Bankrupts face pensions payback

The Government is claiming the pensions of thousands of people made bankrupt in the 1990s despite admitting this is the wrong thing to do.

The Government is claiming the pensions of thousands of people made bankrupt in the 1990s despite admitting this is the wrong thing to do.

A department within the Insolvency Service, called the Protracted Realisations Units (PRU), has been systematically pursing people as they come to retirement and their pension plans vest.

The issue relates to people who have personal pension plans, and only to those who were made bankrupt before May 2000. This is when The Welfare Reform and Pensions Act came into force, which excluded pension from the estate of bankrupts.

At the time, the Government said it was not fair to claim pension rights as bankrupts needed to make a fresh start. However despite the change in the law, the Inland Revenue has been behind the PRU's actions in claiming the pensions of anyone who went bankrupt before May 2000.

One person caught by this, William Malcolm, challenged the PRU's actions, saying they were a breach of his human rights. Late last month, Mr Justice Lloyd ruled in the High Court that the PRU was acting lawfully.

The PRU has also been criticised for claiming the matrimonial homes of bankrupts. It is estimated that as many as 30,000 people may be targeted by the PRU for either their homes or their pension.

Many insolvency experts believe the PRU's actions are against the spirit of Government legislation.