Welcome to the forum trident227.

In terms of the lump sum could you confirm that this is part of your pension arrangements rather than (or perhaps in addition to) a redundancy settlement?

In terms of your pension are you required to take a lump sum or can it be taken in the form of a higher pension payment instead?

Will you receive a redundancy payout as well?

Sorry to ask so many questions.

This page provides more information about pensions, pension lump sums, and retirement in general:

https://www.trust-deed.co.uk/pension-retirement.html

Hi,
Thanks for the reply, yes I would recieve a lump sum and an amount each month. I could take a lesser lump sum with a higher monthly pension as such. This would not affect my ability to maintain my payments to the trust deed either way, I am just afraid that something I have worked for for 22 years would go in an instant. Hope this helps you to advise further and if you need any more information just ask. Furthermore the figures could be somewhere in the region of 30k lump sum and £600 per month....thanks for the advice.

Hi trident227.

Thanks for the additional information.

The general principle behind a trust deed is that it writes off debt that someone cannot afford to pay.
Therefore, if someone's financial circumstances improve for whatever reason during a trust deed any additional income/lump sums are used to help repay the debts.

Pension lump sums might be looked at slightly differently and I think it's best to wait for Mark, Kevin or Julie to confirm the position here when they next visit the forum.

A couple more questions that might turn out to be relevant:

How much unsecured debt did you have when you started the trust deed?

How much have you been paying into the trust deed each month?

Hi,
the amount I owed was 33k and my monthly payment is £240. I have another question which is linked to the original, I at the time of recieving my lump sum I would have approx 8 months remaining on my TD....could I pay what is left owing on it and be done with it ?....cheers for the response.

Hi trident227.

Thank you for the information.

Unlike other assets, money in pensions is generally protected in a trust deed. However I'm not at all sure that this would still be the case if you actually received the lump sum during the trust deed. I'm hoping that Mark, Kevin or Julie will confirm the position soon.

If the pension lump sum does have to be dealt with, it would not be to complete the eight remaining payments. Like other lump sums (for example an inheritance or a lottery win) it might be used up to and including paying the full original debt amount, some interest and the fees of the Trustee.

I hope one of the experts will confirm the position soon.

Hi TDA and Trident,

I was under the impression that if any time during your TD you receive a lump some, whether that be a redundancy payment, inheritance or lottery win - you will only be liable to pay whatever your total debt was when you signed your trust deed?

For example - I had around 16k in unsecured debt, so far I have paid around 1.2k into my TD, so if I won the lottery tomorrow (I wish) I would only be liable to pay 14.8k into the TD to settle all debts in full?

Can you clarify this position because it may help Trident if the lump sum can settle the outstanding amount and have some left over for themselves?

Hi ScotsLad.

The total that you might have to pay into a trust deed if you came into money would be:

1 - The original full debt total +
2 - Some interest on the debt +
3 - The fees of the Trustee

As such it could be a fair amount more than the debt total on the date of signing the trust deed (as it would probably have been if contractual interest had continued to apply).

Of course any monthly contributions already made would count against the total amount.

Hi TDA,

Thanks for that! 🙂 Will think twice now about buying my Euro Millions tickets on rollover weeks!

Well... I don't know how much debt you had at the start of the trust deed (or the fees you are paying), but presumably you'd still be left with a little for yourself if you won on rollover week?!

Maybe just a little!

Sorry for the delay in replying to your query about pensions trident227.

The answer is that this is a bit of a grey area I'm afraid (yes - another one!!). The Accountant in Bankruptcy's notes for guidance state that income from pensions is only included in so far as it potentially increases your monthly disposable income. Lump sums could arguably be claimed to be acquirenda (ie a windfall that could be claimed by the trustee) however, this hasn't been tested in the courts and they suggest that a sensible way for trustees to deal with this situation would be to seek only a part of the lump sum to be paid into the trust deed, as a reasonable compromise.

Given this ambiguity, I would suggest that it might be possible to "buy yourself out" of the trust deed using your lump sum, but this would need to be negotiated with your trustee and is by no means certain.

Sorry - can't be any more definitive than that!

Hi Kevin,

Cheers for the reply.
a). With regards to the monthly pension amount I would recieve then that would just depend on subsequent employment and I feel that would not hinder my capability to continue paying my monthly figure for the remainder of the term.
b). Sorry to ask but what would you consider to be a reasonable figure of 38k ?
c). Again sorry to ask but when you say buy yourself out of the TD then I guess you mean pay back the full debt including fees and interest etc

Thanks very much for your time.

Hi trident227.

It's going to be best to wait for Kevin's answers I think when he next gets chance to visit the forum.

Hopefully that will be fairly soon.

These are tough questions to answer, trident227, purely because the guidance for trustees on the subject is so vague. I imagine that your trustee will request that a chunk of the lump sum will be paid to the trust deed and will allow you to keep the remainder. What proportion is really anybody's guess!

I reckon they are likely to look for more than simply the remaining payments that you would have paid, but I daresay less than the full outstanding debt plus fees and interest. I know that this leaves a big margin but there is no way of second guessing your trustee's view on this.

What I would say is that if they say that they want the lot you might want to argue the point with them and direct them to the Accountant in Bankruptcy's Notes for Guidance, which says the following:

"6.18 Pensions

The general position is that where the debtor is in receipt of any form of pension or annuity at the date of sequestration, such payments are classed as income which, as per Section 32(1) of the Act, does not vest in the trustee. It is of course open to the trustee to seek a contribution from such income through an IPA or IPO, as per Sections 32(4A) or 32(2) of the Act, including a one-off contribution from any lump sum payment received by the debtor.

It is arguable that a lump sum payment constitutes acquirenda which would vest in the trustee as per Section 32(6) of the Act but this proposition has not been tested and to seek a contribution rather than attempt to claim the whole sum may be regarded as a ÔÇÿsafer' option."

NB this refers to sequestration, but trust deeds would normally operate under the same rules. In other words, I think the AIB are saying that they are not sure that a trustee does have the right to claim the lump sum, and that rather than test this in court and possibly lose it might be wise for trustees to seek to come to an amicable agreement with the debtor instead.

Sorry if this is all a bit technical, but I think laying it out the guidance that is there is the only way of answering this one.