An individual voluntary arrangement (IVA) is a formal agreement allowing you to make affordable payments to your debts, usually over five or six years. At the end of your IVA, any unsecured debt left is written off. You can also make a one-off payment if you choose to, known as a lump-sum IVA. Entering an IVA is not something to be taken lightly. This requires a lot of thought as there are many aspects to take into consideration. One of the most important things is what will happen to any ongoing assets that you may have. This can include your pension.
One of the first questions to ask is whether your pension is at risk if you have an IVA. The Welfare Reform and Pensions Act of 1999 states that if you become insolvent, your pension is exempt from this. In other words, any money already invested over the years you have worked is protected from your creditors. Therefore, when you apply for an IVA, you do not need to offer your creditors any money as part of this financial arrangement.
What happens to the pension payments that I am currently receiving?
If you have reached retirement age and are already receiving monthly regular payments from your pension, then this money makes up part of your income. Therefore, this must be included in your assets when you calculate how much you afford to pay into an IVA. If you start receiving payments during an IVA you must inform your Insolvency Practitioner (IP) right away. They will review your income and expenses budget. This means they can have a clear overview of your expenses and review this by adjusting your current payments accordingly.
Can I pay off an IVA with my pension?
If you reach the age of 55, or you have recently retired during your IVA application, then you may have the option of taking a lump sum from your pension. This, therefore, makes it possible to settle your debt-arrangement early. You can make this offer in exchange for not having to make any more monthly payments. Your creditors would therefore not otherwise be entitled to the cash. However, if they do not agree to the terms of this negotiation, then you can simply withdraw your offer.