Bankruptcy – section 310 Insolvency Act 1986 – income payments orders – pensions – whether uncrystallised pension falling within scope
At the date of his bankruptcy, the bankrupt, Mr Henry, had 4 uncrystallised personal pension policies including a SIPP. Under the terms of his personal pension policies, Mr Henry could have elected to draw down a lump sum from his personal pensions or to receive an annuity but he had no contractual entitlement to receive any payment until he had made any necessary elections as to the amount of any lump sum which he might wish to be paid.
The trustee in bankruptcy applied for an income payments order pursuant to section 310 of the Insolvency Act 1986 which would have required Mr Henry to elect to draw down the maximum lump sum payments from his personal pension policies and pay them to the trustee in bankruptcy.
The court considered whether an uncrystallised personal pension that was not actually in payment fell within the scope of section 310. It held that such a pension did not fall within the scope of the section and so no income payments order could be made. The bankrupt had no existing contractual right to receive payment from his pension and would not have any such right until he made an election with regard to any lump sum payment and each pension fund was crystallised.
In reaching this decision, the court departed from the earlier first instance decision of Mr Bernard Livesey QC in Raithatha v Williamson [2012] 1 WLR 3559, holding that the bankrupt had not “become entitled” to receive any sums from his pension policies within the meaning of section 310(7) merely by asking for payment. Accordingly, the trustee in bankruptcy’s application was dismissed, although the Court commented that it was to be hoped that the Court of Appeal would soon have the opportunity to consider whether this decision was correct.
This case draws a distinction between the treatment in a bankruptcy of uncrystallised personal pension policies and pensions that are actually in payment. Only the latter will fall within the scope of the Court’s jurisdiction to make an income payment order.
