What is an “Unlocking” Retirement Savings Scheme?

The common feature of these schemes is the promise that you can immediately access a portion of the cash value of your locked-in retirement savings account (for example, RRSP, RRIF, LIRA, etc.) or income plan without paying taxes. These schemes may also promise excellent returns on the remaining investment or significant tax benefits.

How Does it Work?

This type of scheme generally involves investing in the shares or units of a public or private company, or a debt instrument of some kind, such as bonds, promissory notes, or mortgages.

Promoters, or their agents, may advise you to move your retirement funds into a self-directed account, to conceal the unlocking transfer from your financial institution or advisor. Once you are in a self-directed account, you have control over your funds and the promoter will provide you with instructions on what to buy. By having you move your money to a self-directed account, the promoter has succeeded in removing the scrutiny that an independent financial advisor or their firm would provide. This could result in you investing in a scam that will cause you to lose some, if not all, of your money.

Individuals or companies that promote these investment schemes package them in a variety of ways, but in the end, they all have the same effect – you suffer significant investment losses on top of serious tax and pension repercussions.

Watch out for one or more of these common characteristics:

• Advice to withdraw funds from your locked-in retirement savings account, and move it to a self-directed account.
• Offers of debt reduction through new sources of income (for example, dividends or interest payments).
• Promises of immediate access to assets in locked-in retirement savings accounts (RRSPs or RRIFs).
• Unrealistic returns on an investment, or frequent high interest or dividend payments.
• Aggressive advertising campaigns or promotional meetings that talk about investments that will help you unlock your locked-in retirement savings.