What are Excessive Pension Contributions?

Section 342A and the further associated provisions within the Insolvency Act 1986 (“the Act”) provide a Trustee in Bankruptcy with the power to apply to seek to recover pension contributions made whether by the bankrupt himself on his own behalf or by another on his behalf.

Before the Court can grant relief it has to be sure that the rights under the pension scheme are the fruits of the complained of contributions and further that the contributions have unfairly prejudiced the individual’s creditors (Section 342A (2)(a) and (b).

Relief is only available where the pension scheme is an approved pension scheme in the eyes of HMRC or excluded rights under an unapproved scheme (Rights under an unapproved scheme would automatically vest in a Trustee in Bankruptcy).

Once the test in Section 342A(2) has been satisfied the Court has to consider two questions being (a) whether the contributions were made with the purpose of putting assets beyond the reach of the individual’s creditors or any of them, and (b) whether the total amount of contributions is an amount which is excessive in view of the individuals circumstances when those contributions were made (Section 342A (6).

To the writer’s knowledge there has been no reported case law on this issue. However Miles Hacking and I recently acted on behalf of Joint Trustees who have successfully prosecuted an application under Section 342A in the case of Stanley and Barber v Wilson and Others

Factual Back ground Challenged Payments Result Lessons for Trustees

The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.