Pensions - Good news for bankrupts

Decoctor

The High Court has refused to follow the Raithatha v Williamson case where it was held that a bankrupt 55 or over could be forced to draw down his pension to pay creditors. As a new user I'm not allowed to post the link but if you go to ashfords.co.uk website and look under the section headed news you will find an article about the case.

The case is going to appeal next year in the Court of Appeal, but it looks for the moment the OR and Trustees cannot now compel a bankrupt to draw down his pension if the bankrupt has not already elected to draw on his pension prior to the bankruptcy. So pensions are once again off limits as the law originally intended.:j:j:j:T:

fermi

Link --> http://www.ashfords.co.uk/the-high-court-refuses-to-follow-raithatha-v-williamson/

Decoctor

Thanks Fermi

jamesd

Decoctor, would you be kind enough to post about that in the Pensions section or if not, are you happy for me to? Protection from bankruptcy is one of the selling points of pensions vs ISAs.

Decoctor

Could you do it please with Fermi's link as I'm not that tech savvy!

debt_doctor

That's really useful - thank you.


DD

lazer

So you can't be forced to take a pension lump some for Bankruptcy but you can be treated as if you have for Benefits?


My mum is 61, my dad is 66, they are on pension credit, mum has a pension scheme (only worth about £10k) with a normal retirement age of 65, this is being treated a notional capital/income in their pension credit calculation.


I think for Bankruptcy, the fair thing would be to set a limit on the amount in the pension scheme and anything above that should be taken by the OR. It is IMO unfair to be 58, have £930,000 in a pension scheme, declare yourself bankrupt and then after the bankruptcy ends, you can drawdown that £930,000 (in a lump sum or as an annuity) while your creditors remain unpaid.

aardyvark

I will be discharged from BR next spring .
my OR at one time was looking at my pension as he said i would be able to draw on it on my 55th birthday . its only worth about a £1000
so not big amount , then i never heard anymore .
but ,,if after i am discharged, can i draw it or would i have to give it to the OR ?

debt_doctor

aardyvark wrote: »

I will be discharged from BR next spring .
my OR at one time was looking at my pension as he said i would be able to draw on it on my 55th birthday . its only worth about a £1000
so not big amount , then i never heard anymore .
but ,,if after i am discharged, can i draw it or would i have to give it to the OR ?

Hi, up until the hearing referred to in this post, the OR could claim the lump sum element (typically 25%) as a one off IPA.
As the law currently stands (possibly subject to appeal) this cannot now happen, and all of the pension is safe.


Under either version of the law, if you are discharged without an IPA in place, then your pension lump sum will be safe.


DD

jamesd

Decoctor wrote: »

Could you do it please with Fermi's link as I'm not that tech savvy!

Thanks, did it in this post.

fermi

https://www.gov.uk/government/news/undrawn-pension-entitlements-summary-of-guidance-for-insolvency-practitioners-and-debt-advisors

Undrawn pension entitlements: Summary of guidance for insolvency practitioners and debt advisors.



From:The Insolvency ServiceFirst published:26 March 2015Part of:Business and enterprise

This news item gives a summary of guidance which has been issued to official receivers and DRO intermediaries on how to deal with undrawn pension entitlements in the light of the decision in Horton v Henry [2014] EWHC 4209 (Ch).

The following is a summary of the guidance issued to official receivers and Debt Relief Order (DRO) intermediaries on how to deal with undrawn pension entitlements in the light of the decision in Horton v Henry [2014] EWHC 4209 (Ch), pending the consideration of that decision by the Court of Appeal.

The information below will enable insolvency practitioners and debt advice agencies to update their policies, particularly when giving advice to debtors in regard to how the Official Receiver or DRO Intermediary will deal with undrawn pension entitlements.

1. Official receivers must not include an undrawn pension fund in any calculation for an Income Payments Order/Income Payments Agreement (IPO/IPA). Only pensions which are in payment at the date of the bankruptcy order may be considered in this calculation. Where an election is made to draw a pension before discharge then the income, including any lump sum, may be included in any calculation or revision of the IPO/IPA. The official receiver may not influence the bankrupt individual in making the election.
2. Similarly, intermediaries in DRO proceedings should not consider an undrawn pension fund, which might be drawn as the debtor is 55 or over, in the calculation of income. Only funds which are in payment as income should be included when considering surplus income.
3. Where the debtor is over 55 and has access to an undrawn personal pension fund both the official receivers and intermediaries are asked to consider whether the insolvency test has been met and, at the date of the application or petition the debtor is unable to meet their debts.
4. In bankruptcy the official receiver will consider whether it would be appropriate to seek an annulment of the order. In a DRO, an intermediary who is concerned that the available fund is considerably higher than the outstanding debt is asked to contact the DRO Team to establish whether the official receiver will in the circumstances grant the application.
5. Official receivers should continue to challenge payments made into a pension scheme where such payments were to the detriment of creditors. This is particularly important where the bankrupt individual holds a Self-Invested Personal Pension (SIPP) and the main asset of the SIPP is property.
6. Where a bankruptcy order was made on a petition presented before 29 May 2000, pension arrangements continue to vest in the trustee of the bankruptcy estate. All such cases where the official receiver is trustee are dealt with by the Insolvency Service’s Long Term Asset and Distribution Team pensions unit. Steps will be taken to realise the maximum amounts available for creditors in these cases, applying the changes in pension rules which will come into effect on 1 April 2015.