Many people who are over 55 can take some or all of their pension pot in cash before they actually retire. You need to know how this may affect you if you are considering an IVA. If you already have an IVA, you may be wondering if your pension is safe.
First a warning: IVAs are individual arrangements and it is possible for almost anything to be included or excluded in the detailed terms and conditions. You will have to look at your IVA paperwork and/or talk to your IVA firm to tell if the generalisations here are applicable to you. Think of this article as an overview which gives you pointers about what to look for.
If you are thinking about an IVA
“Can I keep my pension safe in an IVA?”
If you get to be 55 during your IVA you need to discuss how pensions will be handled with your IVA firm. It’s best to get a clause that excludes your pension completely; second best is a clause which specifies clearly under what circumstances how much can be accessed.
In my opinion it would be dangerous to agree to an IVA where pensions are not mentioned or the wording seems vague. With clear wording you will be protected.
If your IVA firm refuses to change their normal IVA terms, ask them to confirm in writing to you what will happen when you get to 55.
If you are in any doubt, talk to a different IVA firm – there are dozens of them that would love your business! A good place to discuss what an IVA firm is proposing and whether there are better alternatives is this IVA forum.
“Should I use my pension to clear debt instead of an IVA?”
If you are over 55, or will be soon, and have money in a pension, then withdrawing money from your pension is one option for tackling your debts. As that article points out, there are a lot of things to consider, so don’t rush into this. I look at the general pros and cons of IVAs in What is an IVA and how do they work?
If your debt situation is serious enough for an IVA to be a real possibility, then it would be sensible to consider if using your pension pot is a good alternative. Indeed if your pension pot is very large you may find that your creditors will not accept an IVA.
However there are important negative factors with taking money out of your pension. These include:
- you will be retired a long time, probably decades. Don’t make a choice that will leave you struggling when you retire if there are better ways of tackling your debts now;
- what tax you would have to pay on withdrawing the money from your pension – depending on your income and how much you are taking out, you may have to pay between 4% and 45% tax on it;
- if you get any welfare benefits, you need to talk to a debt advisor such as Citizens Advice or National Debtline about whether taking money from your pension and paying it off debts could affect your benefits;
- if you have a pension that is linked to your salary, you could lose a lot of its value by switching it to a money-purchase pension in order to take money out;
Another approach would be to opt for a Debt Management Plan for a year or two now instead of an IVA. After that you may then be able to offer individual creditors full and final settlement offers using money from your pension.
Pensions if you are already in an IVA
“I will be under 55 when my IVA finishes”
If you will be under 55 when your IVA ends, your pension is completely safe. There is only one minor complication – don’t forget that your IVA may potentially be extended beyond the normal 5 years if there is equity in your house that you can’t release or sometimes if your payments are reduced for a period.
“I don’t want to touch my pension”
If you don’t want to withdraw any money from your pension before your IVA ends, then it is very likely to be safe. It could only be at risk if there was a specific clause in your IVA which obliges you to release money from your pension. This isn’t a common term and anything like it should have been discussed with you before the IVA was agreed, so if this doesn’t ring any bells with you, it’s very unlikely you have a problem.
“I would like to withdraw some money from my pension”
Life in an IVA can be tough and you may be hoping that the new pension freedoms will enable you to replace your car or get a new boiler.
If there is no mention of your pension in your IVA terms and conditions, then if you take money from your pension it is likely to be seen as a “windfall” and it may have to be paid to your creditors – not what you wanted! Before you do this, you need clarification from your IVA firm that it will not be touched – get this in writing.
If your IVA has a clause that says your pension is excluded this should be fine. As a general point though do think about the four big negative factors I have listed above for taking money out of a pension.
“I want to try to settle my IVA using money from my pension”
A full and final settlement offer could be a good use of your pension money if you are having big difficulties with your IVA. You do however want to offer the minimum amount possible so that your future pension is not wrecked. You need to talk to your IVA firm about what could be acceptable, they can then propose this to your creditors and if your creditors agree, you can withdraw the money. Don’t take the money from your pension without having the settlement agreed first.
This is important because if you do, it may be taken as a “windfall” payment by your IVA and not as a settlement amount.
