UNAPPROVED PENSION ARRANGEMENTS
If a pension is unapproved (see paragraph 61.27) it is still possible for the bankrupt to seek to exclude his/her rights under the pension from the bankruptcy estate [note 1] [note 2] [note 3]. The relevant regulations provide that the question of whether the pension is one in relation to which the bankrupt can seek exclusion is dependent on the type of pension arrangement [note 4], and certain conditions relating to the pension [note 5] being satisfied.
It is likely that any arrangement termed a ‘pension’ that is not an approved pension (see paragraph 61.27) is likely to fall within one of the definitions given in the regulations and therefore be one in relation to which the bankrupt can seek exclusion from the estate.
A qualifying agreement is an agreement between the official receiver as trustee and the bankrupt that his/her rights under the pension will not form part of the estate.
The terms of the agreement should be in line with the advice given in paragraph 61.42.
The table at Annex F summarises the circumstances in which the official receiver should enter a qualifying agreement with the bankrupt, and the terms of that agreement.
The qualifying agreement must be by deed (in writing and signed by both parties) and incorporate all agreed terms.
The official receiver, as trustee, must notify the pension provider and trustee of the qualifying agreement, within 30 days of the date that the agreement was made [note 7].
There is no facility for this time limit to be extended.
As explained in paragraph 61.14, a pension administered from another EU member state will be an unapproved pension.
In order to ensure parity of treatment for any EU national who has exercised their right to freedom of movement within the EU, The Service has, as a matter of policy, decided to instruct the official receiver to seek to exclude the majority of EU pension arrangements by entering qualifying agreements (see paragraph 61.41) with the bankrupt.
Such a qualifying arrangement should be sought if the EU pension arrangement is an occupational pension scheme (where the bankrupt was an employee but not a director of the company), or the arrangement is a recognised pension scheme under the laws of the EU state in which it is based (see paragraph 61.40).
Where the pension arrangement is not recognised under the laws of the EU state in which it is administered, the official receiver should still enter into a qualifying agreement, but on the same terms as for a non-EU unapproved pension (see paragraph 61.42). Where there is doubt, the advice of Technical Section should be sought.
The following Parts of the Technical Manual give some guidance whether a pension scheme might be tax approved in the country in which it is administered:
Chapter 43.1, Part 3 – Germany
Alternatively, HMRC provide a list of pensions that they have recognised as meeting tax requirements of the country in which they are established. If a scheme is not on the list, it does not necessarily mean that the scheme does not meet tax requirements in its own country, it may be that the scheme provider has not applied for HMRC recognition:
Where the official receiver is required to enter into a qualifying agreement (see paragraph 61.35) in relation to an EU pension, the terms of the agreement will vary depending on the position of the pension:
Annex A is a letter that can be sent to the bankrupt explaining this position and enclosing a draft agreement (Annex B) for signature. Annex D is a letter that should be sent to advise the pension provider to inform them that a qualifying agreement has been entered into. Chapter 43.1 contains a copy of Annex D translated into German.
Unless the pension is an EU pension of the type described in paragraph 61.39 (in which case the advice in paragraph 61.41 should be followed), the official receiver will need to consider entering into a qualifying agreement that provides for some return to the creditors, because an unapproved pension is a vesting asset which the official receiver should realise. In reaching such an agreement the official receiver should take into account the types of matters considered by a court when dealing with an application for an exclusion order (see paragraph 61.47).
As the calculation to be made in this regard will vary on a case-by-case basis, the official receiver should seek the advice of Technical Section before entering into the agreement.
The official receiver should, before entering into any qualifying agreement, consider whether there have been any excessive contributions into the pension fund (see Chapter 31.4B, Part 9) and, if so, the agreement should not be proceeded with unless recovery of the excessive contributions forms part of the agreement.
Where the bankrupt seeks information from the pension provider, and that information is required in connection with the negotiation of a qualifying agreement, the provider is required to produce such information with a period of nine weeks beginning with the date on which the request is received [note 9].
That period can be extended by order of court, where good cause is shown [note 10].
Where the bankrupt has failed to make a full disclosure of all material facts in respect of any pension agreement which is the subject of a qualifying agreement (see paragraph 61.35); and that failure has resulted in a pension being excluded where it otherwise would not have been, the official receiver, as trustee, may revoke the qualifying agreement by giving the bankrupt notice of the revocation (see paragraph 61.46) [note 11].
The official receiver, as trustee, must also notify the pension provider/trustee of the revocation, within 30 days of the date of the notice [note 13].
In deciding whether to make an order excluding the bankrupt’s rights under an unapproved pension from the bankruptcy estate, the court will take into account the future needs of the bankrupt and his/her family and whether the bankrupt is, or is likely to be, in receipt of benefits or pension (other than a UK state pension) that will assist in meeting those needs.
The court can make an order that all or part of the pension benefits are excluded from the estate [note 14].
Where the official receiver is served with a notice of such an application, he/she should consult Technical Section for guidance.
The bankrupt’s application for an order excluding from the bankruptcy estate his/her rights under an unapproved pension must be made [note 15]:
The court can extend these periods, before or after they have expired, where good cause is shown [note 16].