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Will I lose my pension in bankruptcy? – UPDATE


9 November 2016:  We reported in August (will-i-lose-my-pension-in-bankruptcy) upon the precarious uncertainties of pensions in bankruptcy.  Specifically, we were awaiting the Appeals Court decision in Horton v Henry on whether a trustee in bankruptcy could force a bankrupt to draw down their pension if they were of pensionable age (55 years of age).

The waiting game was further exasperated with the introduction of the pension reforms in 2015, which stated that a pension holder could choose to draw down their entire pension, albeit with horrendous tax implications.

A draw down can consist of a lump sum (previously 25% maximum of the total pension pot) and/or regular payments via an annuity.  The pension reforms removed the 25% limit on the pot and enabled the whole pension to be drawn in one go.

Disappointingly for creditors, the Appeals Court ruled that a trustee cannot force a bankrupt of pensionable age to draw down their lump sum and/or annuity.  However, this does not remove the trustee’s ability to attack pensions if they have been abused by way of excessive contributions.

Given the lack of connectivity between the pension reforms and insolvency regulations, we are pleased to see that legislation is being clarified, albeit by way of case law, to provide certainty for those facing bankruptcy whilst still providing a platform for creditors, via a trustee, to recover excessive pension contributions. 

If you want to find out a little more about your rights in bankruptcy, either as a creditor or as a bankrupt, please do speak with one of the BRI Business Recovery and Insolvency management team who will be able to assist.  Please telephone 01604 754352 or email info@briuk.co.uk