If you are making the IVA payments without much difficulty then a settlement offer is still possible. But here a low offer would be unlikely to be accepted – it’s difficult to give any guidelines but I have talked through some of the issues here. Again consider the negative factors listed above. If you are going to end up paying say 30% tax (it could even be more) on the money you take out, then this may not be a good deal for you at all.
Repairing your credit after an IVA
Inflation – can you cut your IVA payments ?
A forgotten debt, can it be added to your IVA?
Earl Barrington says
Being in an IVA is tough believe me. If’ I’d known two years ago about these new pension reforms, I’d have stuck as I was (with a debt company) waited two years, then paid off my debt with my pension pot as luckily its quite substantial. As it is now – negotiations with the IVA company and paying off my contract early is going to be costly. It appears they want the full amount I owe paid back, along with the remaining contributions as well! But needs must and I desperately need to be out of the IVA to progress and generally get my life back on track, invest some money into my own business, so am going to negotiate and pay it off the best I can. IVA’s aren’t all they’re cracked up to be. So, If you’ve a pension looming and are considering entering and IVA, I wouldn’t. Just pay back your debt from your pension and do it that way, as your immediate future will be easier to operate, such as having credit cards and buying a car if you need to etc etc. Freedom speaks volumes, Just learn to curb your spending habit. IVA’s were essentially invented long before the new pension reforms, so they haven’t taken this into consideration for a current client in my view, perhaps in years to come they’ll be more understanding.
Karen Jones says
My husband and I are in an IVA it finished this February, however, as they are allowed they added an extra 12 months. My husband wants to cash in his pension, if he does can the IVA take it? I think it can but he says no and that he’ll transfer the money to one of the children. Is this possible?
Sara (Debt Camel) says
You are most likely to be right. Your IVAs are still running – unless your husband’s pension is clearly excluded from his IVA (which would be unusual) if he takes money from it this is a windfall which will have to be paid into the IVA. Transferring the money to one of the children doesn’t get round this problem.
If he is sure it is OK, then tell him to ask for confirmation from your IVA firm in writing that the money will not be touched before he does this.
carole says
We are in 12 month extension of our IVA and my Husband has been offered the 25% tax free from his pension, he wants to put it somewhere so that we have a start when he retires and we move to Spain but I think the IVA will be able to take it. Can they?
Sara (Debt Camel) says
I think they probably would :(
If he wants to take this, he needs to get it in writing from his IVA firm beforehand that it will not be touched.
The options are either to delay for a year? or to forgo taking the 25% tax free and use the whole pension to get a larger annuity? It might be sensible for him to talk to Pension Wise https://www.pensionwise.gov.uk/ about his options if this is a Defined Contribution pension.
Bill says
Hi I am in the early stages of applying for an iva. In a year I will be 55
Can I use my frozen pension to pay my iva off early
Sara (Debt Camel) says
If you have pension monies that you can access next year, you should seriously think about NOT starting an IVA now but opting for a temporary debt management plan instead until you are 55. Then next year you could look at taking some money out and proposing a full & final settlement, possibly in the form of a single payment IVA, see https://debtcamel.co.uk/debt-options/less-common/full-final/.
If you take the IVA out now, you are incurring all the IVA fees and it is then difficult to take money out of your pension, because any money you take out should be paid into your IVA but NOT as an early settlement, just as an extra to go to your creditors, you would still be expected to carry on with the rest of the IVA.
It is usually a bad idea to commit to an IVA if you know you are likely to want to end it early , either by selling the house or accessing your pension or if you are likely to be inheriting money.
I suggest talking to StepChange at the moment about these different options.
Mrs K says
Have made a F&F offer and my variation meeting is within the next couple of weeks. I have a couple of queries regarding my pension
1) I would like to draw some money (£500) from my pension to pay for Christmas..I have been on SSP for the last 4 weeks so have been unable to put anything by.( my terms state I can have a £500 windfall)
2) should I wait for my certificate of completion before I draw my pension pot and move it elsewhere
My IVA finishes next July
Sara (Debt Camel) says
1) I suggest checking this with your IVA firm before you do this. Also I have to say that if you are in financial difficulty, £500 seems a huge amount to spend on Xmas. Money in your pension is there for your old age and it’s really not a good idea to dip into it for something like this. tell your family now that you aren’t going to be able to afford much this year because of your health and they will understand!
