The decision to protect bankrupts’ pensions from creditors is evidently the right one, so why has there been four years of uncertainty? Denise Fawcett, Pitmans pensions and insolvency partner, discusses.

The Court of Appeal has finally handed down a long awaited judgment that, contradictory to a decision made in 2012, confirms a bankrupt individuals’ pension will be safe from creditors.

The long awaited decision means pensions payments can only be claimed (as income) if it is being drawn while the individual is still bankrupt; an untouched pension is safe.

In the 2012 Raithatha v Williamson case, the court ruled that a bankrupt could be forced to draw down a pension (now available from the age of 55 following the governments’ pensions reforms last year) and the trustee in bankruptcy could take a portion of the bankrupt’s pension income. Clearly this decision was wrong and would add to a bankrupt’s financial despair.

Since the 1999 Welfare Reform and Pensions Act came into force, Trustees had not expected to have access to a bankrupts’ pension.  The aim of that act was to protect it. The Raithatha case was contrary to Parliament’s intention. 

Although it has taken four years, ultimately the decision was the right one, and both individuals and Trustees will benefit from the clarity this decision provides.