Creditors won't not be able to target unspent pensions in bankruptcy, the Court of Appeal has ruled out.
Last week, the court handed down a judgment on an appeal against the 2014 Horton v Henry case which centred on whether a bankrupt individual can be forced to use their pension savings to pay debt as part of an income payments order.
The appeal was lodged after an earlier case, Raithatha v Williamson, had suggested pensions were in scope.
New rules, introduced in April 2015, that mean pensions are accessible as cash from the age of 55 had muddied the situation further.
However, the court dismissed the appeal, meaning bankrupt individuals' pensions are protected if they have not been taken as income. If payments have already been made, or are made while the individual is still technically bankrupt, these can be claimed by firms chasing money owed.
Peter White, of Pinsent Masons, the law firm, said the court's decision that untouched pensions do not count as income was key.
Mike Morrison, of AJ Bell, the fund shop said: "The pension freedoms fundamentally changed the way savers can spend their retirement pot.
"As a result, if the original ruling in Raithatha v Williamson had set a precedent, someone aged 55 or over facing bankruptcy could also have been forced to cash in their pension savings where an Income Payments Order was issued – whether they liked it or not.
"This would have added pension pain to financial misery, and anyone in this position should be able to breathe easier in the knowledge the UK legal system appears to acknowledge pensions should be out of the reach of a bankruptcy trustee."
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