Welfare Reform and Pensions Bill

Welfare Reform and Pensions Bill - continued	House of Lords
PART II, PENSIONS: GENERAL - continued
Pensions and bankruptcy - continued

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Effect of bankruptcy on pension rights: unapproved arrangements.

12. - (1) The Secretary of State 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 for the purposes of Parts VIII to XI of the Insolvency Act 1986.

(2) Regulations under this section 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 paragraph (a).

(3) In this section-

"prescribed" means prescribed by regulations under this section;

"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 section 11, and

(b) is of a prescribed description.

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

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

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

Sections 11 and 12: application to Scotland.

13. - (1) This section shall have effect for the purposes of the application of sections 11 and 12 to Scotland.

(2) A reference to-

(a) the making of a bankruptcy order against a person is a reference to the award of sequestration on his estate or the making of the appointment on his estate of a judicial factor under section 41 of the Solicitors (Scotland) Act 1980;

(b) the estate of a person is a reference to his estate for the purposes of the Bankruptcy (Scotland) Act 1985 or of the Solicitors (Scotland) Act 1980, as the case may be;

(d) a person's trustee in bankruptcy is a reference to his permanent trustee or judicial factor, as the case may be;

(e) the commencement of a person's bankruptcy is a reference to the date of sequestration (within the meaning of section 12(4) of the Bankruptcy (Scotland) Act 1985) or of the judicial factor's appointment taking effect, as the case may be.

(3) For paragraph (b) of each of subsections (5) and (7) of section 11 there shall be substituted-

"(b) if later, the date of sequestration (within the meaning of section 12(4) of the Bankruptcy (Scotland) Act 1985) or of the judicial factor's appointment taking effect, as the case may be."

No forfeiture on bankruptcy of rights under pension schemes.

14. - (1) In the Pension Schemes Act 1993, after section 159 there shall be inserted-

"No forfeiture on bankruptcy of rights under personal pension schemes.	159A. - (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 section 26(1)(b) of the Welfare Reform and Pensions Act 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 IV of that Act), 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 section 159(6) of that Act (application of section 159 to Scotland), after "this section" there shall be inserted "and section 159A".

(3) In section 92(2) of the Pensions Act 1995 (exceptions to the rule preventing forfeiture of rights under occupational pension schemes), 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 sections 342A to 342C of the Insolvency Act 1986 there shall be substituted-

"Recovery of excessive pension contributions.

342A. - (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 court for an order under this section.

(2) If the 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) Subsection (4) applies where the 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 section 26(1)(a) of the Welfare Reform and Pensions Act 1999 (debits giving effect to pension-sharing), less than it would otherwise have been.

(4) Where this subsection applies-

(a) any relevant contributions which were represented by the rights which became subject to the debit shall, for the purposes of subsection (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 paragraph (a)) are not all excessive contributions, relevant contributions which are represented by the rights under the arrangement otherwise than by virtue of paragraph (a) shall be treated as excessive contributions before any which are so represented by virtue of that paragraph.

(5) In subsections (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 court shall, in determining whether it is satisfied under subsection (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 section and sections 342B and 342C ("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 section 12 of the Welfare Reform and Pensions Act 1999.

(8) In the recovery provisions-

"approved pension arrangement" has the same meaning as in section 11 of the Welfare Reform and Pensions Act 1999;

"unapproved pension arrangement" has the same meaning as in section 12 of that Act.

Orders under section 342A.

342B. - (1) Without prejudice to the generality of section 342A(2), an order under section 342A 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 section 342C(1) or in giving effect to the order.

(2) In subsection (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 subsection (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 section 25(1) of the Welfare Reform and Pensions Act 1999 (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 section 342A 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 section 342A 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 subsection (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 section 342A 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.

Prepared 22 July 1999