www.iva.co.uk

i have been medically retired from civil service (yearly pension/lump sum figures not known yet). after consulted my i/p (windfall clause) they informed me that private pensions are classed as windfall but HMRC pensions are protected is this right as my civil service pension falls into the latter. does this mean my whole pension package cannot be touched......

Hi hwg. Welcome to the forum. I don't know the answer to that - but I hope for your sake it's right! Hope someone more knowledgeable will be along soon to assist you. Good luck with this and your retirement, which will hopefully give you more time to focus on your health and well-being. x

If your IP has made this decision it is likely they have taken advice and they also have full details of your proposal, assets and exclusions. You need to speak with them to see if the IVA can now be closed down or whether you can continue with the payments.

Why are they saying that private pensions are deemed to be windfalls? Under the terms of the Welfare and Reform Act, all HMRC approved pensions are ringfenced from insolvency proceedings - some may not be, especially if the debtor has been paying subtantial contributions into the scheme when they are insolvent.

I would feel that your pension is ringfenced, and I guess you are only concerned about how this legislation actually affects you and not the wider picture?

I am not sure why the matter has been raised - is it during your IVA? Have you now become entitled to your pension as a result of early retirement? I also assume you may be due a lump-sum an annuity and have various options regarding larger lump-sum/smaller annuity etc?

In that case (lots of assumptions I know) simply your lump-sum could be a windfall, whilst your annuity could be considered towards your contributions. But both depend heavily on whether your IVA terms specifically provide for the effect of your retirement.

Assuming it does - your IP should quote the relevant term. If it doesn't, unfortunately it is a very grey area.

Although approved pension schemes were excluded under
the legislation, the IP could be referencing the recent case of "Raithatha v Williamson" - full citation Raithatha v Williamson [2012] EWHC 909 (Ch).

In this landmark decision, a bankrupt qualified to draw a lump-sum pension, but chose not to. The Trustee in Bankruptcy successfully argued that the right to draw a pension meant that it was capable of being included in an Income Payments Order.

For an IVA to be considered by creditors, the proposed IVA must offer a more attractive outcome than bankruptcy.

Therefore, if a pension scheme could pay in the next three years (even if you elect not to draw it) it is right and proper to consider whether this should be offered into the IVA. If you choose not to, there is a risk that properly accounting for it in any Bankruptcy comparison would offer a better return to creditors.

I think the IP is being cautious regarding the recent caselaw and is suggesting that you make provision for the pension.

If you are already inside the IVA, subject to whether your terms specifically provide for pensions, you could contest a Supervisor's right to claim any pension windfall due, but if the terms are vague enough - you might find this difficult to dispute.

You could elect to offer it as a settlement if it was substantial enough.

In any case, I would strongly recommend that it is appropriate to take independent advice as electing not to take or introduce a windfall that could be captured under other circumstances could constitute a breach.

Hi iampav. Welcome to the forum. Phew - your post makes a very interesting and insightful read - thank you. Quick questions to you or another expert, why is pension lump sum termed possible windfall and not possible asset? if it existed prior to or during the IVA? Also, if 'all other assets are deemed to be excluded' would this not offer some protection for our pension?

Hi iampav and welcome from me too.
Excellent post and certainly more food for thought concerning the actual bankruptcy comparison.
GilliB. The way I see it the pension is a potential asset of a bankruptcy but normally excluded from IVAs. However, this is in normal situations whereby a client expects to retire at the normal age. In this case the poster is getting the money earlier due to something unforeseen at the outset of the IVA so would need to be treated differently.

Hi GilliB,
put simply there is only a difference between what you have and what you might have in the future.

Generally Assets are known, whilst Windfalls cover assets that are unknown or acquired after the IVA commences.

Most IVAs are based on circumstances which are unlikely to improve without protection from creditors.

The proposal details your Current Assets and Current Liabilities - but the proposal and its terms should also cater for future or unexpected assets and liabilities. This is why proposals should have a Windfall clause.

A Windfall is basically an asset that becomes available after the IVA is approved. Had it been known about prior to approval, it would have been mentioned in the proposal as an Asset (present or likely to become available) and either included for creditors or excluded.

Creditors then have the opportunity to scrutinise the reasons for how it is treated and whether to request it is made available, by modification.

If you had a pension lump-sum going into an IVA, it might make a big difference as to whether an IVA was the appropriate solution.

A term excluding "all other assets" might be included based on no other major assets being available. Remember the spirit of the Windfall clause is that it is an asset, e.g. an inheritance, that couldn't be provided for because it was unknown at the time of proposal.

If an asset such as a Pension fund wasn't detailed (in my view) such a clause does not automatically offer protection. Hope that helps.

Hi Michael, thank you.
I agree it seems to be regarding an unexpected asset.

Hi Paul and welcome ( can you give any clue as to who you are working with ? )Fully understand if you'd prefer not to -- I am just a nosey ol' B

Welcome from me as well.

Which company do you work for? Might be good for clients from your company to be able to get in touch with someone on here if they need to.

Niobe -- sometimes I swear you can read my mind !!!!!

Michael & iampav - many thanks for your swift responses. Very helpful indeed. x

Foggy - I just type a bit quicker than you!!

Hi Foggy / Niobe,

I clearly need to update my profile! To be honest, I'm always wary as I've had letters to individuals copied and pasted on forums verbatim; fortunately, they have yet to be criticised! I also didn't want to be criticised for advertising!

It is Ideal Debt Solutions - but I will update my details. Obviously I would welcome any contact direct or otherwise regarding any problems.

GilliB - you're welcome and good luck. It would be appreciated if you advise us all of the outcome of discussions.