the creditor and the bankruptís pension (39)

by Roderick Ramage, solicitor,

(not been published elsewhere)

Superseded by changes in the law: see article 41.



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.



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 bankruptís 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 bankruptís 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 bankruptís 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 memberís 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.




copyright Roderick Ramage

click below to

return to list of pension law articles

return to list of other law articles

return to home page