Economic slowdowns leave many Ontarians in need of cash to get them through the hard times. An advantage of Registered Retirement Savings Plans (RRSPs) is that investments can be liquidated and withdrawn early if it is needed, and included in income tax. There is one type of Retirement Savings Plan where withdrawal is not so simple - a Locked-In Retirement Account (LIRA). Except in certain cases, you cannot withdraw funds from a LIRA until you reach the designated age, usually 55 or older, and then there are maximum amounts you can withdraw annually.

A new breed of scam artists is preying on people anxious to get at their locked-in funds. Beware of investment schemes that promise to give you access to money tied up in LIRAs. Newspaper ads promoting these scams are appearing more frequently, and often follow this pattern:

A promoter advertises an "RRSP Loan" that lets you take advantage of a supposed loophole in the tax laws to access your locked-in funds. The promoter instructs you to liquidate your current LIRA holdings, usually to purchase shares of a start-up company of the promoter's choosing. The promoter promises to loan you 60-70% of the value of the investment, keeping the balance as a fee. You are told you will get ready cash, with no tax consequences, and still hold a valuable investment in your LIRA.

The reality is that the stocks the promoter recommends are virtually worthless. You often get no funds from the promised loan, and you may be forced to pay tax on the de-registered money even though you did not receive it. There is no tax loophole that allows you to use the money in a locked-in retirement plan. The end result is that your retirement savings are gone, and you may have violated federal income tax law.

How can you avoid this type of scam? Use the following tips as a guide:

• Check with an independent specialist if there is any claim of a tax loophole.
  
  
• Check that any securities you are being offered are legitimate and RRSP eligible.
  
  
• Know the tax consequences of using the funds in your LIRA.
  
  
• Read the prospectus, and make sure you understand what you are investing in.
  
  
• Understand the financial position of the company you are investing in.
  
  
• Make sure that the investment matches your risk tolerance profile.
  
  
• Consult with a registered financial adviser on the suitability of the investment.
  

If you are truly in need of your locked-in money, contact the Financial Services Commission of Ontario at (416) 250-7250 to find out if you qualify to withdraw the funds from your LIRA.

If you are approached to invest in this type of scam, or have information pertaining to this or a similar scam, contact the OSC at 1-877-785-1555.