Question

What are pension assets? Are they good or bad?  How are pension assets impacted by a bankruptcy filing?

Answer 1

Pension Assets:

The term pension plan assets refers to the funds a company will use to meet its future compensation obligations to retired employees. Pension plan assets consist of cash as well as investments such as capital stock, bonds, and annuities.

A lump-sum payout may also be a good idea for those who intend to continue working at another company and can roll this amount into their new plan, or for those who have delayed their Social Security until a later age and can count on a higher level of guaranteed income from that.

Impact of bankruptcy:

If you've got one or more pensions, becoming bankrupt may affect your pension rights. This will depend on:

• what type of pension it is
• whether you're receiving an income from your pension yet
• whether you'll be entitled to receive payments from your pension within 4 years of becoming bankrupt

Pensions are a complex area. It's really important to get advice about how going bankrupt will impact your pension, before you decide to apply.

Type of pension

Most types of pension schemes are classed as approved. If your pension is approved, your pension funds won't be counted as an asset in the bankruptcy.

If your pension scheme isn't approved, the trustee can claim the funds in it as a lump sum of property, although you may have options for protecting some or all of it. You should get legal advice about this.

If you're not receiving income from your pension

If you're not going to cash in a lump sum or get regular income from your pension within 4 years of becoming bankrupt, the bankruptcy trustee can’t access any of your pension pot.

You should get advice about how your pension will be affected before you decide to proceed with applying for bankruptcy.

If you receive income from your pension

If you get an income from a pension, these payments are treated as income by the bankruptcy trustee. This means you could be asked to pay some or all of the money towards your debts, if you have more than enough income to cover your day-to-day living costs. This would normally happen under an income payments agreement or income payments order.

If your only income is from a state pension and/or other benefits such as pension credits, you won't be asked to pay any of this towards your debts.