We previously reported on Raithatha v Williamson (4 April 2012) where the High Court held that a bankrupt’s right to draw a pension was subject to an income payments order (“IPO”) even if the individual had yet to draw his pension. This judgment represented a significant departure from previous practice under the Welfare Reform and Pensions Act 1999 which protected future pension rights from IPOs and distinguished them from pensions in payment. It also effectively allowed a trustee in bankruptcy to compel a bankrupt to draw pension against his wishes.

The Regulator has updated its guidance on assessing and monitoring the employer covenant in order to help trustees apply the defined benefit funding code of practice (“the Code”).

The guidance is intended to identify good practice for trustees in:

The High Court has held that a bankrupt’s unexercised rights to draw his pension did not represent income to which the bankrupt was entitled and so refused to make an income payments order, contradicting the controversial decision in Raithatha v Williamson which held that a bankrupt’s right to draw income from a personal pension may be subject to an income payments order even if the individual has yet to draw his pension.

Horton v Henry [2014] EWHC 4209 (Ch)

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.

Since the Welfare Reform and Pensions Act 1999 (“1999 Act”), it has been understood that the rights of a bankrupt under a tax approved pension plan are excluded from the bankruptcy estate and do not vest in his Trustee in Bankruptcy.

That said, where a Bankrupt was already drawing an income from his pension, his Trustee could seek an Income Payments Order over that income.