Trust Deeds and Pensions
While your savings can be considered an asset, and might be added to your Trust Deed, pension funds are different. They are not considered assets, and this means that you will not be required to release its equity in order to pay your creditors. You may, however, be asked to stop making payments into any private pension funds.
On the other hand, pension payments that you are receiving count as income. This means that they are factored into the calculations that determine your affordable monthly payments. These calculations involve adding up all your income and taking away all your necessary expenditure.
If you are receiving pension payments as your only source of income, then this would look like:
- Monthly pension payment – (Food + Rent/Mortgage + Utilities + other essentials) = disposable income = your affordable monthly payment into a Trust Deed
If you are planning to retire in the near future, it is important to discuss your situation with your advisor as soon as possible. Receiving your pension as a ‘tax free lump sum’ is likely to result in that lump sum being treated as a windfall if it happens just before, or during, your Trust Deed. This would mean that this amount will be expected to be used as a contribution towards your creditors.
Some pension lump-sums are paid automatically at a certain age, so make sure you are aware of the rules and regulations of your pension fund. It may be possible to ask them to postpone this pay out, but if you can’t then you may need to consider other options.
No matter whether you are adding to your pension, retired, or planning to retire, it is important that you are prepared when you enter a Trust Deed. Make sure your advisor or Insolvency Practitioner knows your plans and savings so that they can offer you the best advice.