BR and ill health payout

Joa1210_2

Hi, I'm after some advice for a friend.
She put in a claim for ill health retirement which was rejected and went BR in May.
She's since had the decision overturned and is being offered a lump sum of £10 k and £800 per month pension income.
She's been told that she can defer this payment though if its processed before end of BR.
How would the OR view this?
Any help gratefully accepted

TheGardener

Tricky area and not one I'm too familiar with. Pension pots are no longer taken as part of a BR's estate and assets. However, income from a pension is used to calculate IPA's in the same way a wage would be.
Lump sums that are 'payment in lieu of earnings' are potentially at risk so she would need some professional advice. Does she have the option to have zero lump sum and a larger monthly income?
Would the lump sum be needed for adaptations and aids for a disability?

Joa1210_2

Thanks Gardener, ill ask about the zero lump sum, no adaptations, shes currently on universal credit so i would imagine that would be reduced accordingly and no IPA invoked. This may or may not be sorted before end of may (her discharge date)

She is more thinking that she may be doing something illegal by deferring the payment. i dont think the zero lump sum has been considered, even though she initially thought there wouldnt be a lump sum.

TheGardener

If she is still working age - and unless it is clear there is no ways she could consider paid employment in the future - then it would not be unreasonable to defer a lump sum and payment of pension in the expectation that she may get paid employment elsewhere.
It's more likely to cause problems with the benefits than the OR.
I would advise speaking to someone who is a specialist in pensions and BR.

debt_doctor

Hi,

The general rule on pensions is that the OR cannot force a bankrupt to take their lump sum for the benefit of creditors. This applies to all HMRC approved pensions - the vast majority are HMRC approved.

Any amount received (including a lump sum) as income could become subject to an IPA in bankruptcy if the OR can demonstrate that the bankrupt has surplus funds over and above their reasonable domestic needs.

The OR has no power to make the bankrupt take their pension at any particular time, including any lump sum.

It clearly makes sense to not elect to take a lump sum at this time.

DD