2) definitely!
MrsK says
Sorry Sara
I also meant that the majority of the £500 would be to supplement my wages as I’m on SSP… not the full amount for Christmas !!
Sara (Debt Camel) says
OK! I suggest talking to your local Citizens Advice about your situation, as there may be some help you can get from benefits?
Mrs k says
Thanks for the advice.. but I have my variation meeting in a few weeks, so hoping the end is nigh
toyah says
My husband took out an IVA just before we married a little over a year ago. i think it was for around 30,000. He currently repays 190 per month.
I ve never heard about them extending it until I read this post.
He s just turned 55 and we ve been to an IFA to discuss pension options. He has 3 seperate pensions. Two of which are old and he has nt paid ibto fir 20 years. His iva aggrement words something about a pension.his small company pension only. I presume he forgot to mention the other two.
The IFA is looking at the possiblility of cashing in all pensions to enable us to buy a small house outright. over this finicial year and next. sounds crazy but i m 20 years his junior so our household income set up is differenr and currently we pay 625 rent. So purchasing a house outright makes finicial sense and a huge saving per year.
We are just not sure if this is possible in an iva ? Any ideas?
Sara (Debt Camel) says
Yiu must not take money out if a pension unless the IVA firm has agreed you can in writing beforehand. Otherwise it will be taken into your IVA.
Also even if you are allowed to keep the money and buy a house, it is likely to mean that his IVA payments are increased a lot, so you may be no better off.
Your choices are either to forget about this idea until his IVA has finished or discuss his options with his IVA firm.
Rowntree Travis says
I have made a full and final settlement payment which has been agreed and monies received by my IP. I await my Certificate of Completion. If I take money from my pension pot before the certificate arrives, can the IVA still grab it? I could maintain it is for reinvesting in a ‘pension scheme’ (in property) or put it back into a pension if they demanded it. As full and final settlements go, surely I have satisfied my debt obligations in the eyes of the law and the Certificate is merely a formality?
Sara (Debt Camel) says
Get your IP to agree to this in writing before you take the money out. Better safe than very sorry!
baby cable says
I have just over 3years of an iva to run, i have since found out that i have a pension pot of £43,000. from me opting out of serps many years ago.
i was thinking of taking my 25% but reading into the iva site and people e-mails this does not seem a good idea.
so i am putting it on hold .for 12 months
My son as said he will make an offer to the iva to come to a settlement, can he do this, and will this bring my iva to an end so i can access my fund with no problems.
.
Sara (Debt Camel) says
You absolutely must not take this money out without checking with your IVA first that you don’t have to pay it into your IVA. With the vast majority of IVAs you would just lose this money:(
Also you can’t usually just take the 25% tax-free out, you have to withdraw the whole amount and pay tax on the 75% OR take the 25% tax-free and buy an annuity with the rest. Actually, there are a lot of other complicated options, but only touching the tax-free amount isn’t usually one of them. If you want to find out what the options are – and this would be a good idea as you may want to do it in 3 or 10 years time if you don’t do it now, then contact Pension Wise, which is a government service.
How much are you paying a month to the IVA? Are you renting or buying?
Your son making a settlement offer could work well. Or you could propose to your IVA firm that if they agree to accept the amount as a full & final settlement, you will take the money from your pension. But they have to agree this FIRST and in writing, before you do this.
Rowntree Travis says
This will work as I’ve just done it. Keep the pension thing a secret until you have your certificate of completion. Make sure you have a good reason (real or fabricated) for an early settlement. Good luck!
Mike says
What about a car on pcp.
I have heard they take them back but not sure as also heard they let you keep them until the balloon payment is due, then if you haven’t got it, they take it back?
Sara (Debt Camel) says
There may be a clause in your PCP agreement that allows the company to terminate it if you become insolvent – an IVA is a form of insolvency like bankruptcy. Some finance companies will, some won’t – it may depend how far your car is in negative equity at the moment.
When the balloon payment is due, unless someone else could pay it for you, you won’t be able to afford it to the car goes back. You are then in the difficult position of having no deposit, and a wrecked credit record. It may be possible to get a car on HP but the interest rate is going to be very large.
