Court of Appeal close to setting debt repayment precedent

The Court of Appeal will set a precedent later this year determining whether or not a trustee in bankruptcy can access an individual's pension to pay off a debt they owe.

The High Court ruled last month in the Horton v Henry case, that the court does not have the power to force Henry to withdraw from his uncrystallised pension policies to pay off debts of more than £387,000.

Robert Horton is now challenging the High Court's ruling in the Court of Appeal against Michael Henry.

Henry's representative, Deborah Clark, said that after conflicting High Court judgments in the past few years, the Court of Appeal's decision will provide clarity given the imminent relaxation of pension rules.

"From April it will, in theory, be possible for an individual to draw down their entire pension pot, though they will be taxed on it as income," she said.

"If this appeal were to succeed it would have huge ramifications. The trustee in bankruptcy will be able to force the individual concerned to draw the entire contents of their pension policies to pay creditors."

There is precedent for Horton to win his appeal but there are also contradictions which make the case less clear.

In 2012 the High Court gave bankruptcy trustee, Situl Devji Raithatha, the right to claim against Michael Roy Williamson's £1m pension in order to repay creditors.

At the time of the case, Williamson was of an age where he was entitled to start drawing his pension, but he had not started to do so and but the judge ruled against him.

In the current case, Henry is also of an age to start drawing from his pension policies but has also not started do so, and puzzlingly, Deputy Judge Robert Englehart has ruled in his favour.

Henry has a self-invested personal pension and three personal pensions policies, which he has argued he does not want to crystallise.

The date has not been set for the hearing yet.

Binyamin Ali is assistant editor of Private Client Adviser