# The Personal Insolvency Bill and pensions



## Brendan Burgess (31 Dec 2012)

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.”.


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## declan (16 Jan 2013)

*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)!


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## leroy67 (16 Jan 2013)

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


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## gearoidc (17 Jan 2013)

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.


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## Brendan Burgess (22 Jan 2013)

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]


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## gearoidc (22 Jan 2013)

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?


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## Jim Stafford (23 Jan 2013)

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


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## ronron (23 Jan 2013)

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


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## Jim Stafford (23 Jan 2013)

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


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