The Personal Insolvency Act, 2012 introduced three alternatives to bankruptcy for insolvent persons. Those arrangements are:
- Debt Relief Notice [DRN], a 3-year arrangement for unsecured debts below €20,000.
- Debt Settlement Notice [DSA], a 5-year arrangement for all unsecured debt.
- Personal Insolvency Arrangement [PIA], a 6-year arrangement for unsecured debt and secured debt up to €3 million.
Persons entering such arrangements are entitled to deduct ‘reasonable living expenses’ from their income in determining how much they can afford to repay their creditors.
The Insolvency Service of Ireland has published guidelines on its website and it seems that while ‘savings and life assurance’ payments are allowed, it is unlikely that discretionary pension contributions will be allowed for the duration of the arrangement. There appears to be no explicit prohibition on employer pension contributions continuing and contractual employee contributions, deducted at source seem to be implicitly allowed.
This puts the self-employed at a disadvantage compared to those in pensionable employment.
There is no provision in the new Insolvency arrangements to seize personal pension assets as there can be in bankruptcy but any retirement income being received will be taken into account by creditors in any insolvency arrangement. Any pension benefits that commence during an arrangement will also be taken into account and if these are greater than €400 per month may trigger debt repayments under a DRN.
Undrawn pension benefits may be included only if a person can draw those pension benefits now or within a specified period of time which is 6 months for a DRN; 6 years 6 months for a DSA and 7 years 6 months for a PIA.
While all pension arrangements may be at risk for inclusion, 30% of Additional Voluntary Contributions [AVC] may be included from now until March 2016 under the early access scheme.
Approved Retirement Funds [ARF] and vested Personal Retirement Savings Accounts [PRSA] are automatically taken into account as available assets because the benefits can be taken straight away.
It is very important to get good advice about private pension benefits before entering any arrangement.