Pensions: High court ruling affects bankrupts with pensions

Posted on April 7th, 2012 | Categories - News

A new High Court ruling will affect bankrupts who have a pension and are over the age of 55.

The ruling, made in the case of Raithatha v Williamson, means that the bankruptcy trustee will be able to draw from the bankrupt’s pension, providing they are the “right age”, usually 55.

Pensions & bankruptcy

Prior to the ruling a bankrupt’s pension had been considered to be beyond the reach of the bankruptcy trustee as it was not considered income. However the new ruling seems to have changed this, allowing the pension to be subject to an income payments order.

The judge in the Raithatha v Williamson case, B Livesey QC, ruled that because the bankrupt is entitled to an income from the pension, assuming of course they are of the “right age”, then the pension is subject to the bankruptcy rules.

The ruling will force bankrupts over the age of 55 to use their pension funds to help repay their debts, which could seriously affect the retirement provision of bankrupts, especially if they are still working and are forced to take income from a occupational pension scheme where they are still a live member.

Reaction to pension & bankruptcy ruling

Pensions had traditionally been protected in the event of the members bankruptcy, however this ruling, which is still pending an appeal, would seem to change that position.

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.”

He continued: “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.”