Your Pension and an IVA

08/10/2021
,
Your Pension and an IVA

Your existing pension fund is not at risk if you start an IVA. However the amount you currently pay in may have to be reduced.

Want help to start an IVA?

Give us a call: 0800 011 4712 or complete the form below to speak to one of our experts

What happens to your Pension if you start an IVA?

If you start an IVA any money already in your pension (known as the fund) is protected. Unlike other forms of savings it is regarded as an exempt asset. The fund cannot be touched to help repay your debts.

However if you are already receiving payments these form part of your income. As such these receipts must be included when calculating the amount you can pay into the Arrangement.

If you start drawing your pension during an IVA you must tell your Insolvency Practitioner (IP). They will then review your income and expenses budget. The amount you pay into the Arrangement could be affected as a result.

You cannot be forced to start drawing your pension during an IVA. This was confirmed in the case of Horton v Henry (Nov 14, upheld Oct 16).

Can you continue paying into a Plan during an IVA?

Making regular payments into your pension is important for a secure retirement. As such these are recognised as allowable in an IVA living expenses budget. However the amounts must be reasonable.

Payments into a company scheme are taken directly from your wages. You should be allowed to continue making the minimum contributions required to stay in the Plan. However overpayments may have to be suspended.

If you pay into a private scheme then depending on your circumstances you should be able to continue doing so. Again the amount paid in each month must be reasonable and may have to be reduced if deemed too high.

You may have to reduce or suspend payments into your pension during an IVA. However once it is completed you will be in a position to increase the payments again if you wish.

Can you do an IVA if you already receive Pension Payments?

You can start an IVA if you are already receiving your pension. In fact given this form of income is generally guaranteed it should mean that you have no problem maintaining the agreed payments.

It is important to understand that this money is not protected. It must be included when you are working out your total income each month. As such it can be used to help pay your debts.

In other words pension receipts are included when working out how much you can afford to pay into your Arrangement each month.

If your pension income changes during your IVA you must inform your IP. If the amount you receive increases your payments may also go up.

Can you withdraw a lump sum from your Pension during an IVA?

You may have the option of drawing a lump sum from your pension after reaching the age of 55. However if you are already in an IVA you should act with care and get further advice before doing so.

If you take a lump sum without prior agreement from your IP it will be treated as a windfall. If discovered all of the cash you received will have to be paid into your Arrangement.

Where you are facing a financial emergency your IP might allow you to withdraw cash to cover it. But you must first get written agreement from them. You might also be able to draw a lump sum to settle your IVA early.

After the Horton v Henry ruling you cannot be forced to withdraw a lump sum from your pension to increase the amount you pay into your IVA.

Share
Related Articles
Already in IVA 46 IVA Suitability 55

24 thoughts on “Your Pension and an IVA”

    micky says:
    05/07/2015 at 18:53

    hi i have just completed my 4th year of my iva. During my 2nd year i made a full and final offer which was higher than my monthly payments would have been at the end of the term. They would not accept bcoz i wanted to keep a lump sum as well so i could drop my hrs at work due to ill health.

    Since then i am still on medication and have stepped down my position at work. I am again in a position to offer a settlement which would be considerably higher than my final payments can they feasibly turn me down again. I need to cut my hours last time they didnt even contact my creditors

    Reply
      James Falla says:
      06/07/2015 at 10:10

      Hi Micky

      If you are in a position to make an offer to your creditors to settle your IVA then as long as it is reasonable it is your right to have the offer presented to your creditors.

      I suggest you speak to your IVA company and say that you have an offer that you would like to be presented. If they refuse for any reason then you should threaten to make a formal complaint. Your IP cannot refuse to present a reasonable offer on your behalf. It is then up to your creditors to accept or reject it.

      Reply
    Bill says:
    27/03/2018 at 12:32

    Hi my friend is in an iva but doesnt finish it until 2020. The pension my friend transferred to is now deemed missold. If my friend gets any money back from this, does it have to go into the iva?

    I have been reading about what happens with missold PPI and it has to be paid into the IVA. In my friend’s case if the money was originally a pension fund, and if the money is either all or in part, reunded to set up another more trustworthy pension scheme will they be able to keep it?

    Reply
      James Falla says:
      27/03/2018 at 12:38

      Hi Bill

      As highlighted in the article above funds already paid into a pension are protected assets. As such they cannot be included in an IVA agreement. Given this in your friends case I would be confident in saying that any refund of the pension funds themselves could be deposited in full into a different pension scheme. They would not be treated as a windfall meaning they would not then have to be paid into the IVA.

      That said if your friend were to receive any kind of compensation for the mis selling over and above the return of the actual pension fund itself this would be considered a windfall. They would have to hand over this element to their IVA company.

      Reply
    Graeme says:
    16/07/2018 at 18:53

    Hi

    I am in the last year of an Iva and am due to retire in August. I am due a lump sum and an annual pension – is it best to defer it until my Iva is completed?

    Reply
      James Falla says:
      16/07/2018 at 18:58

      Hi Graeme

      Yes absolutely. If you receive a lump sum from your pension while you are still in your IVA it will be treated as a windfall. You would then have to hand over the full amount received to your IVA company.

      However after your IVA is completed and you have your completion certificate you can take a lump sum from your pension and it will be yours to keep. As such if you can I recommend waiting until then before withdrawing any cash.

      Reply
    Lisa says:
    28/08/2018 at 21:04

    Hi James, I completed my IVA well over a year ago. During the IVA I was given bad advise to invest my existing pension funds into one that I have come to realise was high risk. I’m currently seeking compensation more than a year after completion. I have been told by my IVA that it’s classed as miss-sold and comes under the same umberrella as PPI, where the IVA can now claim the money. Can this be avoided please? Are there any other options please?

    Reply
      James Falla says:
      03/09/2018 at 10:21

      Hi Lisa

      It seems that your IVA company is choosing to rely on the Green v Wright PPI ruling even though in your case the compensation is not for PPI but a different mis selling incident. They are saying because the incident for which you are claiming happened during your IVA the money received can be classed as an unrealised asset of your Arrangement and as is recoverable by them.

      This is a very specific area of the law and given we are not solicitors here I am unable to give you a specific answer as to whether your IVA company is right or wrong. It is correct to say that the ruling in the Green v Wright case was specific to the terms and conditions of that particular IVA. As such whether it would apply in your case will depend on whether the terms of your IVA were the same.

      Your IVA company seems to believe that they were. As such the only way you are likely to be able to challenge this is by going to court over the issue I am afraid.

      Reply
    Steven says:
    27/09/2018 at 11:58

    Myself and my wife had a joint iva which we we paid off early by remorgaging our house. Iva was completed in 2006. Now 12 years later I can access my pension can the iva still take it. We claimed all our PPI with no problem.

    Reply
      James Falla says:
      27/09/2018 at 12:05

      Hi Steven

      I can confirm that now your IVA is completed you can draw a lump sum from your pension with no problem. The money is yours to keep. Pensions are not in the same category as PPI. PPI can be considered an unrealised asset of an IVA which means that if you claim after the Arrangement is completed any compensation due may still have to be paid to the IVA Company. Pensions do not work the same way so accessing your pension now is fine and you will receive 100% of the benefit.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *