Press release: CFEB welcomes today's announcement by the Department for Business
10 November 2010
CFEB welcomes today’s announcement by the Department for Business that a Statutory Instrument will be laid before Parliament to amend the eligibility criteria for debt relief orders (DROs) to allow those with HMRC-approved pension schemes to have access to a DRO. This was a central recommendation of the response that CFEB submitted to the Insolvency Service consultation on this subject earlier this year.
Today’s announcement corrects an anomaly in insolvency law whereby people going through bankruptcy did not have pension assets taken in account but people applying for a DRO, which is designed to be a cheaper form of bankruptcy, did. This meant that many people with very small pension pots were not able to access DROs.
Consumer Affairs Minister, Edward Davey announced today that: > “I propose to allow those with HMRC-approved pension schemes to have access to a DRO. This brings DROs into line with bankruptcy where debtors are able to keep their approved pensions, and will provide welcome assistance to many of the most vulnerable.”
In response to the Insolvency Service consultation on the subject, in June this year, CFEB said: > “One of CFEB’s functions is to enhance the ability of members of the public to manage their own financial affairs.> We are concerned that, under the current criteria for Debt Relief Orders, a significant amount of otherwise eligible applicants are being excluded from being able to apply due to future rights to a pension, which is either small or a long time away from being able to draw down.> The result of this is that people are left without the ability to select the most appropriate debt resolution tool for their needs, thus reducing the ability of individuals to manage their own financial affairs in the most appropriate way.> Given that DROs were introduced as a cheaper, more proportionate alternative to bankruptcy, we believe that there should be a uniform approach to the inclusion of pension assets. > > Therefore all pensions that are HMRC approved should be excluded from the asset calculation for the purposes of deciding whether an individual is eligible for a DRO.” > > View our full response