Pensions at risk on bankruptcy

The recent High Court Chancery Division case of re Raithatha –v- Williamson ([2012] EWHC 909 (Ch)) establishes a new legal precedent whereby a bankrupt can be ordered to draw down his pension in order to satisfy an Income Payment Order on bankruptcy. This may have a significant impact on family law cases, as it means is that where anyone of pensionable age is entitled to their pension, even if they have not taken it, they can be forced to do so where, under a Bankruptcy Order, they must pay out a proportion of their income to satisfy creditors. Previously the general rule applied by the Court was that those who had reached retirement age had some limited protection over their pension. A dependent spouse in these circumstances may see their maintenance or pension sharing order drastically affected as a result. Obviously those bankrupts who do not have access to their pension and are below pensionable age will not see any effect on their pensions or annuities. This decision is now subject to an appeal due to its wide ranging nature. Responses have ranged from criticism that it will have a disproportionately adverse impact on more senior citizens, to approval that those who have got themselves into financial difficulty should be responsible for discharging their liabilities, whatever their age.

We await the decision of the Court of Appeal.

© Punam Denley, July 2012

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