Insolvency Service case raises issue of pension protection

Insolvency Service case raises issue of pension protection

A bankruptcy case has raised the issue of who owns a pension when a company goes to the wall.

The government has filed a 10-year bankruptcy restriction order against Northampton-based Christopher John Day after, despite being declared bankrupt, he withdrew his entire pension of £30,000 from company accounts.

At a hearing on 13 September 2016 the order was made as "a result of his conduct, lasting until 12 September 2026".

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Mr Day was declared bankrupt on 17 June 2015 on a petition presented against him by HM Revenue & Customs.

An Insolvency Service investigation found Mr Day withdrew his entire pension, of more than £30,000, after bankruptcy proceedings had been started against him by HMRC.

Martyn Rawbone, deputy official receiver, said: “This is a serious case in which the bankrupt’s misconduct continued even after he had been made aware of his obligations.

"Extending the period of the bankruptcy restrictions should act as a deterrent and warning to others who might be considering such actions.”

By the time he attended an interview with the Official Receiver’s Office in July 2015, Mr Day said he had £10,500 remaining, and that this was being "looked after" by a family member. He was told he needed to pay the money to the Official Receiver.

He didn’t pay the money over, and instead instructed his family member to keep hold of the money on his behalf. 

Following court proceedings, only £4,500 was recovered.

Helen Howcroft, managing director at Islington-based IFA Equinimity, said: "Pensions in bankruptcy is a hot topic at present as there have been several cases in the court over recent years on this matter where the judgments have differed.  

"Back in 1999 the Welfare Reform and Pensions Act made changes to the way in which pensions are treated in bankruptcy. Pensions were effectively “excluded” from bankruptcy because the bankrupt had a right to income in retirement. 

"Excessive contributions might be reclaimed, but the pension pot itself was out of bounds."

Ms Howcroft added: "No cases have yet to be ruled over in relation to the new pension flexibility rules. This is such a topic of interest at present, that I would expect further cases to be seen by the courts in the near future."