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High Court ruling shields pensions from bankruptcy


Bankrupt pension savers may have their pension pots protected from creditors after a recent High Court ruling.

In Hinton v Wotherspoon last month the High Court agreed with the verdict in an early case – Horton v Henry – which established that the existence of drawdown funds did not mean they were liable to an Income Payments Order.

IPOs are made by trustee in bankruptcy cases. Since the pension freedoms there has been growing uncertainty over whether untouched pension savers are in scope of an IPO.

In 2012 in Raithatha v Williamson the High Court concluded undrawn pensions should be included in an IPO if the savers is over 55. However, Horton v Henry and now Hinton v Wotherspoon, take the opposite stance.

Horton v Henry is currently under appeal with a judgment expected soon.

AJ Bell head of platform technical Mike Morrison says: “If the Raithatha ruling became a legal precedent or the Horton judgment were reversed, it could cause serious issues for those facing bankruptcy following the introduction of the pension freedoms.

“When the Raithatha judgment was passed the maximum that could be drawn from a pension fund (so to which an individual became “entitled”) was restricted. After 6 April 2015 this was no longer the case. The whole fund could be taken using the pension freedoms and therefore the whole fund value could have been included in the IPO.

“Horton v Henry made more sense as it restricts the amount that can be included in the IPO, and this latest case also better reflects the original aim of the law.”



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Interesting and an issue that needs to be addressed. I would suggest that how the pension was funded should be part of the process. If the pension funds where made by say the director of the company, a major shareholder instructing the funds to be made BY THE COMPANY, when they knew it was in trouble, this should be subject to investigation. Would be wrong to take all the funds built up for retirement over 40 years? The funds for shareholders or business holders taken whilst knowing the business was likely to face bankruptcy should be an allowable target in my opinion, if proven it was instructed to protect the cash from creditors.

  2. Christine Brightwell 8th June 2016 at 11:23 am

    This does make sense generally for public policy reasons as well – if they don’t have the pension then the tax payer may well have to pay the bankrupt individual benefits

    It also reflects the “poison pill” provision in some schemes which gives trustees various discretions as to the payment of benefits to a bankrupt.

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