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Bankruptcy & Pensions

A look at how bankruptcy may affect any pensions you have taken out.

The fear of losing a pension "nest-egg" is a common concern for many that consider bankruptcy when dealing with debts.

Most pensions however should be protected and thus exempt from a bankruptcy estate.

Many who consider bankruptcy will naturally be concerned about how the process effects any pensions they may have. Firstly, let’s look at the different types of pensions – you may have one or more of these:
State pension, occupational pension, personal pension plan and group personal pension plan.

You have a duty to provide full and accurate information to the person overseeing your bankruptcy case, so supplying details of any pensions will be included in this duty. You will need to supply the following information:
-The name of any occupational pension scheme that you have contributed to.
-Evidence of how much benefit you currently get or will get in the future from an occupational pension scheme, and how much you have contributed to such schemes in the past two years.
-The policy details for all personal pension plans.
If currently receiving a pension, the amount you get, and details of any lump sum received via the scheme.

How will bankruptcy affect my pension?

All pension schemes approved by HM Revenue and Custom remain outside a bankrupt’s estate – and thus the trustee or official receiver cannot claim them. This has been the case for any bankruptcies since May 2000.
So what is an “approved” scheme? These tend to be schemes registered under section 153 of the Finance Act 2004, and are mainly schemes registered by HM Revenue and Customs as already mentioned, plus annuity contracts that are used to secure benefits under a registered pension scheme, but do not immediately pay benefits.
In addition to the above, they may be retirement annuity contracts, personal pension schemes approved by HM Revenue and Customs for tax purposes, and also stakeholder pensions.
If the official receiver is in any doubt as to whether a bankrupt’s pension scheme is “approved”, then they will write to the relevant pension provider.

What if my pension scheme is an unapproved scheme?

If your scheme is unapproved, this does not automatically mean it will form part of your bankruptcy – it can still be excluded. To do this, you would need to apply to the court for an exclusion order, or by making a qualifying agreement with your trustee. If not, then the policy can be claimed as part of your estate. You can “buy back” your interest in the policy, but this is something you would need to discuss with whoever handles your case.

What if I receive pension payments while I’m bankrupt?

Even if your pension is protected from the bankruptcy estate, if you receive payments from that pension before your discharge date then these payments can be included in any calculation for a repayment schedule.

State Pensions

A state pension or any payments from the State 2nd Pension (S2P, formerly known as SERPS) do not form part of the bankruptcy estate.

Making pension contributions after a bankruptcy order is made

These can continue after a bankruptcy order, under the arrangements of the order. If your pension has been claimed as part of the bankruptcy estate, then it may not be in your interest to you to continue to make payments, as you won’t see all the benefit of those payments. Always seek professional advice on the matter.

Other information

If your trustee can claim your pension benefits under a personal pension or an occupational pension, this will include any lump sum as well as the regular payments.
If you are under 60, you may be able to ‘buy back’ the benefits under the scheme from the official receiver. In most cases you will need to pay the official receiver 45% of the current fund value.
If your pension has been claimed by the trustee as part of the bankruptcy estate, the trustee will collect it when you reach the earliest retirement age under the arrangements of your pension.
The trustee cannot claim a state pension as already stated, and also cannot claim any protected rights in a pension. In an occupational pension scheme, the protected rights may be known as 'a guaranteed minimum pension' or 'benefits under the reference scheme test'.

Free debt counselling and advice is also available from the Money Advice Service available at: doesn't charge a fee for its bankruptcy service, but receives remuneration from the partners that we work with in order to keep operating. Those partners must charge a fee to the customer to likewise cover operational costs, and this amount will vary depending on the solution offered, and the terms of the parner. For details of these terms, please refer to the website of the organisation dealing with your bankruptcy. Upon application with, we will forward your information on to one of our specialist debt partners. You will then be contacted, and you will be able to explain your case, and expert advice will be offered in order to ascertain the most appropriate debt solution.