Following a recent Court of Appeal ruling at the beginning of the month, any saver facing bankruptcy should not be forced to cash in their pensions in order to pay off any outstanding debts.

Horton v Henry was a case based on whether a bankrupt person who is subject to an Income Payment Order, or IPO, can be forced to cash in their savings to pay off the impending debt. As per the rules of an IPO, a person subject to such is required to pay a proportion of their income to the bankruptcy trustee usually in the form of salary or wages.

This case was initially heard about two years ago when the Judge decided there shouldn’t be any entitlement to undrawn funds in a pension under the aforementioned circumstances. This same principle applies to lump sum rights.

This ruling ran counter to Raithatha v Williamson heard in 2012. The Court in this case held that individuals with pensions that had not been crystallized could be forced to take them under an IPO. If this particular ruling had set a precedent, anyone over the age of 55 facing a bankruptcy could potentially be forced to draw their pensions whether they really wanted to or not.

Fortunately for savers, an appeal against the ruling in Horton v Henry was dismissed. One HR expert said this kind of pension freedom really changes the way savers can choose to spend their retirement pot. Other human resource experts also agree this kind of UK legal system decision really indicates how the legal system acknowledges the importance of the pension and the fact that it should truly belong to the saver.