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i England, Wales and Northern Ireland

How bankruptcy affects me

Bankruptcy and my pension

Bankruptcy can affect your life and your pension. Make sure to check how it will impact you before going ahead.

Savings in a pension fund are not seen as an asset in bankruptcy. In most cases, the official receiver (OR) cannot take these from you.

Some other savings are considered assets. The OR could take these from you when you go bankrupt. Things like:

  • Personal savings
  • Investments
  • Shares

Contact us for help if you:

  • Are aged 51 or older
  • Have pension savings
  • Are planning to go bankrupt

The rules around debt relief orders (DRO) have changed. These changes could benefit those considering an insolvency solution like bankruptcy. Please take a look at the changes, as for some people a DRO will be a cheaper alternative to full bankruptcy.

Can money be taken from my pension during bankruptcy?

There are some cases where the official receiver can take money from your pension savings. This is a risk if you have:

Excessive contributions to your pension

Did you pay a large amount into your pension before you went bankrupt?

The OR may take this back if:

  • You pay more than 15% of your income into your pension
  • The people you owe are left at a disadvantage as a result

Non-approved pension schemes

Your pension must be approved by HM Revenue & Customs (HMRC).

Any savings in a pension that is not approved will not be protected.

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Pension savings cancelling bankruptcy

Your application may be refused if:

  • You go bankrupt in England and Wales, and
  • You could draw down a big enough lump sum from your pension to clear your debt

If your application is rejected:

  • You have to deal with your debts again
  • You lose your application fee

The OR can cancel or 'annul' your bankruptcy if:

  • You do not declare your pension savings when you apply, and
  • They find out later that you had enough to pay all your debts

They can do this even if you do not draw down the money from your pension.

If it is annulled:

  • You may have to pay towards the OR’s costs

Most people can begin drawing down money from their pensions from age 55.

Contact us for help if this is the case and your pension savings are higher than your debts.

Income from pensions after bankruptcy

The OR will not order you to pay anything after your bankruptcy if:

  • You are retired, and
  • Your only income is from a state pension and pension credits

You may have to make payments after your bankruptcy if:

  • You get any other income on top of your state pension and pension credits
  • Like, a private pension

Income Payment Arrangements (IPA)

The OR checks your income and living costs.

  • They set up an IPA if you have any money left over after you have paid your essential household costs
  • This is where you make monthly payments for three years

This happens in around 1 in 5 bankruptcies. (Source Insolvency Service figures 2012-14).

  • An IPA should be set at an amount you can afford
  • You can ask for it to be changed if your circumstances change
  • You make payments to the OR or a ‘trustee’ they appoint
  • The OR can take court action if you do not make the IPA payments

Making pension fund payments after bankruptcy

Are you paying into a company pension?

  • The OR takes this into account when working out if you need to pay anything after bankruptcy
  • They may ask you to pay a lower amount until you are discharged
  • The OR may not let you to pay into a private pension during bankruptcy
  • You can start paying again when you are discharged

Drawing money from your pension after bankruptcy

You may choose to take money from your pension fund if you turn 55 after you go bankrupt.

You can do this as:

  • A lump sum, or
  • A regular income (an ‘annuity’)

The OR cannot force you to take money from your pension savings. But they can claim any lump sums of extra cash or income after your bankruptcy.

Get advice before you use your pension savings if:

  • You have not been discharged from your bankruptcy
  • You are still paying into an IPA

Get free bankruptcy advice

Going bankrupt is a big step. Get expert debt advice first.

Use our online debt advice tool to find the best solution to your debt problem.