In the recent decision of Horton v Henry [2014] EWHC 4209 (Ch) the High Court held that a Bankrupt’s unexercised rights to draw his pension did not represent income to which the Bankrupt was entitled within the meaning of section 310(7) of the Insolvency Act 1986 and so refused to make an Income Payments Order. This contradicted the controversial decision in Raithatha v Williamson [2012] EWHC 909 (Ch) and has created uncertainty as to which is the correct position. The Horton case is being appealed.

However, it is important for Insolvency Practitioners to remember that they can still claim pension assets where the member became bankrupt before the statutory protection of the Welfare Reform and Pensions Act 1999 came into force on 29 May 2000. Where a Bankrupt’s pension vested in his Trustee before 29 May 2000, the pension remains vested in his Trustee even after the Bankrupt’s discharge.

The reforms announced in the 2014 Budget are set to allow individuals to withdraw up to 100% of their pension as cash when they are 55. This clears the way for Trustees to argue that after discharged Bankrupts reach age 55 they can draw down all of their pension.

For example, a Bankrupt age 40 in 2000 was under the age limit for drawing pension. Income can be drawn from the pension now the Bankrupt is age 55. Provided his Trustee has not relinquished his interest, the pension is still vested in the Trustee.