Using pension fund to avoid bankruptcy?

AlanWT · 23 January 2012 at 4:43PM

I am currently staring down the barrel of an IVA or perhaps more likely bankruptcy, which is very frustrating as I have funds that would resolve my situation but seem not to be able to do so.

I have total debts (cards and overdraft) of £27k. Monthly debt servicing payments amount to around £580. I am a tenant, not a houseowner, and live alone most of the time but have my son to stay every other weekend. I also make child maintenance payments for him. My monthly living expenses (which I have pared to the absolute bone) excluding card and overdraft payments are just covered by my salary. In other words, each month I get £580 further into debt.

Yet I have a personal pension fund from a previous job of £34k. Two years ago, when I reached 55, I took the early release option and withdrew the then maximum permitted amount of (IIRC) £14k. I have asked the Financial Adviser who arranged the early release if it would be possible to release the remaining funds, to clear my debts. He said it would not be possible.

I can appreciate that there is legislation in place to stop people squandering their provision for retirement. However although £35k is a substantial sum of money, it is much less so in terms of providing a pension. I have a reasonably decent occupational pension in the job I am currently in, so I would certainly not be relying on the frozen pension scheme I have been describing as a primary income in retirement.

Does anyone know if there is a mechanism by which I could release this money to clear my debts and avoid bankruptcy?

Your opinion advice and experience would be much appreciated.

jumperjohn · 23 January 2012 at 4:52PM

No, as you had NI and tax relief to enable the pension savings. If you were able to take the cash from a pension in full everyone would do so. If you go bankrupt however the receiver will take your pension fund to pay the debt.