How long until your PCP ends? Do you have a house with equity?
Mrs A says
Hi, my Iva comes to an end this August, having run for the past five years, and I’ve been told that I will have to wait up to 6 months for the final administration to be completed and the notice of completion issued. Would I be wise to wait till this is issued to access my pension pot – I am now 59 and am considering leaving my employment soon, so may need to draw down some or all of my pension at some stage.
Does the Iva have any call on my pension once the letter of completion has been issued?
Sara (Debt Camel) says
You must not take any money from your pension before you have your letter of completion UNLESS your IVA firm tells you in writing that you can do this and none of the money will be claimed for your IVA. It’s really best to wait if at all possible.
After a completion certificate, your IVA has ended and you can access your pension if you want.
maddy says
is it suffice to wait for the completion certificate or do you have to wait until your name is taken of the insolvency register before claiming pension ?
Sara (Debt Camel) says
The completion certificate should be enough. If you are unsure, ask your IVA firm to confirm this.
June says
I have the chance to release some of my company pension, because, I owe the person I live with a lot of money. I also have an IVA. If I take out the money, can the IVA company take any or all of it?
Sara (Debt Camel) says
Yes, they are likely to take all of it. You must not take money out of a pension when you are in an IVA unless your IVA firm tells you in writing it is ok and you can keep it all.
Gary098 says
Hi my question is I have got four different pension s one is a defined pension total fund value 126000.I am in a IVA started in 2014 Before my annual review my IP brought up the fact that I was still paying into my employer scheme which is Tesco .I looked on my original contract in my IVA and the creditors said I could make the payment which at start was defined pension scheme .It has now changed at Tesco to money purchase I am putting 4% and company matched .My payment to my IVA got brought and my pension I no about the high court decisions in 2016 1 am 49 my nominee said in 2014 I had to be above 52 to lose them through ipo my IVA transferred from Knightsbridge to creditfix one thing which was asked my payments into my pension could be dropped I admit I have received a closure bonus from defined pension scheme which was paid into new scheme at Tesco is their anyway they can get them without permission also previous pension was held with one of banks I owe money to
Sara (Debt Camel) says
There is no way you can get the money out of a pension if you are 49. It doesn’t matter where the pension is held, it just can’t be accessed.
I also think you should complain if your IP asks for your pension contribution to be dropped – your IVA was not set up on that basis. I am sorry to hear that Credit fix are asking about this.
Gary098 says
My IVA payment after expenses was set at 80 pounds in my IVA .I currently pay 65 pounds every four weeks into my pension. Had no increase in my IVA payment for three half years they mention ppi claims sent evidence by old credit statements at year one but bank just said no Barclaycard.
Total debt was 22000 on credit cards
Sara (Debt Camel) says
That is no reason to cut back on your pension contributions. If you had gone bankrupt (and I am guessing you are renting, so bankruptcy would probably have been a better option for you) you would never be asked to reduce your pension contributions.
Gary098 says
Yes I am renting from housing association.But work the fees on IVA equivalent to 30 months payment .Nominee said my creditors would take a IVA rather than bankruptcy because they get a greater return .understand that they can’t have IPO if not working if IVA did fail would go bankrupt but my creditors would not want this because my nominee said I had little or no assets a part from my pension.whitch was told can be included in individual payment order only at 52 and a IPO can only last for three years .The trustee could only acesss funds in my pension if I contributed 15% or more of my salary into pension and they show that I was deliberately placing money in the pension to hide from them.Also some pension schemes have a protected early age of 50- 52 if scheme started before government changed to 55 and early pension benefit age protected in private scene example previous Scottish amicable Pension scheme if transfer would loose that right.Also creditors asked for them to be frozen.But did not agree to this . Scotish amicable now is a closed fund been managed by Prudential in Hong Kong .Which complicates things even further .
Sara (Debt Camel) says
“But work the fees on IVA equivalent to 30 months payment” bankruptcy fees are £680 pounds – that is about 8 months worth of IVA fees, not 30 months. What your creditors want doesn’t matter – they couldn’t stop you going bankrupt. You would have been much better advised to do this, I am sorry.
