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Expert opinion and discussion about bankruptcy issues
#22569
In April 2012, a ruling in the High Court changed the protection for pension funds in some bankruptcy cases.

Previously if a debtor reached a pensionable age while bankrupt, they could chose to defer any lump sum draw down from thier pension and annuity payments thus protecting these from being added to the bankrupct estate. However of the 4th April 2012 in the case of Raithatha v Williamson the Judge ruled that if a debtor reaches a pensionable age while they are bankrupt, then they must elect to draw a lump sum from their pension fund which must then be handed over to the official receiver. They must also start to draw allowable pension payments which are then added to their income calculation and may have to be paid to the OR in the form of an income payments order.

Whether or not this ruling sets a precident for similar casis in the future is still to be seen. However most experts believe that it will do so. For this reason if you are considering declaring yourself bankrupt and know that you will reach the age where you can begin drawing a personal pension during the period you are likely to remain bankrupt you must take expert advice or risk losing 25% of your pension fund to the official receiver.
#22597
That is interesting James. I guess it means if you are around the age of 54 and thinking about bankruptcy and you have a personal pension which would pay a tax free lump sum, then it is best to avoid bankruptcy until the pension lump sum option has passed?

Do you think this ruling will also affect people who reach pensionable age while thay are in IVAs? After all if the creditors would have been due something in bankruptcy they would also look for it to be paid in the IVA as well would they not?
#22630
Yes Hayden, I think it is very likely that this ruling will also affect people who are in IVAs or at least those who are considering starting an IVA who will reach the age of 55 while is is running. However it is early days yet so we have to wait and see how things pan out.

What I would say is that if you are currently in an IVA and will reach the age where you are eligable to draw a lump sum from a personal pension then generally speaking you should only do this if you get agreement from your IP that the money will be used to settle the IVA. Otherwsie it will simply be swallowed up as a windfall.