Google Adwords 0808 278 1398 Bing Ads 0808 274 4482

Can pension savings be used to pay off bankruptcy debts?

The Court of Appeal will set a precedent later this year determining whether or not a trustee in bankruptcy can access an individual's pension to pay off a debt that individual owes. We eagerly await the Court of Appeal’s decision due in the Spring.

The High Court ruled in December 2014 in the case of Horton v Henry that the court does not have the power to force Mr Henry to withdraw from his un-crystallised pension policies to pay off debts of more than £387,000.

Mr Horton is now challenging the High Court's ruling in the Court of Appeal against Mr Henry.

Mr Henry's representative, Ms Clark, said that after conflicting High Court judgments in the past few years, the Court of Appeal's decision will provide clarity given the pension reforms announced in the 2014 budget. She said "from April it will, in theory, be possible for an individual to draw down their entire pension pot, though they will be taxed on it as income. If this appeal were to succeed it would have huge ramifications. The trustee in bankruptcy will be able to force the individual concerned to draw the entire contents of their pension policies to pay creditors."

There is precedent case law in favour of Mr Horton to assist his appeal but there are also contradictions which make the case less clear. It is a tricky one to call.

In 2012 the case of Raithatha v Williamson saw the High Court give the bankruptcy trustee the right to claim against the bankrupt’s £1m pension in order to repay creditors. At the time of the case, the bankrupt was of an age where he was entitled to start drawing his pension, but he had not started to do so and the judge ruled against him. In Mr Henry’s case, he is of an age to start drawing from his pension policies but has also not started do so. Puzzlingly, Deputy Judge Robert Englehart has ruled in Mr Henry’s favour. Mr Henry has a self-invested personal pension and three personal pension policies, which he has argued he does not want to crystallise. We understand that permission to appeal has been granted.

If you need to recover debts due from your own Debtors then Insolvency proceedings can be a very useful tool in recovering debts in the right circumstances, or if you have financial issues, taking advice early will help. If you require any assistance in relation to Insolvency related matters, then please speak to our Head of Litigation, Daniel Cottrell who would be happy to help you.

Posted in: Law

Expert legal advice you can rely on,
get in touch today:

Please let us know you are not a robot