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Pensions and Bankruptcy, The Position Finally Clarified?

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The Court of Appeal has now handed down its long-awaited judgment in the case of Horton v Henry [2016] EWCA Civ. 989.

The outcome of the case was to determine whether a Trustee in Bankruptcy could compel a Bankrupt to draw their pension even though the pension was not yet in payment because the bankrupt had not elected to draw it as at the date of bankruptcy.

Pension treatment in a bankruptcy scenario has been a moot point for quite some time and this decision brings some much needed clarity to a complex relationship. 

Pensions and Bankruptcy Background

In 2012 the judgment of Raithatha v Williamson [2012] EWHC 909 (Ch), [2012] 1 WLR 3559 (“Raithatha”), determined that someone who was of pensionable age could be made to draw their pension by their Trustee in Bankruptcy if they go bankrupt.  After the pension reforms introduced on 6 April 2015, this decision became even more controversial given anyone over the age of 55 could elect to withdraw their entire pension, immediately.

In 2014 the decision in Horton v Henry contradicted that of Raithatha, deciding that the Trustee in Bankruptcy had no power to tell the bankrupt to draw their pension.  This decision was then appealed by the Trustee in Bankruptcy.

Summary

The decision of the Court of Appeal was unanimous dismissing the Trustee in Bankruptcy’s appeal meaning that the position is now clarified and the court has confirmed that it does not have the power to require a bankrupt to elect to draw their pension within the context of an application by a Trustee in Bankruptcy for an income payments order pursuant to section 310 of the Act, a complete vindication of the position taken in Raithatha.  

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