Insolvency And Your Pension

Author:Mr Stephen Gillick and Peggy Hughes
Profession:Mason Hayes & Curran

A recent Court of Appeal decision in the UK has ruled that individuals facing bankruptcy cannot be forced to hand over their pensions to pay off outstanding debts. We examine the affect insolvency can have on your pension in this jurisdiction.

The recent UK Court of Appeal decision in  Horton v Henry ruled that there was no requirement to draw down funds held in a pension in the event of bankruptcy. As a result of this decision, the UK legal system now appears to acknowledge that pension funds should be out of the reach of a bankruptcy trustee.

Insolvency in Ireland

If you are unable to pay your debts and don't think that you will be able to do so in the next few years, there are now four debt solutions which may help. The solutions available are:  Debt relief notices; Debt settlement arrangements; Personal insolvency arrangements; and Bankruptcy. The option available depends on the amount owed, the type of debt, your income, and your assets. Each debt solution treats a pension differently.

Debt relief notices

You may apply for a debt relief notice ("DRN") if you have: debts below €35,000, a low income, and few assets. Your DRN can include some secured debts, such as a car loan or mortgage, and unsecured debts, such as personal loans, credit card and business loans. A DRN will  typically last for  three years. After this, the money you owe will be cleared and the unsecured creditors named in your DRN cannot take any legal or debt collection action against you.

Any pension arrangements you have will be taken into account at your application stage. If you are deemed to be eligible and receive a DRN, the arrangement will have no further impact on your pension, unless your pension income increases during the supervision period.

Debt settlement arrangements and personal insolvency arrangements

A debt settlement arrangement ("DSA") is only suitable for unsecured debts and will typically last up to five years. During this time, any unsecured creditors cannot take any legal or debt collection action against you. A DSA allows you to pay off as much of your unsecured debt as you can. Any outstanding balance after five years is written off.

A personal insolvency arrangement ("PIA") can include both secured and unsecured debts. A PIA will normally last up to six years, but can be seven years in some cases. During this time the creditors named in your PIA cannot take any legal or debt collection action against you.

An on-going pension income, or...

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