Can A Trustee In Bankruptcy Access An Undrawn Pension Pot?

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At present the law relating to what a Trustee in Bankruptcy can access, in terms of the undrawn pension of a bankrupt, is anything but certain.  This follows the High Court decision in Horton v Henry [2014] which conflicted with another High Court decision in Raithatha v Williamson [2012]. 

In Raithatha the High Court ruled that, as long as a bankrupt has an entitlement to elect to draw his pension, that pension can form part of the bankruptcy estate.  This is the case even if the bankrupt had not used his entitlement in drawing his pension.

In Horton the High Court, unusually, refused to follow the decision in Raithatha on the grounds that it was wrongly decided.  Instead, in Horton, the High Court held that, as the bankrupt had not used his entitlement in drawing his pension, it could not form part of the bankruptcy estate.

The decision in Horton has been appealed.  The appeal is due to be heard in the Court of Appeal in July this year.  Until then we have the unsatisfactory situation of two conflicting High Court authorities.  In theory either could be followed in a subsequent case making the law in this area anything but certain.  Having said that it is generally thought that, where a later decision was reached following careful consideration of a former case, it is the later decision that should be followed.

Clarity in this area of the law, due in July 2015, will most certainly be welcomed – especially in light of the pension changes due to be introduced next month.  In particular, those over the age of 55 will have greater flexibility to draw down their pension in lump sums.  This will make the question of whether ‘a mere entitlement to elect to draw a pension is sufficient to make it form part of the bankruptcy estate?’ more pressing than ever.

At Forbes we deal with all aspects of corporate and personal insolvency, including bankruptcy.  If you would like any advice in relation to any of these areas please contact Lucie Cocker on 0800 037 4628 or by using the contact form here.

 

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