Employment & Benefits 12 Days of Christmas - Bankruptcy and Personal Pension Policies
Welcome to day 3 of our 12 days of Christmas series. Today we look back on the effect of bankruptcy on a personal pension policy.

Provider Beware! Bankruptcy Payment Order May Be Required to Pay a Bankrupt's Pension to Official Assignee

Welcome to day 3 of our '12 Days of Christmas' series. Today we look back on the effect of bankruptcy on a personal pension policy.

In February this year, we commented on the High Court case of In re James Coady (a Former Bankrupt) [2017] IEHC 653. The Coady case considered Section 44A of the Bankruptcy Act 1988. The general rule is that where a bankrupt may become entitled to payments under a pension arrangement, those payments do not vest in the Official Assignee (the "OA") in bankruptcy. Section 44A(2) sets out exceptions to this rule. Costello J provided interpretive guidance on these exceptions. Mr Coady was adjudicated bankrupt in 2014. While still in bankruptcy he reached retirement age and became entitled to exercise a number of options under his personal pension policy. The OA sought directions from the Court for guidance as to whether any of Mr Coady's rights under his personal pension policy automatically vested in the OA. Costello J drew a distinction between an option in a pension policy which would cause a bankrupt to:

  1. receive an income (section 44A(2)(a)); and
  2. to receive an amount of money other than income (section 44A(2)(b)).

Costello J concluded that rights under (1) do not vest automatically and therefore a bankruptcy order was required before the OA could be paid an annuity directly from the pension provider. However, rights under (2) can vest automatically in the OA who can in their discretion exercise the option on the bankrupt's behalf. In this case the OA was permitted to exercise the option for the lump sum on Mr Coady's behalf. Read our full original article here.

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