Lamborghini Pensions

There is a new buzzword in the land of pensions…the ‘Lamborghini’ pension.

This has been brought about by the Government’s reforms of the draw-down rules for personal pension pots from April 2015. In summary persons of pensionable age can now draw-down their entire pot (previously you could draw-down to a maximum of 25%), buy a flash car and, if they fall on hard times, still have a State pension to fall back on.

Whilst this connotation has an amusement value for solvent pensioners, the implications for insolvent pensioners is more serious. Recall that the Welfare Reform and Pensions Act of 1999 was driven by the policy that debtors should have proper provision for their retirement and as a result pensions were excluded from bankruptcy proceedings.

This was challenged however in 2012 by Raithatha v Williams where it was held that a pensioner’s right to income or draw-down from a pension pot could be subject to an Income Payments Order. There has been some see-sawing in the appeal courts but this is still the held belief.

What does this mean…well with the new pension reforms it means the insolvent pensioner could now have 100% of his pension pot at risk of an Income Payments Order. After all, if he or she can buy a Lamborghini, they might just as well repay their creditors. If you or one of your clients might be facing formal insolvency proceedings, please contact EWS for a free consultation on the likely impact. Contact us.