Pension Rights Protected in Bankruptcy
Author: Chris Millar
In the recent case of Horton v Henry, the Court of Appeal considered whether a bankrupt’s un-exercised right to draw down his personal pension should be included in his income assessment, and therefore payable to his trustee under an IPO within Section 310(7) of the Insolvency Act 1986.
The Court of Appeal dismissed the trustee’s appeal. It confirmed that a trustee cannot compel a bankrupt to draw down his unelected pension for an IPO. Only pension policies which are in payment may be subject to the IPO regime.
Accordingly, a judgment creditor who knows or believes that a debtor may have significant funds in a personal pension plan should consider a Third Party Debt Order, as bankruptcy will afford the debtor protection.
The decision also provides some certainty for those savers with defined contributory pension schemes and occupational pension schemes; their funds remain out of reach for IPO purposes if they are made bankrupt.