TaxAdministrationInsolvency Service to chase bankrupts’ pensions

Insolvency Service to chase bankrupts' pensions

Thousands of previously bankrupt individuals who thought they were safe from creditors are on the verge of losing their pensions to debt collectors from the government's insolvency unit.

Link: Christmas fears as bankruptcy soars again

The unit has identified up to 14,000 cases, 3,000 of which it expects to have worked through by March 2006 for handing over to practitioners.

Pensions have not been forfeit in bankruptcy since 2000, but the Insolvency Service’s protracted recovery unit (PRU) said it would start to work through the backlog of thousands of cases that pre-date the change to the law. Beginning in March, it will spend 10 months targeting cases involving those aged 50 and over with pension funds of £10,000 or more.

The sums are likely to stretch into the tens of millions of pounds.

After the first 3,000 cases have been reviewed, the remainder will be dealt with by new Regional Trustee/Liquidator Units (RTLUs) once individuals reach their 50th birthday.

The insolvency service said: ‘This area of work is affected by the Welfare Reform and Pensions Act, and the cases PRU has are only those in which the pensions were taken out prior to 2000.’

David Rubin, chairman of the smaller practice issues committee of R3, which lobbied successfully for the change to the law, described the forfeit of pensions in bankruptcy as ‘scurrilous’ and ‘ridiculous’.

‘You can have a milkman who has done 35 years, has a nice pension, goes into business and it goes bust and he goes bankrupt and loses his pension,’ he said.

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