How will my pension be treated in bankruptcy?

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In bankruptcy all your assets, except the necessaries of life, become vested in the Official Assignee. There are some exceptions to this rule and pension are one of those exceptions.

Put simply, your pension does not vest in the Official Assignee where it is not accessible for a period of at least 5 years after the adjudication.  In many cases this will mean that a pension is not affected by bankruptcy, but advice needs to be taken before adjudication to ensure this is the situation.

For example, we came across a case recently where the debtor believed that his pension was not accessible until he was 60 years of age. As he was 48 at the time of his bankruptcy he assumed his pension was safe. However, his pension arose from a previous employment. When he ended this employment his employer (as is normal practice) used the pension fund to acquire a buy out bond. A buy out bond is accessible from the age of 50. As the debtor was 48 at the time of his adjudication the fund was accessible within 5 years, and the monies therefore became vested in the Official Assignee.

If the debtor had been aware of this before his adjudication he could have acquired a new pension product that was not accessible until the age of 60 thereby securing the fund from the consequences of bankruptcy.

In other cases where the debtor is of an age so that the pension is accessible the purchase of an annuity product may be a solution. Annuity products are generally considered bad value but they do give an income for life. This is obviously preferable to the loss of the fund in total.

Again, prior to considering adjudication in bankruptcy advice should always be taken on the effect, if any, this will have on pensions.

I hope you found this useful. Please feel free to leave a comment below if you have any further questions abotu pensions inbankruptcy.

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