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High Court rules untouched pension pots are no longer safe in bankruptcies 4 April 2012

The High Court has ruled the untouched private pension pots of undischarged bankrupts can be used to pay off creditors.

Until now pensions which had not been drawn remained out of creditors’ reach.

But Bernard Livesey QC judged that pensions of bankrupts yet to be accessed should no longer be off limits when it comes to settling debts.

Making the decision Mr Livesey QC, deputy judge of the high court, explained: “Why should it be that a person who elected on the day preceding his bankruptcy should be in a position where his entitlement to enjoy the fruits of his pension is liable to be subject to right of the trustee to apply for it to go to his creditors…

“Whereas the person who had not yet done so is immune from the impact of the section and can enjoy the full fruits of his pension to the detriment of his creditors?”

Mr Livesey QC added: “By using the word “immune” I mean that, such a bankrupt could avoid losing any part of his pension simply by choosing – for whatever reason – not to issue an election until the date of his discharge.

“I can think of no reason or policy, nor has one been suggested to me in argument, why the legislature should have legislated in order to create such an anomaly.”

It came after Situl Raithatha, of Springfields Business Recovery & Insolvency, acting as trustee in bankruptcy, brought an application before the court to force Michael Williamson, 59, to access his pension.

Williamson was made bankrupt in 2010 with debts of more than £1m and, despite being eligible to draw his pension, had not done so.

Ashwin Mody, solicitor and insolvency partner at Spearing Waite LLP, acting on behalf of Raithatha, successfully argued there should be no difference between a bankrupt who had drawn his pension and one who had not.

Commenting on the outcome Mody said: “I have never understood the unfairness that existed in the law prior to this decision.”

Meanwhile, Damon Watt, who acted for Williamson, described the decision as “far-reaching” and said Mr Livesey QC had given permission to appeal the decision.

He explained: “From our perspective it’s a very disappointing outcome for Williamson but from a broader perspective it treats older people disproportionately.

“Different age groups will be treated entirely differently under these regulations, previously pensioners were perceived to have some limited (pension) protection.

“This really strips away that protection.”



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