When you enter sequestration, your assets are placed in the control of a Trustee who will seek to realise as much money as possible from them in order to pay your creditors. Your assets include things such as property, vehicles and cash savings.
However when it comes to the money you have saved in your pension pot, the rules are a little different. Here is all you need to know.
The good news is that money saved in a pension scheme is not classed as an asset in sequestration. As a result any money you have saved into a pension will not, in the vast majority of cases, be taken by the Trustee. This is different to other savings, shares or investments, which would be treated as assets and would be taken from you when you enter sequestration.
However you should be aware that this protection is limited to money saved in an approved pension scheme. Any money you may have earmarked to eventually use to fund your retirement that is not held in a pension scheme will not be afforded the same treatment. Any money saved outside of the ‘pension wrapper’ is considered an asset; this money can and will be taken to pay your creditors.
The only situation when you may be required to take money out of your pension scheme is if you’ve made large deposits into your pension in the period just before being sequestrated. If this has happened then these payments may be reversed and taken back from your pension. This will typically only apply if you’ve been paying more than 15% of your income into your pension. Excessive pension contributions will only be considered if the Trustee deems that they were made with the sole purpose of putting cash beyond the reach of your creditors.
Typically you will be allowed to continue to pay into an existing pension; however the rules vary depending on the type of scheme you are enrolled with.
If you are employed and paying into a pension scheme run by your employer, you will usually be allowed to continue to pay into this following sequestration. However you may face a restriction on the amount you are able to contribute. If you are paying in a significant percentage of your salary, you may be asked to reduce this amount, bringing it down to the minimum contribution level.
If you are paying into a personal pension the rules are slightly different. There is usually less flexibility with this type of scheme. You may find yourself being asked to suspend any payments until the end of your sequestration. However this will depend on your age and other circumstances. If you are forced to stop making contributions to a personal pension, you will be able to start your payments again once you’re discharged. Regardless of this, any money you currently have saved in a personal pension will be afforded the same protection as a workplace pension.
If you need help or guidance regarding the sequestration process, Scotland Debt Solutions can help. We have a network of offices and teams of experienced insolvency practitioners around Scotland, with offices in Glasgow, Edinburgh, Aberdeen and Dundee. Call us directly to find out more and to arrange a free consultation.
The Register of Insolvencies is a public register that documents Trust Deeds until five years after the discharge date and includes personal details.
Joint Trust Deeds don’t exist, however, if you want to run a Trust Deed that encompasses debts as a couple, this will be two individual Trust Deeds.
Our Scottish based team can help advise you on your debt problems.