Annex C
(January 2011)
Illustrative examples to support Annex B guidance where the official receiver seeks to claim a lump sum pension payment under an IPA/IPO
NOTE: All new IPAs agreed on or after 1 December 2010 will seek to recover the full amount of surplus income available to the bankrupt where this surplus income is £20 or greater, see notice T54/10.
(1) Worked example 1 (amended March 2012) - The bankrupt is undischarged, is not subject to an IPA, and has monthly surplus income after retirement which would support an IPA/IPO (IPA to be agreed on or after 1 December 2010)
Mr A is an undischarged bankrupt and not subject to an IPA, and the income payments calculation/agreement takes place on or after 1 December 2010. Mr A receives a lump sum pension payment of £27,000 with a monthly annuity of £800. He intends to continue with his employer on a part-time basis after retirement and will earn an additional £700 net per month. His outgoings post retirement have been calculated at £1,200 per month.
| £ | |
| Monthly income | 1,500 |
| Outgoings | (1,200) |
| Surplus real disposable income | 300 |
| Assessed monthly payment rate (collecting the total surplus income) | = £300 |
(2) Worked example 2 - The bankrupt is already subject to an IPA, is discharged and has surplus income post retirement (IPA in existence before retirement, agreed on or after 1 December 2010)
Mrs B is discharged from bankruptcy and is subject to an IPA paying £80 per month (agreed before 1 December 2010), total amount to be collected when the IPA was originally agreed = £2,880.
The agreement has been in force for 12 months and the bankrupt has made 12 payments totalling £960.
Mrs B will receive a lump sum of £6,000 and a monthly annuity of £175. Post retirement Mrs B has taken on part-time employment earning an additional £500 net per month. Her outgoings post retirement have been calculated at £625 per month.
| £ | |
| Monthly income | 675 |
| Outgoings | (625) |
| Surplus real disposable income | 50 |
| Assessed monthly payment rate following receipt of pension (collecting the total surplus income) is £50 x 24 months | = £1,200 |
Under the formula in Annex B, paragraph 11 the official receiver would seek 50% of the lump sum = £3,000.
| The revised total to be collected under the IPA is now: | £ |
| 12 x £80 (amount agreed and paid for the first 12 months) | 960 |
| 50% of the pension lump sum | 3,000 |
| 24 x £50 (varied amount to be collected for the final 24 months) | 1,200 |
| Total | 5,160 |
The IPA will be varied to nil with a single final payment of £4,200 (£5,160 - £960).
(3) Worked example 3 - The bankrupt is discharged and subject to an existing IPA (agreed before 1 December 2010), after retirement has sufficient funds to meet reasonable domestic needs but no surplus income
Mrs C is discharged from bankruptcy and subject to an IPA (agreed before 1 December 2010) paying £80 per month. The agreement has been in force for 12 months and she has paid £960, leaving an outstanding balance of £1,920 from the total of £2,880 originally agreed.
Mrs C will receive a lump sum of £6,000 and a monthly annuity of £175. Post retirement Mrs C has taken on part-time employment earning an additional £500 net per month. Her outgoings post retirement have been calculated at £625 per month.
| £ | |
| Monthly income | 675 |
| Outgoings | (625) |
| Surplus real disposable income | 50 |
Assessed monthly payment rate for the remaining term of the IPA = nil (as the bankrupt is subject to an IPA agreed before 1 December 2010 and on variation of that agreement is allowed to retain the £50 per month which she would have retained previously, see chapter 31.7 paragraph 31.7.162)
Under the formula in Annex B paragraph 11, the official receiver would seek 50% of the lump sum (£6000 x 50%).
The income payments agreement will be varied to nil with a single final payment of £3,000.
(4) Worked example 4 - The bankrupt, who is undischarged, has insufficient income post retirement to meet domestic needs and no IPA was agreed before retirement or before 1 December 2010.
First calculation:
Mr D is an undischarged bankrupt and not subject to any income payments agreement.
On or after 1 December 2010, Mr D will receive a lump sum payment of £28,800 and a monthly annuity of £1,000. His outgoings post retirement have been calculated at £1,200.
| £ | |
| Monthly income | 1,000 |
| Outgoings | (1,200) |
| Deficiency in real disposable income | (200) |
Assessed monthly payment rate = nil
Second calculation:
Lump sum £28,800 (full amount) divided by 36 = £800
| £ | |
| Monthly income | 1,000 |
| Pension lump sum supplement | 800 |
| Outgoings | (1,200) |
| Surplus of notional real disposable income | 600 |
| Assessed notional monthly payment rate (collecting the total surplus income) | = £600 |
Total notional payment rate = £600 x 36 = £21,600
The income payments agreement will be for £21,600 comprised of a single lump sum payment.
The bankrupt (who is discharged), was subject to an IPA before retirement and has insufficient income post retirement to meet domestic needs, the IPA was agreed on or after 1 December 2010
Ms E is discharged from bankruptcy , she has been subject to an IPA (agreed on or after 1 December 2010) for 25 months paying £50 per month so has already paid £1,250 from the original IPA total of £1,800.
Ms E will receive a lump sum payment of £24,000 and a monthly annuity of £800. She has additional income of £50 per month. Her outgoings have been calculated at £900 per month.
| £ | |
| Monthly income | 850 |
| Outgoings | (900) |
| Deficiency in real disposable income | (50) |
| Assessed monthly payment rate | = nil |
Second Calculation
Lump sum = £24,000 x 25% (see Annex B paragraph 11(b) ) = £6,000
Revised total to be collected under the IPA is now:
| £ | |
| 25 x £50 (amount agreed and paid for the first 25 months) | 1,250 |
| 25% of the pension lump sum | 6,000 |
| 11 x Nil (remaining 11 months where there is no surplus income) | 0 |
| Total | 7,250 |
The income payments agreement will be varied to nil with a single final payment of £6,000 (£7,250 – 1,250)
(6) Worked example 6 (amended April 2012)
The bankrupt, (who is undischarged), was not subject to an IPA before retirement, and post retirement has insufficient income to meet domestic needs. The IPA calculation was agreed on or after 1 December 2010.
Ms F is an undischarged bankrupt, and was not subject to an IPA before retirement.
Ms F will receive a lump sum payment of £24,000 and a monthly annuity of £800. She has additional income of £50 per month. Her outgoings have been calculated at £900 per month.
|
|
£ |
|
Monthly income |
850 |
|
Outgoings |
(900) |
|
Deficiency in real disposable income |
(50) |
|
Assessed monthly payment rate |
= nil |
Second Calculation
Lump sum £24,000 divided by 36 = £667
|
|
£ |
|
Monthly income |
850 |
|
Pension lump sum supplement |
667 |
|
Outgoings |
(900) |
|
Surplus of notional real disposable income |
617 |
Assessed notional monthly payment rate claiming the full amount of the surplus (see the income payments calculator for post 1 December 2010 calculations available on the Technical Section (Income Payments Calculators and Household Expenditure) intranet page) = £617
Total notional payment rate = £617 x 36 = £22,212
The income payments agreement will be varied to nil with a single final payment of £22,212