The Welfare Reform and Pensions (Northern Ireland) Order 1999

Pensions and bankruptcy

Effect of bankruptcy on pension rights: approved arrangements

12.—(1) Where a bankruptcy order is made against a person on a petition presented after the coming into operation of this Article, any rights of his under an approved pension arrangement are excluded from his estate.

(2) In this Article “approved pension arrangement” means—

(a) an exempt approved scheme;

(b) a relevant statutory scheme;

(c) a retirement benefits scheme set up by a government outside the United Kingdom for the benefit, or primarily for the benefit, of its employees;

(d) a retirement benefits scheme which is being considered for approval under Chapter I of Part XIV of the Taxes Act;

(e) a contract or scheme which is approved under Chapter III of that Part (retirement annuities);

(f) a personal pension scheme which is approved under Chapter IV of that Part;

(g) an annuity purchased for the purpose of giving effect to rights under a scheme falling within any of sub-paragraphs (a) to (c) and (f);

(h) any pension arrangements of any description which may be prescribed by regulations made by the Department.

(3) The reference in paragraph (1) to rights under an approved pension arrangement does not include rights under a personal pension scheme approved under Chapter IV of Part XIV of the Taxes Act unless those rights arise by virtue of approved personal pension arrangements.

(4) Paragraph (5) applies if—

(a) at the time when a bankruptcy order is made against a person a retirement benefits scheme is being considered for approval under Chapter I of Part XIV of the Taxes Act, and

(b) the decision of the Commissioners of Inland Revenue is that approval is not to be given to the scheme.

(5) Any rights of that person under the scheme shall (without any conveyance, assignment or transfer) vest in his trustee in bankruptcy, as part of his estate, immediately on—

(a) the Commissioners' decision being made, or

(b) (if later) the trustee’s appointment taking effect or, in the case of the official receiver, his becoming trustee.

(6) Paragraph (7) applies if, at any time after a bankruptcy order is made against a person, the Commissioners of Inland Revenue give notice—

(a) withdrawing their approval under Chapter I of Part XIV of the Taxes Act from a retirement benefits scheme, or

(b) withdrawing their approval under Chapter IV of that Part from a personal pension scheme or from any approved personal pension arrangements,

and the date specified as being that from which the approval is withdrawn (“the withdrawal date”) is a date not later than that on which the bankruptcy order is made.

(7) Any rights of that person under the scheme or arising by virtue of the arrangements, and any rights of his under any related annuity, shall (without any conveyance, assignment or transfer) vest in his trustee in bankruptcy, as part of his estate, immediately on—

(a) the giving of the notice, or

(b) (if later) the trustee’s appointment taking effect or, in the case of the official receiver, his becoming trustee.

(8) In paragraph (7) “related annuity” means an annuity purchased on or after the withdrawal date for the purpose of giving effect to rights under the scheme or (as the case may be) to rights arising by virtue of the arrangements.

(9) Where under paragraph (5) or (7) any rights vest in a person’s trustee in bankruptcy, the trustee’s title to them has relation back to the commencement of the person’s bankruptcy; but where any transaction is entered into by the trustees or managers of the scheme in question—

(a) in good faith, and

(b) without notice of the making of the decision mentioned in paragraph (4)(b) or (as the case may be) the giving of the notice mentioned in paragraph (6),

the trustee in bankruptcy is not in respect of that transaction entitled by virtue of this paragraph to any remedy against them or any person whose title to any property derives from them.

(10) Without prejudice to Article 73, regulations under paragraph (2)(h) may, in the case of any description of arrangements prescribed by the regulations, make provision corresponding to any provision made by paragraphs (4) to (9).

(11) In this Article—

(a) “exempt approved scheme”, “relevant statutory scheme” and

• “retirement benefits scheme” have the same meaning as in Chapter I of Part XIV of the Taxes Act;

  (b)

  “approved personal pension arrangements” and “personal pension scheme” have the same meaning as in Chapter IV of that Part;

  (c)

  “estate”, in relation to a person against whom a bankruptcy order is made, means his estate within the meaning of Article 11 of the[1989 NI 19.] Insolvency (Northern Ireland) Order 1989;

  (d)

  “the Taxes Act” means the[1988 c. 1.] Income and Corporation Taxes Act 1988.

(12) For the purposes of this Article a person shall be treated as having a right under an approved pension arrangement where—

(a) he is entitled to a credit under Article 26(1)(b) as against the person responsible for the arrangement (within the meaning of Chapter I of Part V), and

(b) the person so responsible has not discharged his liability in respect of the credit.

Effect of bankruptcy on pension rights: unapproved arrangements

13.—(1) The Department may by regulations make provision for or in connection with enabling rights of a person under an unapproved pension arrangement to be excluded, in the event of a bankruptcy order being made against that person, from his estate within the meaning of Article 11 of the [1989 NI 19.] Insolvency (Northern Ireland) Order 1989.

