UK: What Should Trustees Do If Approached By A Bankrupt Pension Scheme Member's Trustee In Bankruptcy?

Last Updated: 7 November 2016
Article by Hannah Beacham

The Court of Appeal resolves some of the conflict between insolvency and pensions law in its decision on Horton v Henry.

The Court of Appeal has upheld the High Court decision of the Deputy Judge in Horton v Henry (2014) confirming that a trustee in bankruptcy cannot access uncrystallised funds in a bankrupt's pension arrangements (or force the bankrupt to access them himself).

This means that the earlier conflicting High Court decision in Raithatha v Williamson (2012) was wrongly decided, as the judge in Horton v Henry had, as it turns out correctly, concluded.

In an alert last year, we highlighted the issue and what this might mean for pension scheme trustees.

What's the problem again?

There are two regimes in competition with each other: the insolvency regime and the pensions regime.

Section 310 of The Insolvency Act 1986 enables a trustee in bankruptcy to apply for an Income Payments Order (IPO) from a bankrupt's income, including payments to which the bankrupt "becomes entitled".

The Welfare and Pensions Act 1999 (section 11) excludes pension rights under approved pension arrangements from a bankrupt's estate (though (i) excessive contributions into a pension scheme may in some cases be recoverable for the benefit of creditors and (ii) any pension actually in payment can be the subject of an IPO).

So what about pension rights which have not actually crystallised but which the bankrupt could access if he chose to do so? Are these available for the trustee in bankruptcy or not? This was the question before the Court of Appeal.

In 2012 in Raithatha, the judge had said the trustee in bankruptcy could potentially obtain an IPO against the bankrupt's pension policies which were not in payment but were capable of crystallisation. The bankrupt, as a matter of fact in that instance, had not decided how his pension should be paid (such as whether or not to take a lump sum and therefore what the level of pension income could be). The judge did not feel that a bankrupt who could elect to take his pension because he qualified in age terms etc, but who had not yet exercised that right should be "immune" from his creditors. Although he gave leave to appeal, the matter was compromised, so there was never a decision on the amount of the IPO.

In 2014 in Horton v Henry, the judge took a different view and decided Raithatha was wrong and that the trustee in bankruptcy was unable to access uncrystallised funds of the bankrupt (or to compel the bankrupt to access the funds). The fact that there were lots of decisions still to be made by the bankrupt (such as when and how to access the benefits) was an important factor. Although the bankrupt was as a matter of fact stated to be living on the generosity of friends and family, having made a decision not to access his pensions in order to be able to leave them for the benefit of his children, the judge did not feel it appropriate for the court to override this decision.

Update on Horton v Henry 

In the Court of Appeal, Lady Justice Gloster agreed with the Deputy Judge in Horton v Henry. She decided it would "drive a coach and horses" through the protection afforded to a bankrupt's pension rights by the insolvency and pensions legislation if a trustee in bankruptcy were permitted to require a bankrupt to make the entirety of his pension available for creditors.

If a trustee in bankruptcy could not force a bankrupt to work so as to receive a salary which might then be subject to an IPO or to request payment from a discretionary trust, he equally couldn't force a bankrupt to take steps to turn excluded property (such as pension rights) into income in order to allow an IPO to be made.

She also considered that a prospective right to a future payment of income from a pension fund was not the same thing as an "entitlement" to that income and further noted there was no statutory criteria to enable a court to decide how to direct the fund to "pay" up pension rights in any event. Such an exercise would involve the court determining what pension savings a bankrupt might need for the rest of his life - a far more complex exercise than determining the income needs of the bankrupt over three years (the period during which an IPO can be made).

Lady Justice Gloster said it was for parliament to decide where the line should be drawn between protecting the interests of the creditor on the one hand and safeguarding the savings of private pension holders on the other.

The case effectively puts to bed the contradicting cases, so unless the trustee in bankruptcy is able to appeal further, there is now some certainty on what a trustee in bankruptcy can recover, particularly important given the pension flexibilities on offer in the DC space. Although Horton v Henry preceded the introduction of those freedoms (so the trustee in bankruptcy in that case couldn't have called for the bankrupt to take an uncrystallised funds pensions lump sum of the full fund value), the outcome of this case in the post-April 2015 flexible world suggests that trustees in bankruptcy still can't step into the shoes of the bankrupt for the purpose of exercising rights to convert pension rights into hard cash.

As an aside, Lady Justice Gloster was unconvinced by an argument based on the case of Blight v Brewster (a pre-bankruptcy case where the creditor successfully compelled the debtor to drawdown pension in order to satisfy the creditor's judgement), which the trustee in bankruptcy argued supported his assertion that it should be possible to require a bankrupt to elect to access his pension post-bankruptcy. The pre-bankruptcy position therefore remains the same - it is potentially open to a creditor to enforce a judgement against pension assets.

Actions for trustees and administrators

The action points for trustees and administrators of occupational pension schemes in our alert last year still stand: don't panic if a trustee in bankruptcy comes knocking, read the scheme rules and beware of the data protection requirements. Where the pension is uncrystallised, a polite but firm "no" will probably be the answer to the knock on the door.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions