The Personal Insolvency Bill and pensions

[Brendan Burgess]

I haven't seen any discussion of this issue and have extracted the following from Alan Shatter's speech to the Dail on 19th December

Pension assets excluded?

Section 2: In page 11, subsection (1), between lines 34 and 35, to insert the following:

• “ “relevant pension arrangement” means:
  • (a) a retirement benefits scheme, within the meaning of section 771 of the Taxes Consolidation Act 1997, for the time being approved by the Revenue Commissioners for the purposes of Chapter 1 of Part 30 of that Act;
    
    (b) an annuity contract or a trust scheme or part of a trust scheme for the time being approved by the Revenue Commissioners under section 784 of the Taxes Consolidation Act 1997;
    
    (c) a PRSA contract, within the meaning of section 787A of the Taxes Consolidation Act 1997, in respect of a PRSA product, within the meaning of that section;
    
    (d) a qualifying overseas pension plan within the meaning of section 787M of the Taxes Consolidation Act 1997;
    
    (e) a public service pension scheme within the meaning of section 1 of the Public Service Superannuation (Miscellaneous Provisions) Act 2004;
    
    (f) a statutory scheme, within the meaning of section 770(1) of the Taxes Consolidation Act 1997, other than a public service pension scheme referred to in paragraph (e);
    
    (g) such other pension arrangement as may be prescribed by the Minister, following consultation with the Ministers for Finance, Social Protection and Public Expenditure and Reform;”

More stuff on pensions later

Section 48: In page 46, between lines 20 and 21, to insert the following new section:

48.—(1) Subject to subsection (4), in relation to Debt Settlement Arrangements and Personal Insolvency Arrangements, where a debtor has an interest in or an entitlement under a relevant pension arrangement, such interest or entitlement of the debtor shall not be treated as an asset of the debtor unless subsection (2) applies.

(2) Where this section applies and a debtor has an interest in or entitlement under a relevant pension arrangement which would, if the debtor performed an act or exercised an option, cause that debtor to receive from or at the request of the person administering that relevant pension arrangement—

• (a) an income, or
  
  (b) an amount of money other than income, in accordance with the relevant provisions of the Taxes Consolidation Act 1997, that debtor shall be considered as being in receipt of such income or amount of money.

(3) Subsection (2) applies where the debtor—

• (a) is entitled at the date of the making of the application for a protective certificate,
  
  (b) was entitled at any time before the date of the making of the application for a protective certificate, or
  
  (c) will become entitled within 6 years and 6 months of the date of the making of the application for a protective certificate in relation to a Debt Settlement Arrangement or within 7 years and 6 months of the date of the making of the application for a protective certificate in relation to a Personal Insolvency Arrangement, to perform the act or exercise the option referred to in subsection (2).

(4) Nothing in subsections (1) to (3) shall remove the obligation of a debtor making an application for a protective certificate to make disclosure of any interest in or entitlement under a relevant pension arrangement in completing the Prescribed Financial Statement.”.



Section 85: In page 75, before section 85, but in Chapter 3, to insert the following new section:

• 85.—(1) Where, as respects a debtor who has entered into a Debt Settlement Arrangement which is in force, a creditor or the personal insolvency practitioner concerned considers that a debtor has made excessive contributions to a relevant pension arrangement, the creditor or personal insolvency practitioner may make an application to the appropriate court for relief in accordance with this section.
  
  (2) The reference to the debtor having made contributions to a relevant pension arrangement shall be construed as a reference to contributions made by the debtor at any time within 3 years prior to the making of the application for a protective certificate on behalf of the debtor under section 54.
  
