The High Court ruled that pension assets linked to a former bankrupt’s personal pension did not automatically vest in the Official Assignee, and that any future annuity income could be paid to the Assignee only under a separate bankruptcy payment order.
In a judgment delivered on 25 October 2017, Ms Justice Costello answered questions referred by the Official Assignee under section 61(6) of the Bankruptcy Act 1988. The application concerned a personal pension policy held by James Coady. He took no part in the proceedings. Aviva Life & Pensions and the Revenue Commissioners were notice parties and made submissions.
Mr Coady was adjudicated bankrupt on 30 June 2014, before reaching the policy’s normal retirement date of 19 September 2015. He was automatically discharged from bankruptcy on 29 July 2016. He had not exercised the policy options by the time of his adjudication. The judgment said the fund was valued at €34,530.32 on 18 September 2015; the maximum tax-free lump sum then available would have been €8,632.58.
The court interpreted section 44A of the 1988 Act, which protects assets relating to certain pension arrangements from vesting in the Official Assignee, subject to exceptions. It held that payments already received, or due under a present entitlement at the date of adjudication, vest in the Assignee. The underlying pension assets do not. A future right to receive annuity payments is not a present entitlement for this purpose.
Where a bankrupt could take an action or exercise an option under a pension arrangement that would generate a payment, the Assignee may do so in the bankrupt’s place if the Assignee considers it beneficial to creditors. The judgment distinguished income from other money: income remains treated as received by the bankrupt, while a lump sum or other non-income amount vests in the Assignee. The ruling did not itself direct the Assignee to exercise an option or award a payment.
Aviva and the Assignee disputed whether the Assignee could receive annuity payments directly without a further order. The Assignee argued that future payments were already covered by the statutory vesting rule. The court rejected that interpretation. It held that section 85D requires a bankruptcy payment order before a pension provider can pay annuity income directly to the Assignee. The judgment stated that such an order could no longer be sought after Mr Coady’s discharge, which had already occurred.
The court answered the referred questions by holding that pension assets used to provide an annuity or lump sum do not become assets vesting in the Assignee; “such amount of money” in section 44A(2) means money other than income; and future annuity income does not vest automatically. The Assignee would need an order under section 85D before a provider could pay that income for creditors.