(2) Regulations under this Article may, in particular, make provision—

(a) for rights under an unapproved pension arrangement to be excluded from a person’s estate—

(i) by an order made on his application by a prescribed court, or

(ii) in accordance with a qualifying agreement made between him and his trustee in bankruptcy;

(b) for the court’s decision whether to make such an order in relation to a person to be made by reference to—

(i) future likely needs of him and his family, and

(ii) whether any benefits (by way of a pension or otherwise) are likely to be received by virtue of rights of his under other pension arrangements and (if so) the extent to which they appear likely to be adequate for meeting any such needs;

(c) for the prescribed persons in the case of any pension arrangement to provide a person or his trustee in bankruptcy on request with information reasonably required by that person or trustee for or in connection with the making of such applications and agreements as are mentioned in sub-paragraph (a).

(3) In this Article—

“prescribed” means prescribed by regulations under this Article;

“qualifying agreement” means an agreement entered into in such circumstances, and satisfying such requirements, as may be prescribed;

“unapproved pension arrangement” means a pension arrangement which—

(a)

is not an approved pension arrangement within the meaning of Article 12, and

(b)

is of a prescribed description.

(4) For the purposes of this Article a person shall be treated as having a right under an unapproved pension arrangement where—

(a) he is entitled to a credit under Article 26(1)(b) as against the person responsible for the arrangement (within the meaning of Chapter I of Part V), and

(b) the person so responsible has not discharged his liability in respect of the credit.

No forfeiture on bankruptcy of rights under pension schemes

14.—(1) In the Pension Schemes Act, after section 155 there shall be inserted—

“No forfeiture on bankruptcy of rights under personal pension schemes.

155A.— (1) A person’s rights under a personal pension scheme cannot be forfeited by reference to his bankruptcy.

(2) For the purposes of this section—

(a) a person shall be treated as having a right under a personal pension scheme where—

(i) he is entitled to a credit under Article 26(1)(b) of the Welfare Reform and Pensions (Northern Ireland) Order 1999 (sharing of rights on divorce etc.),

(ii) he is so entitled as against the person responsible for the scheme (within the meaning of Chapter I of Part V of that Order), and

(iii) the person so responsible has not discharged his liability in respect of the credit; and

(b) forfeiture shall be taken to include any manner of deprivation or suspension.”.

(2) In Article 90(2) of the Pensions Order (exceptions to the rule preventing forfeiture of rights under occupational pension schemes), sub-paragraph (b) (which allows forfeiture of such rights by reference to a scheme member’s bankruptcy) shall cease to have effect.

Excessive pension contributions made by persons who have become bankrupt

15.  For Articles 315A to 315C of the [1989 NI 19.] Insolvency (Northern Ireland) Order 1989 there shall be substituted—

“Recovery of excessive pension contributions

315A.— (1) Where an individual who is adjudged bankrupt—

(a) has rights under an approved pension arrangement, or

(b) has excluded rights under an unapproved pension arrangement,

the trustee of the bankrupt’s estate may apply to the High Court for an order under this Article.

(2) If the High Court is satisfied—

(a) that the rights under the arrangement are to any extent, and whether directly or indirectly, the fruits of relevant contributions, and

(b) that the making of any of the relevant contributions (“the excessive contributions”) has unfairly prejudiced the individual’s creditors,

the Court may make such order as it thinks fit for restoring the position to what it would have been had the excessive contributions not been made.

(3) Paragraph (4) applies where the High Court is satisfied that the value of the rights under the arrangement is, as a result of rights of the individual under the arrangement or any other pension arrangement having at any time become subject to a debit under Article 26(1)(a) of the Welfare Reform Order (debits giving effect to pension-sharing), less than it would otherwise have been.

(4) Where this paragraph applies—

(a) any relevant contributions which were represented by the rights which became subject to the debit shall, for the purposes of paragraph (2), be taken to be contributions of which the rights under the arrangement are the fruits, and

(b) where the relevant contributions represented by the rights under the arrangement (including those so represented by virtue of sub-paragraph (a)) are not all excessive contributions, relevant contributions which are represented by the rights under the arrangement otherwise than by virtue of sub-paragraph (a) shall be treated as excessive contributions before any which are so represented by virtue of that sub-paragraph.

(5) In paragraphs (2) to (4) “relevant contributions” means contributions to the arrangement or any other pension arrangement—

(a) which the individual has at any time made on his own behalf, or

(b) which have at any time been made on his behalf.

(6) The High Court shall, in determining whether it is satisfied under paragraph (2)(b), consider in particular—

(a) whether any of the contributions were made for the purpose of putting assets beyond the reach of the individual’s creditors or any of them, and

(b) whether the total amount of any contributions—

(i) made by or on behalf of the individual to pension arrangements, and

(ii) represented (whether directly or indirectly) by rights under approved pension arrangements or excluded rights under unapproved pension arrangements,

is an amount which is excessive in view of the individual’s circumstances when those contributions were made.