  (3) Where the appropriate court considers that having regard in particular to the matters referred to in subsection (4) the contributions to a relevant pension arrangement were excessive it may:
  • (a) direct that such part of the contribution concerned (less any tax required to be deducted) be paid by the person administering the relevant pension arrangement to the personal insolvency practitioner for distribution amongst the creditors of the debtor, and
    
    (b) make such other order as the court deems appropriate, including an order as to the costs of the application.
  (4) The matters referred to in subsection (3) as respects the contributions made by the debtor to a relevant pension arrangement are:
  • (a) whether the debtor made payments to his or her creditors in respect of debts due to those creditors on a timely basis at or about the time when the debtor made the contribution concerned;
    
    (b) whether the debtor was obliged to make contributions of the amount or percentage of income as the payments actually made under his or her terms and conditions of employment and if so obliged, whether the debtor or a person who as respects the debtor is a connected person could have materially influenced the creation of such obligation;
    
    (c) the amount of the contributions paid, including the percentage of total income of the debtor in each tax year concerned which such contributions represent;
    
    (d) the amount of the contributions paid, in each of the 6 years prior to the making of the application for a protective certificate on behalf of the debtor under section 54 including the percentage of total income of the debtor concerned which such contributions represent in each of those years;
    
    (e) the age of the debtor at the relevant times;
    
    (f) the percentage limits which applied to the debtor in relation to relief from income tax for the purposes of making contributions to a relevant pension arrangement in each of the 6 years prior to the making of the application for a protective certificate on behalf of the debtor under section 54; and
    
    (g) the extent of provision made by the debtor in relation to any relevant pension arrangement prior to the making of the contributions concerned.”.

 

[declan]

Banks' input to the Act is evident

The late clarification of the extent to which pension assets are caught is welcome. However, the absence of a threshold means that even those with modest pension funds will suffer if they are within the specified time-frame. Not fair surely, as it is directed against older persons who by definition will have less time to re-build their lives following exit from a PIA or DSA. At least they will retain their private home (under a PIA)!

 

[leroy67]

Agree with Declan, if you're 45 you will be okay, 60 or 65 it's a different matter, very unfair on the older person

 

[gearoidc]

I wonder can someone explain (I must confess I find a lot of the above to be impenetrable) the extent to which creditors will have a call on a person's (state) pension in the event of that person declaring bankruptcy.

Any clarification in this regard would be much appreciated.

 

[Brendan Burgess]

From the Explanatory Memorandum

[FONT=&quot]New Section 117 [/FONT][FONT=&quot]allows a creditor or personal insolvency practitioner of a debtor in respect of whom a Personal Insolvency Arrangement is in force, to make an application to the appropriate court for relief in accordance with this section, where the creditor or the personal insolvency practitioner concerned considers that a debtor has made excessive contributions to a relevant pension arrangement. The alleged excessive contributions to the debtor’s pension must have been made within the 3 years period prior to the issue of the protective certificate. Subsection (3) provides that where the court finds that the debtor’s pension contributions were excessive it can direct that such part of the contribution concerned (less any tax required to be deducted) be paid by the person administering the relevant pension arrangement to the personal insolvency practitioner for distribution amongst the creditors of the debtor, and make such other order as the court deems appropriate, including an order as to the costs of the application. Subsection (4) sets out the matters that the court shall have regard to in the consideration of the matter.[/FONT][FONT=&quot][/FONT]

 

[gearoidc]

Thanks for the above Brendan.
If my understanding of what Section 117 says is correct, a state pension would be secure in the event of a PIA being entered into. Am I correct??

And can I assume the a pension would be similarly safe in the event of a bankruptcy?

 

[Jim Stafford]

Gearoid

Any income from any pension, including a state pension, will be reviewed by the Personal Insolvency Practitioner in a PIA arrangement, and by the Official Assignee in a bankruptcy, and if the debtor's total income is in excess of what is needed by the debtor to live on, then the excess income will be used to pay creditors for the period of the PIA, and for a period of up to 5 years in a bankruptcy.

Jim Stafford

 

[ronron]

Hi Jim

in your last posting, you posting you said that the pension income can be used for a period '5 years in bankruptcy.' Did you mean 3 years as that is there bankruptcy period.
Ron

 

[Jim Stafford]

Ron

Whilst the bankruptcy period is three years, the Official Assignee (i.e. the person responsible for supervising your bankruptcy) may obtain an income payments order for 5 years.

Many commentators have suggested that such a payments order would effectively extend the bankruptcy period to 8 years. Obviously, if the payment order was made at the beginning of the bankruptcy, then the debtor would fully escape bankruptcy after 5 years.

Jim Stafford