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Pensions & Bankruptcy

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  • blue.peter
    blue.peter Posts: 1,228 Forumite
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    As others have said, Welfare Reform and Pensions Act 1999 changed things so that pensions were excluded from the bankruptcy estate after the relevant sections came into force. Since the bankruptcy in this case was before that, the pension would normally form part of the bankruptcy estate.

    BUT there are a couple of exceptions to this:
    1. "Protected Rights" (that is, pension funds arising from contracting out of the state scheme on a money purchase basis) were always outside the bankruptcy estate.
    2. The pension in question MIGHT have a "forfeiture clause". This will mean that in the event of a bankruptcy, the pension is forfeited, and the scheme trustee/manager will have discretion as to whether and how any benefits are paid. Assuming that such a clause exists and is valid, it has the practical effect of keeping the pension out of the bankruptcy. It's common in such cases for the scheme to end up paying the member once they have been discharged.

    You'll need to check with the scheme administrator whether either of these exceptions applies.

    With regard to the creditors no longer existing, it's possible that the trustee in bankruptcy is still owed money. They can charge for their work, and their charges are payable by the bankruptcy estate. (I once saw a final statement issued by a TiB to the creditors. The TiB's own charges exceeded the value of the estate, so that the creditors received nothing!)
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