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Dear <<First Name>>,

In the latest case involving the pension assets of bankrupts to reach the courts, the Court of Appeal ruled that savings should be safe from creditors. At ThorntonRones we can help guide your clients if these issues affect them.
The issue: to what extent, if any, is a pension not yet in payment available to be taken into account on an application by a trustee in bankruptcy for an income payments order?

The factors considered by the profession to be relevant prior to the Court of Appeal decision:
  • What does “entitled” mean in section 310 Insolvency Act 1986? Does it mean only that money which the bankrupt has elected to take from the pension pot or does it include the funds for which the bankrupt could elect to take but has not yet done so?
  • Is it possible for the court to make an order requiring the bankrupt to take certain steps in relation to the pension pot?
  • What are the true effects of the amendments made to section 310 Insolvency Act 1986 by, progressively, the Pensions Act 1995 and the Welfare Reform and Pensions Act 1999? Do they allow only actual payments to be taken into account for Income Payment purposes or is the cumulative effect of those amendments to make the entire pot available?
The Court of Appeal has decided that:
The pension pot remains an asset excluded from the estate and income to which the bankrupt is entitled only applies to a pension fund that is actually in payment. There is no right on the part of a trustee in bankruptcy to compel a bankrupt to take any particular election in relation to a pension scheme.

The reasons:
  • The clear rationale from the 1995 and 1999 Acts was to exclude pensions from the bankruptcy estate;
  • A trustee in bankruptcy cannot have rights to compel a bankrupt to take an action in relation to an asset that is not part of the estate;
  • It would drive a coach and horses through bankruptcy legislation if this were so;
  • The bundle of rights that the bankrupt has in connection with a pension fund do not naturally fit within the definition of “income” under section 310 Insolvency Act 1986;
  • The bankrupt was only “entitled” to the income that was actually in payment.

This decision will have an important impact on future potential bankruptcy situations, so for a clear understanding of what it could mean for your clients, please contact Richard Rones on 020 8418 9333 or email
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ThorntonRones – we put the solve into insolvency

ThorntonRones is a specialist insolvency practice experienced in advising on both corporate and personal scenarios.  The principal of ThorntonRones, Richard Rones, is a Licensed Insolvency Practitioner, a Fellow of R3 and a Fellow of the ICAEW. 

Richard has extensive experience in the SME market that includes trading as ThorntonRones Insolvency Practitioners since 1999. He and his staff fully understand the difficult pressures faced by anyone running their own business and relish the opportunity to be of assistance.

We look forward to taking care of you.
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