Raithatha related to income payments orders and whether they could be applied to defined contribution pensions that weren’t yet in payment.
The TIB took the line that because the normal minimum pension age was 55, a debtor ‘became entitled’ to the pension income on their 55th birthday.
The TIB then successfully argued that, regardless of whether the debtor had elected to crystalise their pension, an income payments order could be applied based on the theoretical entitlement that existed.
In practice, this meant a debtor could be compelled by the TIB to crystalise their pension, following which the TIB could apply an income payments order to it.
A lot of commentators viewed this as a somewhat controversial decision and not entirely in keeping with the spirit of the legislation.
Many therefore welcomed the decision in a later High Court case in 2014 of Horton v Henry, where a different view was taken.
In Horton, the facts of the case were virtually identical to Raithatha. Unusually, however, the judge declined to follow Raithatha on the basis simply that it was wrongly decided.
Here, the judge held that the debtor only became entitled to pension income once the pension had been crystalised.
This left TIBs, debtors and their legal advisers in a somewhat awkward position given they were faced with two conflicting cases from courts of the same standing.
Thankfully, this was cleared up in 2016 when Horton was taken to the Court of Appeal.
Here, the appeal was dismissed on the basis that the right to elect how to receive a pension is part of a bundle of contractual rights that remain vested in the debtor (and not the TIB).
At age 55, the debtor only becomes entitled to a ‘right to elect’ not a ‘right to payment’.
Under section 333 of the Insolvency Act 1986, the debtor has a general duty to cooperate with the TIB.
The judge also noted that this section could not be used to compel the debtor to crystalise.
The end result is that Raithatha has been rolled back, and an uncrystalised pension fund is beyond the reach of an income payments order.
A TIB cannot force a debtor to crystalise their pension.
Life after Horton
There is another court case of note – this being Hinton v Wotherspoon, which was heard in the High Court in 2016.
Strictly speaking, Hinton was heard before the Horton appeal, but it still followed the Horton first instance decision, which was later upheld.
It was interesting as it provided some insight into how an income payments order might work in practice in a defined contribution pension scheme.