I am not quite sure what you are asking at the moment. You can’t access your pension now and Creditfix should not be suggesting that you can. Nor should they be suggesting that you decrease your pension contributions – they are not high and that would not be a reasonable request. If Creditfix are pushing you to agree to something, then I suggest going to your local Citizens Advice and asking for their help.
Gary098 says
Did receive communications by email while Knightsbridge saying some would say this is the wrong option but they can assure me IVA was right option currently no chance of IVA failing if keep up with payments also some other data company from notingham which specialises in recovery of greater tfunds to creditors through IVA contacted me not
sure if I was supposed to no this wasn’t Knightsbridge or creditfix. A company called tdx group ltd which specialises in credit recovery
Ps the company employed open up us all new pension scheme after change plus was asked if we still wanted protected early retirement age
Sara (Debt Camel) says
I am still not sure what you are being asked to do by Creditfix?
Stephen says
I had an Iva which was completed and Certified in September 2013, in the last year i moved my SIPP pension in to an investment through my pension company, being under 55 i did not have access to to funds only able to transfer them. the company who dealt with this and the investment company have gone bust , and liquidation, i believe the company was false and was ill advised.
The FSCA are looking at compensation to get some money back but say the IVA trustee could have access to any compensation, even tho i didn’t have the money as a windfall and the investment was only accessible at the age of 55.
Could you shed any light on this, as i would rather return the money to a pension for my retirement.
Sara (Debt Camel) says
I am very sorry to hear you have been a victim of this sort of pension scam.
“I had an Iva which was completed and Certified in September 2013, in the last year i moved my SIPP pension in to an investment ” can I check what the phrase “in the last year” refers to here? did you do this in 2012/3 or in 2017?
Tony says
Hi Sara
I am in the process of trying to source my final payment of my IVA which is to the value of £14,109.00. Having drawn blanks with raising finance or a remortgage I`ve been told that when I reach 55 I can draw my private pension to clear my final payment. I`m not 55 until April next year so for now I`m thinking of asking for a 10 month extension and to keep making my monthly payments then clear the remainder with my pension. My pension is only £20,621.00 so it wont leave much but if I do this will they take the remaining £6000.00 from me as available money and also will I be taxed on taking the money to clear the IVA if this is the way chosen
Thanks for any advise you can give
Sara (Debt Camel) says
Is this final payment specified in your IVA – that would be unusual. Or are you just being asked to release equity?
Tony says
Hi Sara
I`ve been instructed that I need to source funds to the whole of my share of the equity
Tony says
Could you do a quick calculation for me please Sara.
I`m in a joint mortgage and only me is on an IVA.
Our house is valued at £175,000. and left on my mortgage is £146,000
Can you calculate what my share of the equity is that I need to find for my final payment.
Thank you
Sara (Debt Camel) says
See Equity release in an IVA – that has a calculator.
But read the whole of that article. It would VERY unusual for you to have to release the whole amount of your equity – you are normally allowed to keep 15%. And you should only be asked to get a remortgage – if you can’t you just have to pay an extra year of payments.
There should be no need for you to have to use your pension – which would be very expensive for you as yopu have to pay income tax on the money you are taking out.
Tony says
Thanks for your reply Sara
I`ll read through your article.
I put my figures into your equity release calculator and it calculated below £5000 so nothing to pay. I’ve previously spoke to my IVA company and asked them if I should only be paying 85% of my equity share and they said I need to pay the whole of my share. Also I mentioned the 12 month extension to them as I can`t remortgage, raise finance or get a 3rd party input but they told me that I would need to pay the whole of my share over however many years it would take to pay the £14109.00.
Sara (Debt Camel) says
You need to read your IVA documentation. What they are saying isn’t impossible but it is very unusual and you should have had this explained to you when you agreed to the IVA.
Ian says
Hello
Thank you for a fabulous website. My completion certificate on my Iva was 26/7/18 after early settlement. I then cashed in pensions after this date. My inland revenue letters still say they are sending copies to my Iva firm. Is there any way the Iva firm can touch the pension as it is after the date of completion? Can I get them removed as an ‘agent’ with the HMRC?
