Pensions excluded from the bankruptcy estate


August 2013


61.21  Pensions excluded from the bankruptcy estate (amended August 2013)

The legislation [note 1] provides that, where a bankruptcy order is made on a petition presented on or after 29 May 2000, all rights and benefits (see paragraph 61.24) under approved pension arrangements (see paragraph 61.27) will be excluded from the bankrupt’s estate.

The vast majority of pensions encountered by an official receiver in current cases will be excluded from the estate by the virtue of these provisions, though it may still be possible for pension funds to be claimed by the official receiver, as trustee, for the benefit of the estate (see paragraphs 61.26 to 61.26c).


61.22 Unapproved pensions – excluded by court order or agreement

It is possible for the rights and benefits under an unapproved pension to be excluded from the bankrupt’s estate by court order or agreement with the trustee (see Part 3).


61.23 Pensions where bankruptcy order made prior to 29 May 2000

Where the official receiver is dealing with a pension in a case where the order was made on a petition presented before 29 May 2000 (and the pension is therefore not excluded from the estate), he/she should follow the guidance in Part 4 of this chapter.


61.24 Exclusion of all rights and benefits under the pension

All rights and benefits under an approved pension are excluded from the bankrupt’s estate.  This exclusion would include not only the right to receive a pension payment and lump sum, but also any ancillary benefits such as a death benefit.  Any right to bring a claim (a right of action) where that right arises from the pension arrangement would similarly be excluded from the estate.


61.25 Realisation of benefits under an excluded pension (amended June 2015)

The official receiver may not realise directly the bankrupt’s rights and benefits under an excluded pension, but any payments received by the bankrupt during the term of  their bankruptcy or during the period of an existing IPO/IPA may be included in the calculations for an IPO/IPA, or the variation of an existing IPO/IPA, subject to certain exceptions (see Chapter 31.7 paragraph 31.7.49). 

The trustee has no power to require that a bankrupt bring their pension into payment to facilitate this (see paragraph 61.26), though there are provisions to allow for the recovery of excessive pension contributions (see Chapter 31.4B, Part 9).


61.26 Trustee has no power to require that a pension comes into payment (amended June 2015) 

The court has considered whether the definition of ‘income’ for the purposes of an IPO/A should include an entitlement to an undrawn pension and has found that there is no entitlement to receive the pension monies until the decision is made on how to draw the pension.  Therefore a pension fund is not within the definition of ‘income’ unless the bankrupt decides to draw it, and the official receiver cannot require that it is drawn [note 3].  There is a contrary decision on this point [note 2] but official receivers should follow the later decision outlined above.  It is expected that this conflict will be addressed by the Appeal Court in early 2016, following which further guidance will be issued, as required.


61.26a  Establishing whether the bankrupt has abused the protection given to pensions in bankruptcy (amended June 2015) 

Where the bankrupt is aged 55 or over and holds an undrawn personal pension fund, the official receiver should obtain the current fund value (see paragraph 61.17).  Where the pension fund value exceeds the total unsecured liabilities and, in a debtor’s petition case, the bankrupt might have elected to draw the pension before petitioning for bankruptcy, official receivers are asked to consider whether the bankrupt met the insolvency test (see paragraph 45.138).  Where they did not, the official receiver should consider making an application for annulment on the grounds that the order ought not to have been made (see Chapter 6A, Part 2).


61.26b  Reporting details of pension funds to Professional Standards Team (amended June 2015) 

In order that the extent of any abuse of the nature outlined at paragraph 61.26a can be assessed, official receivers should email Technical.Section with details of any bankruptcy cases where the bankrupt is over 55 and has access to an undrawn pension fund that is not an occupational pension.  The email should include the following details and should be entitled ‘Pension report’ in the subject line of the email: 

  • Case name
  • BKT number
  • Fund value
  • Total unsecured liabilities


61.26c Deleted May 2015


61.27  An approved pension arrangement

An approved pension arrangement is defined in the legislation [note 5] as, in summary: 

  • Any pension schemes registered under the tax legislation [note 6] (in essence, schemes tax-approved by HM Revenue and Customs).  
  • An annuity (see paragraph 61.18) purchased in relation to a tax-approved pension scheme. 
  • An occupational pension scheme set up by a government outside the UK for the benefit, or primarily the benefit, of its employees. 


61.28  No need to seek verification of tax approved status/registration

With the exception of foreign pension schemes (see paragraph 61.31), it can be assumed by the official receiver that the vast majority of occupational pension schemes and personal pensions will have tax approval/registration from/with HM Revenue and Customs.

As such, unless the circumstances outlined in paragraphs 61.26a or 61.26b are present, the official receiver should not write to the pension provider seeking confirmation of approval and may assume that the pension is approved (see paragraph 61.27) and, therefore, excluded from the estate (see paragraph 61.21).


61.29  Paragraph deleted August 2013


61.30  Paragraph deleted August 2013


61.31  Unapproved pensions

In the very unlikely event that a scheme is unapproved, the official receiver should consider the guidance in Part 3 of this chapter.

A pension scheme administered in another country is likely to be unapproved (see paragraph 61.14).  Guidance in relation to those types of pensions is provided in paragraph 61.39 for EU-based foreign pensions and paragraph 61.42 for non-EU based foreign pensions).


61.32  Exclusion of state pensions

As with other forms of benefits, the right to receive a state pension (see paragraph 61.12) is excluded from the bankrupt’s estate [note 7]. The purposes of an IPO/A a state pension is treated in the same way as other benefits.

In other words, the right to receive the pension cannot transfer to the official receiver, as trustee, but he/she can still access, in theory, the pension benefits through an IPO/A.


[Back to Part 1 – Pensions – general background] [On to Part 3 – Unapproved pensions and the exclusion of unapproved pensions]