the creditor and the bankrupt’s
pension (39)
by
Roderick Ramage, solicitor, www.law-office.co.uk
(not
been published elsewhere)
Superseded
by changes in the law: see article 41.
DISCLAIMER
This article is not advice
to any person and may not be taken as a definitive statement of the law in
general or in any particular case. The author does not accept any
responsibility for anything that any person does or does not do as a result of
reading it.
prescript
The Raithatha decision, noted below, was disapproved by the Court of Appeal in Horton (as trustee in bankruptcy of Michael
Gerard Henry) v Henry [2016] EWCA Civ 989.
Raithatha v Williamson [2012] EWHC 909 Ch
The Welfare Reform and Pensions Act 1999 prevented
trustees in bankruptcy from accessing a bankrupt’s pension scheme funds for the
benefit of the creditors, leaving them with access to whatever could be
received from the scheme under an income payment order (IPO). Until now it had been assumed that an IPO
could be made against only money actually payable from a pension scheme, so
that a bankrupt could shelter his pension fund by deferring the start of his
pension until after his discharge.
The
main finding of the High Court in Raithatha v
Williamson (judgement
4 April 2012) is that an IPO may be made against benefits, which the bankrupt was entitled but has not exercised his right to draw from the scheme, including both pension payments for the
duration of the IPO and the tax free lump sum of up to 25% of the value of the
bankrupt’s pension fund. This outcome
applies to both occupational and personal pension scheme. The case may go to the Court of Appeal. A fuller note about the case is available on
the website
of Spearing Waite LLP, who advised the TIB
Trustees
in bankruptcy might consider, as well as seeking IPOs even, as in this case, if
the bankrupt’s discharge date is imminent, obtaining an injunction to prevent
the bankrupt from taking any steps to draw his pension, because the maximum
recovery for the creditors (tax free lump sum and pension) could be frustrated,
if bankrupt were to crystalize his entitlement by starting his pension with no
tax free lump sum.
As pension schemes are prohibited from exercising
forfeiture powers on bankruptcy, there is little that they can do to protect
members, but one possibility could be to provide that bankruptcy automatically
triggers a benefit commencement event, under which a member’s pension would
start and no lump sum would be paid. The
pension can be subject to an IPO, but the cost to the bankrupt will be less
than suffering the loss of 25% of the fund and pension under an IPO.
END
07/04/12
copyright Roderick Ramage
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