People often ask ‘How will bankruptcy affect my pension?’. Pensions, like any other form of income, can be used to repay creditors.

Therefore, your Trustee could claim all or part of your pension – whether you’re receiving it now or are due to receive it in the future.

The Trustee cannot usually claim a pension as an asset providing the pension scheme has been approved by HM Revenue and Customs.

Q: What types of pensions are there?

Typically, there are four types of pensions:

State pension: The State Earning Related Pension Scheme (SERPS). This is available to all UK citizens.

Occupational pension: This type of pension scheme is set up by an employer. Employees make contributions into the scheme. Employers can also make payments into individual policies.

Personal pension: Personal pension polices are set up by individuals – not companies. Normally these are set up with an insurance company. Retirement annuity contracts are similar to personal pension plans. If you have a retirement annuity contract, it will be treated in your Bankruptcy in a similar way to a personal pension plan.

Group personal pension: This is a personal pension policy that is taken out with a pension provider. Following a Bankruptcy order, a group personal pension will be dealt with the same as a personal pension.

Q: Will I lose my pension if declare myself Bankrupt?

A: Trustees dealing with your Bankruptcy cannot claim your state pension or any earnings from the State Earnings Related Pension Scheme (SERPS). If you have a pension with protected rights, they will represent the equivalent of the SERPS benefits within your pension. In an occupational pension scheme, the protected rights might be known as ‘a guaranteed minimum pension’ or ‘benefits under the reference scheme test’. However; personal, occupation and group pensions could fall under the control of your Trustee. Therefore it’s important that you look at the terms and conditions of your pension policy or speak to the company handling your pension.

Q: What happens to the lump sum payable under my pension?

A: If you are guaranteed a lump sum as part of you occupational or private pension, then it could come under the control of your Trustee if the Trustee has permission to claim benefits from your pension.

Q: What information will the Official Receiver / Trustee need about my pension?

A: You must provide the following information about your pension(s):

• Details on any occupational pension scheme(s) that you have contributed to, plus those that current or former employers have made payments towards.
• Documentation outlining the value of your benefits under the occupational pension scheme. You will also have to provide information on contributions, particularly those made within the last two years.
• Policy documentation for all personal pensions that you have taken out. If you are receiving a pension, you must provide details to the Official Receiver about the regular benefits you are currently receiving. If you have received a lump sum payment, you must provide information on the date and the amount of lump sum paid.

Q: Can I still make pension contributions after filing a Bankruptcy Order?

A: Pension contributions can continue to be made under your existing pension arrangements or under new pension arrangements made after your Bankruptcy Order. However, we recommend you receive advice in the first instance as you may not receive the full benefit if your pension becomes under the control of your Trustee.

Q: Can I stop my Trustee claiming my pension?

A: You should speak directly to your Trustee as they may decide not to use your pension as an asset. This would mean benefits would come to you when they become payable. If a relative is willing to provide a suitable sum of money, based upon the current transfer value of your pension fund (excluding protected rights), your Trustee is likely to agree to this option.

Q: If my Trustee has not collected my pension before I am discharged from Bankruptcy, will it become payable to me?

A: Any part of your pension that is claimed by your Trustee will be collected when you reach retirement age – even if this is after your discharge from bankruptcy.

For more information on dealing with debt, speak to us today on 0800 015 3135†.