A bankrupt could now be forced to draw their pension and hand it to their creditors, following a High Court judgment of 4 April.
Damon Watt, principal of EMW, says: "Until now a bankrupt’s undrawn pension has generally been considered out of reach of bankruptcy creditors and not previously considered as ‘income’, subject to an income payment order."
The judgment in Raithatha v Williamson  All ER D 57, handed down at the High Court by Mr B Livesey QC, states that a bankrupt does have an entitlement to a payment under a pension scheme not merely where the scheme is in payment of benefit but also where, under the rules of the scheme, he would be entitled to payment merely by asking for it.
The decision will, therefore, affect anyone of pensionable age under their pension scheme, even where they might not have reached the current "state" retirement age of 65, who becomes bankrupt.
Once the pension is drawn down, sums received by the bankrupt from the pension annuities are considered as income (whether actually received by the bankrupt or where he is merely entitled to them) and are also, therefore, susceptible to an income payment order.
Damon Watt, principal of EMW, the commercial law firm which acted for Mr Williamson, says that the decision will add to the worry and hardship of those nearing their retirement age who get into financial difficulty.
Says Mr Watt: "Up until now those who had reached retirement age were perceived to have some limited protection over their pension, but this decision strips away that protection.
"The judgment will have a disproportionately adverse impact on more senior citizens who have private pensions, whereas younger bankrupts who have not yet reached pensionable age under the scheme will not be subject to such an order depriving them of an element of their pension pot."
The judge granted permission for Mr Williamson to appeal the decision.
Author: Pensions WorldPensions World is the leading monthly magazine for pensions professionals published by LexisNexis.