because it looks like she wouldn't say yes anyway. She said a pension advance wouldn't even be her "last" resort.

"Oh no.  That wouldn't be a resort.  There's nothing that would make me sign my pension over.  And there should be no reason for anyone to sign their pension over," she said.
Plus, a lot of times, pension advance businesses make you buy life insurance and make the company the beneficiary so, if you die, it still gets paid.
In some states, you can't even transfer your pension. So this is not an issue. 
Action 9 checked and, in the Carolinas, you can transfer it, as long as the company sending you your pension lets you.