Bankruptcy protection for pensions

jamesd · 24 December 2014 at 1:36PM

Some good news for pension protection. In the Horton v Henry case the High Court has refused to follow the Raithatha v Williamson decision where it was held that a bankrupt 55 or over could be forced to draw down his pension to pay creditors. So Mr. Henry could not be forced to start taking money from his SIPP just because he'd been made bankrupt.

There's an appeal pending for 2015, so pensions for those over 55 might still end up vulnerable.

Thanks to Decoctor and fermi for this news.

System · 24 December 2014 at 1:39PM

If pension pots are going to be "just like bank accounts" then the relaxed rules will surely have wider implications too for entitlement to benefits and care costs?

jamesd · 24 December 2014 at 1:54PM

Not sure all of that has been worked out yet. Particularly issues like how much income must be taken and the chance that this may be above the safe long term withdrawing rate.

kidmugsy · 24 December 2014 at 2:34PM

jamesd wrote: »

Some good news for pension protection.

Bad news for creditors. The toe-rag who owes you money will be able to weasel out of his debts, and live the high life later.

thenudeone · 25 December 2014 at 11:28PM

That's a bit unfair IMO.

Pensions are given the beneficial tax treatment they have with the specific intention of providing an income in retirement. In some cases, most or all of the funds may have been provided by employers, not by the employee themselves.

They are held in trust and don't belong to the beneficiary. There are already separate rules which prevent people deliberately squirelling away money out of creditors' way in a pension, if they are aware of impending financial trouble.

That is not to say that they should always be left completely out of any bankrupt's settlement, but if (say) it takes 3 years discharge bankruptcy, it cannot be fair (IMO) that the pension of someone aged 51 will be completely untouched whereas the pension of someone aged 52 (who will reach 55 before coming out of bankruptcy) can be accessed to pay creditors.

atush · 26 December 2014 at 9:53AM

Not entirely unfair to those the money is owed to?

In any case, I have been wondering about this point for some time re the new pension rules.

And it probably should have been legislated at the same time, not waiting for law to sort it out.

System · 26 December 2014 at 5:31PM

thenudeone wrote: »

They are held in trust and don't belong to the beneficiary. .

But to an increasing extent they do.

If the pension pot is now widely referred to officially as "your pension pot", and you effectively have sole decision as to whether to draw money from it or not, then arguably the rules of trust have already been considerably relaxed if not quite broken.

A court can already overrule the trust rules and split a pension between a divorcing couple. It's only a matter of a short time before there is further pressure from creditors, HMRC, local authorities, DWP etc to push for changes so that they can access pensions to satisfy their demands too.

Thrugelmir · 27 December 2014 at 3:11PM

atush wrote: »

And it probably should have been legislated at the same time, not waiting for law to sort it out.

Legislation is law. Good law evolves. Appears that the judge has a personal opinion too.

Therefore the Judge concluded that:

"I have most anxiously considered the decision in Raithatha but I have, albeit with considerable reluctance, come to a different conclusion."

Bankruptcy protection for pensions

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