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Subject: Re: Bankruptcy risks pensions.	Date: 13/04/2012 11:02
Author: SuperBeau	Number: 14106 of 15032
I agree that it is a gap in the legislation. The legisaltion was intended to prevent the previous possibility which is that the trustee in bankrutpcy could take the whole of the pension, including all the future income stream, to pay to creditors (so you potentially lost everything). But it was not intended to put all pension payments outside the reach of the creditors: a pension in payment is treated like any other income (eg salary). The point not expressly covered under the legislation is what you do with pensions which are not in payment but where the bankrupt has a right to ask for it to be put in payment immediately: I think the judge was right about that, ie that this should be treated as an entitlement. I am slightly more nervous about the lump sum aspect, particularly in the case of a defined benefit scheme where the lump sum commutation factors may not be favourable to the member and taking a lump sum is not the best thing to do. The whole area is difficult because of the balance between the interests of creditors and the need to encourage people to save for retirement. However a pension is only one form of asset and we don't see public protest about bankrupts (ie let's not forget, people who have borrowed money they cannot repay) being stripped of their homes or their ISAs. It won't be easy for occupational schemes to insert a consent requirement for taking a lump sum where there is not one at the moment, at least for accrued rights.
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