BRR E-alert: So, how safe are pensions?

Business Recovery & Reconstruction E-alert: News & view from the bridge

Following the recent Court of Appeal decision in Horton v Henry we now know that debtors' pensions will be safe in bankruptcy. But they are not necessarily out of the reach of creditors. It is now, more than ever, worth considering a creditors other options where the debtor's main asset is a pension.

So what else can a creditor do?

In Blight v Brewster, a judgment creditor was seeking to enforce his judgment against the debtor's pension (the debtor was not bankrupt). The debtor was entitled to request drawdown from his pension but had not made the request. The facts were therefore similar to both Horton v Henry and Raithatha v Williamson. The court made orders so that the creditor's solicitor had power to make a request for drawdown on the debtor's behalf and to receive payment from the pension in discharge of the judgment debt.

We have also encountered a situation where a court appointed receiver was granted a similar power to request drawdown on the debtor's behalf.

Following the Court of Appeal decision in Horton v Henry we know that a trustee in bankruptcy would not be able to get at that asset. In Horton v Henry, the court was directed to Blight v Brewster and acknowledged the significant difference in protection for pensions pre- and post-bankruptcy. The difference is not logical or necessarily fair but, as the Court of Appeal recognised, through the enactment of the primary legislation, Parliament expressly excluded pensions from bankruptcy recoveries. Conversely, it is not necessarily fair that a bankrupt individual may be able to draw on a significant pension immediately upon their discharge from bankruptcy but again that is the effect of both the legislation and the decision in Horton v Henry.

Where an individual's primary asset is a pension fund, there is now a stark difference between bankruptcy, where it cannot be attacked, and enforcement through the courts, where it can. When considering how to proceed against a creditor, this should therefore be an important part of the consideration of an individual's asset position.

Of course, it might be an option for a debtor to present their own petition once threatened with enforcement action against their pension, but not always one the debtor will wish to, or be able to, take.

We would be very interested to hear of any of your experiences. Please do get in touch with our Business Recovery & Reconstruction team if there is anything that you would like to discuss.