BusinessBusiness RecoveryHigh Court rules bankrupts must hand over pensions

High Court rules bankrupts must hand over pensions

A High Court judge ruled today that bankrupts could be forced to draw their pensions and hand them over to their creditors

A HIGH COURT JUDGE has ruled that bankruptcy trustee should be allowed to draw from a debtor’s pension pots to repay creditors if they are of the “right age”.

In the case Raithatha v Williamson, B Livesey QC ruled that a pension which has not yet been drawn, but which a bankrupt could draw because they are of the right age, can be subject to an income payment order, Accountancy Age’s sister publication Proffessional Pensions reports.

Previously a bankrupt’s undrawn pension had been considered out of reach of creditors as it was not considered income.

However, the judge ruled today that because a bankrupt is entitled to a payment from a pension, even if they are not yet taking payments, that pension is subject to other bankruptcy rules.

Specifically, the judgement will affect people who have reached their pension scheme’s retirement age, but have not reached their state pension age, and are still working, allowing creditors to force them to raid their pensions to pay off their debts.

Damon Watt, the EMW lawyer for the bankrupt, Williamson, said: “Up until now those who had reached retirement age were perceived to have some limited protection over their pension but this decision strips away that protection.

“The judgment will have a disproportionately adverse impact on more senior citizens who have private pensions whereas younger bankrupts who have not yet reached pensionable age under the scheme will not be subject to such an order depriving them of an element of their pension pot.”

The judge granted Williamson permission to appeal the decision.

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