Bankruptcy And Retired People: The Facts

Retirement should be a time of relaxation and enjoyment, but it’s a sad fact that debt problems are on the rise amongst elderly people in the UK. Statistics released by the Debt Advice Foundation in 2013 revealed that five times as many pensioners are going bankrupt than 10 years ago, and the size of the debts owed has also increased sharply.

Debt experts have pinned the reasons for this on two main causes. Firstly, the spiralling costs of general living expenses, which have affected all consumer groups. And secondly, the endowment mis-selling scandal, which is leaving many older people saddled with large interest-only mortgages that they can’t afford to repay.

Add in the likelihood of further debts in the form of bank overdrafts, credit cards and even payday loans, and it’s easy to see why bankruptcies amongst the retired population are on the increase.

So what happens when a retired person is made bankrupt?

Andy Gorton, Managing Director of leading debt advice firm Bankruptcy Clinic, explains: ‘The basic process for declaring bankruptcy is the same for retired people as for those of working age. You’ll need to file a Bankruptcy Petition, appear in court and hand over control of your assets and estate to the Official Receiver (OR) in the same way. You can read all about how it works and process for declaring yourself bankrupt on our website.

As with a non-retired person being made bankrupt, if you’re a pensioner and you own your home, there’s a chance that the property may be sold to help repay your debts. However, if this happens, there may be an option for a friend or family member to buy your interest in the property, so you can stay in your home.

If your case is straightforward, you’ll probably be discharged from your bankruptcy after 12 months. All the debts included in your bankruptcy will then be written off and, you’ll effectively be debt-free, apart from any debts that weren’t included. So if bankruptcy is a suitable option for you, it can be a relatively quick way to deal with your debts. It may also be a good choice if you don’t own a property or other major assets.

What happens to your pension?

The good news is that all pension schemes that are approved by Her Majesty’s Revenue and Customs (HMRC) won’t be included in your bankruptcy estate and can’t be claimed by the OR. However, any regular payments you’re receiving might be included (see below).

Approved pension schemes include:

  • Pension schemes registered under section 153 of the Finance Act 2004
  • Retirement annuity contracts
  • Personal pension schemes approved by HMRC for tax purposes
  • Stakeholder pensions.

Also, your state pension will never be included in your bankruptcy estate.

If the OR isn’t sure whether or not your pension is approved, they’ll check with HMRC before confirming to you and your pension provider if it will form part of your estate. If they find that your pension isn’t approved, you can try applying for an Exclusion Order from the bankruptcy court or making an agreement with your bankruptcy Trustee or the OR.

What if my pension is included in my bankruptcy estate?

If the OR decides that your pension must be included in your bankruptcy estate, they or your Trustee can claim both the lump sum and your regular payments to help repay your debts. This could remain the case even after your bankruptcy is discharged. So if you think there’s a chance that your pension might not be approved, it’s vital to seek professional advice as soon as possible.

On a more positive note, if your pension is claimed, you may be able to ‘buy back’ your interest in your policy from your Trustee, so you can continue to benefit from it later on.

What happens to my pension payments?

The OR will treat your pension payments like any other form of income. This means that, whilst it’s unlikely, you could end up having to pay some of your pension to your Trustee each month through an Income Payments Order or Agreement. This could continue even after your bankruptcy is discharged.

However, the court will always make sure you have enough money to cover your essential living expenses, and you’ll also still receive your state pension entitlement as normal.

Where can I find out more?

Bankruptcy Clinic is here to answer all your questions on bankruptcy and to help you decide whether it’s a suitable option for you. We’ll put you in touch with friendly, fully-trained advisers at our partner firm, MoneySolve Ltd, who’ll take the time to talk through your personal circumstances and help you find the right answer to your financial problems.

Contact us today

  • Call our freephone number on 0808 168 7389 or 01625 462 770 from a mobile.
  • Email us at
  • Enquire online here.


We look forward to helping you soon.


Andy Gorton is the author and editor of the Bankruptcy Clinic

Andy Gorton – who has written posts on Bankruptcy Clinic Blog.

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