Will I lose my pension if I am insolvent?

Summary: This article explains how an individual’s pension may be taken into consideration if they are insolvent and facing bankruptcy.

If an individual was insolvent, and a petition for bankruptcy was made before May 29th 2000, the individual’s occupational or personal pension fund would have been considered an asset, and rights to that pension would be taken by the trustee. A state pension fund, on the other hand, would have been protected, including any payments from the state. If, however, the petition was made after May 29th 2000, there are different rules.

Could I lose my pension fund if I am insolvent and made bankrupt?

After May 2000, provided the personal or occupational pension has been approved by HM Revenue & Customs, the trustee cannot usually touch the pension fund. This is also the case with a state pension. If the pension has not been approved by HMRC (for example a pension arranged in country outside the UK), then the rules that were in place before 29th May 2000 will apply.

I am a pensioner, will my regular payments be taken from me if I am insolvent?

Any regular income will be taken into consideration if an individual has been petitioned for bankruptcy, or is entering an Individual Voluntary Arrangement (IVA). In the case of bankruptcy, if the trustee believes the individual to have more income than they need to cover their essential expenditure, then they may be required to pay something towards the debt. This could be an agreement between the individual and the trustee (an Income Payment Agreement - IPA) or it could be an order from the court (Income Payment Order - IPO). This is usually true for both personal and occupational pensions. If the only income is from a state pension, then it is unusual for any payments to be requested. In the case of an IVA, any income, including that from a pension, will be taken into consideration when calculating the monthly repayments.

If an individual is facing insolvency and they are concerned about how it may affect their pension, it is important to seek advice from a licensed money advisor.