(7) For the purposes of this Article and Articles 315B and 315C (“the recovery provisions”), rights of an individual under an unapproved pension arrangement are excluded rights if they are rights which are excluded from his estate by virtue of regulations under Article 13 of the Welfare Reform Order.

(8) In the recovery provisions—

• “approved pension arrangement” has the same meaning as in Article 12 of the Welfare Reform Order,

• “unapproved pension arrangement” has the same meaning as in Article 13 of that Order.

Orders under Article 315A

315B.— (1) Without prejudice to the generality of Article 315A(2), an order under Article 315A may include provision—

(a) requiring the person responsible for the arrangement to pay an amount to the individual’s trustee in bankruptcy,

(b) adjusting the liabilities of the arrangement in respect of the individual,

(c) adjusting any liabilities of the arrangement in respect of any other person that derive, directly or indirectly, from rights of the individual under the arrangement,

(d) for the recovery by the person responsible for the arrangement (whether by deduction from any amount which that person is ordered to pay or otherwise) of costs incurred by that person in complying in the bankrupt’s case with any requirement under Article 315C(1) or in giving effect to the order.

(2) In paragraph (1), references to adjusting the liabilities of the arrangement in respect of a person include (in particular) reducing the amount of any benefit or future benefit to which that person is entitled under the arrangement.

(3) In paragraph (1)(c), the reference to liabilities of the arrangement does not include liabilities in respect of a person which result from giving effect to an order or provision falling within Article 25(1) of the Welfare Reform Order (pension sharing orders and agreements).

(4) The maximum amount which the person responsible for an arrangement may be required to pay by an order under Article 315A is the lesser of—

(a) the amount of the excessive contributions, and

(b) the value of the individual’s rights under the arrangement (if the arrangement is an approved pension arrangement) or of his excluded rights under the arrangement (if the arrangement is an unapproved pension arrangement).

(5) An order under Article 315A which requires the person responsible for an arrangement to pay an amount (“the restoration amount”) to the individual’s trustee in bankruptcy must provide for the liabilities of the arrangement to be correspondingly reduced.

(6) For the purposes of paragraph (5), liabilities are correspondingly reduced if the difference between—

(a) the amount of the liabilities immediately before the reduction, and

(b) the amount of the liabilities immediately after the reduction,

is equal to the restoration amount.

(7) An order under Article 315A in respect of an arrangement—

(a) shall be binding on the person responsible for the arrangement, and

(b) overrides provisions of the arrangement to the extent that they conflict with the provisions of the order.

Orders under Article 315A: supplementary

315C.— (1) The person responsible for—

(a) an approved pension arrangement under which a bankrupt has rights,

(b) an unapproved pension arrangement under which a bankrupt has excluded rights, or

(c) a pension arrangement under which a bankrupt has at any time had rights,

shall, on the bankrupt’s trustee in bankruptcy making a written request, provide the trustee with such information about the arrangement and rights as the trustee may reasonably require for, or in connection with, the making of applications under Article 315A.

(2) Nothing in—

(a) any provision of section 155 of the[1993 c. 49.] Pension Schemes (Northern Ireland) Act 1993 or Article 89 of the[1995 NI 22.] Pensions (Northern Ireland) Order 1995 (which prevent assignment and the making of orders that restrain a person from receiving anything which he is prevented from assigning),

(b) any statutory provision (whether passed or made before or after the making of the Welfare Reform Order) corresponding to any of the provisions mentioned in sub-paragraph (a), or

(c) any provision of the arrangement in question corresponding to any of those provisions,

applies to the High Court exercising its powers under Article 315A.

(3) Where any sum is required by an order under Article 315A to be paid to the trustee in bankruptcy, that sum shall be comprised in the bankrupt’s estate.

(4) Regulations may, for the purposes of the recovery provisions, make provision about the calculation and verification of—

(a) any such value as is mentioned in Article 315B(4)(b);

(b) any such amounts as are mentioned in Article 315B(6)(a) and (b).

(5) The power conferred by paragraph (4) includes power to provide for calculation or verification—

(a) in such manner as may, in the particular case, be approved by a prescribed person; or

(b) in accordance with guidance—

(i) from time to time prepared by a prescribed person, and

(ii) approved by the Department.

(6) References in the recovery provisions to the person responsible for a pension arrangement are to—

(a) the trustees, managers or provider of the arrangement, or

(b) the person having functions in relation to the arrangement corresponding to those of a trustee, manager or provider.

(7) In this Article and Articles 315A and 315B—

“the Department” means the Department of Health and Social Services;

“prescribed” means prescribed by regulations;

“the recovery provisions” means this Article and Articles 315A and 315B;

“regulations” means regulations made by the Department;

“the Welfare Reform Order” means the Welfare Reform and Pensions (Northern Ireland) Order 1999.

(8) Regulations under the recovery provisions may contain such incidental, supplemental and transitional provisions as appear to the Department necessary or expedient.

(9) Regulations under the recovery provisions shall be subject to negative resolution.”.