If you’re made bankrupt, can you lose your pension, too?

Pensions can be taken as part of the settlement process with creditors.  Pensions include occupational pensions, state pensions, and pensions that are taken out as part of insurance policies to be paid out later in life.  State pensions or payments from the State Earnings Related Pension Scheme (SERPS) cannot be claimed as part of bankruptcy proceedings, and some private pensions have clauses that in the event of bankruptcy, the earnings accumulated revert back to the employer or the trustee.  Most pensions approved by HM Revenue and Customs will be exempt.  Some schemes have a ‘guaranteed minimum pension’ that cannot be touched by creditors.

The Official Receiver of your case will look into whether any part of your pension is safe from creditors’ claims, and even if it is not, the income you receive from pension payments can be included in the calculations of your income given to the court.  In that case, you may have to make a certain percentage payment from your pension once you begin receiving it.  If your pension can be taken as part of bankruptcy proceedings, any lump sum payment could also be included.

If any of your pension can go towards paying your debt to creditors, you may want to rethink making new payments into the account.  Check with your pension provider to see whether to make new payments.

How do I prevent this?

You can’t transfer the rights to your pension to someone else, but if you can get a loan from a family member or friend that is close to the current transfer value of your pension, you can present that option to your trustee in lieu of losing your pension.

If the pension is found to be claimable by your trustee, it will remain so even after you have been discharged from bankruptcy.  When the pension is available to you, the trustee will claim it.