Sara (Debt Camel) says
I am not aware of any way your pension can be touched if you access it after your IVA is closed.
P Bevan says
Hi.
Just starting an IVA at age of 38. The repayments are based on my pay before overtime. I earn on average over the year £500 month take home in overtime. So a chunk of that will go toward the IVA. If I increase my pension contributions in work to bring the take home pay down to the 10% threshold barrier allowed to earn then surely that’s best way to go.
Sara (Debt Camel) says
Your IVA firm may not think that is reasonable… and most IVA firms check P60s at the end of the year so they will be able to see what has happened.
If your IVA hasn’t started, you need to decide if you are happy to proceed knowing it will take such a large amount of your overtime.
If it is already underway, talk to your IVA firm about your options, don’t try to evade the rules.
Christine Ley says
I am 59 years of age. Worked for probation service for 29 yes. Work are offering me Ill health retirement. I am in a IVA. I am in my 4th MTH of my 4th yr of my 6th yr IVA. I pay £309 MTH pet MTH. They have received at least £25.000 in PPI’s at the moment. What happens to my Iva’s, will my pension pot pay the remaining pot
Sara (Debt Camel) says
You have a house with equity? Will you be able to pay the mortgage on your pension?
Simon says
Hi and this is probably a very dumb question!
I am currently in an IVA (6 year term with 18 months remaining). My original debt was approx. £50k. I am now almost 62 years of age and owing to ill health and consequent low earnings, I pay and always have paid £70pcm, with no missed or late payments.
A good friend has offered to make payment to my IVA firm to clear this earlier and would be as a full and final offer.
Would this be possible?
Secondly, would the full and final offer/payment she makes be the balance of the original £50k debt or 18 (months) x £70?
Sara (Debt Camel) says
Read https://debtcamel.co.uk/iva-settlement/ which looks at your situation.
Jeffery says
My IVA was paid and finished over 5 years ago but i have been told by a company who are claiming on my behalf for mis information in reguard to moving a company pension to a private one that the IVA company must be informed because they will want their cut of any pension compensation i receive can you tell me if this is possible and if it is will i ever be debt free because of the iVA.
Sara (Debt Camel) says
who was your IVA with? You can contact them yourself and ask them – after 5 years many IVA firm may not have retailed your records.
john G says
My iva finishes in Oct I’m 51 will my pension be safe
Sara (Debt Camel) says
Yes, no problem.
Tony says
I’m 65, dissabled and have been advised to stop working. Four months ago entered I to an IVA for £20k, Ii saw no way of surviving the few years I have left.
Two weeks ago I was contacted by HMRC regarding NI payments and pension payout per week. This plus my disability is ok to survive on and pay my IVA.
They informed me that 27 years ago I had COPE out, to a private fund set up by my company . If I had known that I would not have done the IVA. This pot for me is life changing as I do not have another 10 years to live. My IP is aware ( but not of the pension because I did not know at the time. ) and I am classed as Vulnerable. What do I do ? I would like to use part of this pot to clear my IVA and be debt free for my last few years.
Should I just take the pot to a new bank and carry on as I am or let the IP know ?
This IVA and all I have been through is causing more stress ( on my 3rd heart attack ) this money would not extend my life but it would make my final years stress free. Please Please help …..
Sara (Debt Camel) says
Do you have a house with equity? Who is your IVA? How large is this pension pot?
TONY Wood says
Council disabled bungalow.
IVA Debt £20k
Pension pot £69k
On my IVA it says they have 50% of any draw down.
My IVA total repayment £5,300
50% draw down on £69k after tax would give them £27k . £7k more than the original debt. I would like to do Full and final, get rid of it and be free.
Freeman Jones.
Running since December last year. Still in my 4mths higher payment period.
Honestly, if I had known I would not have done IVA. The stress of them controlling my life for sixty months is too much .
Thank God for HMRC. X
Sara (Debt Camel) says
What 4 months higher payment period?
Tony Wood says
Tried to ring them today on hold for One Hour. Then was told would ring me back …. no call.
They added Council tax to the debts, I was not behind with it, in fact I was ahead. Told me they were going to pay it from my payments. Only owed £150 with four months to go !
Turns out they added £250 and put my payments up to £157 × 4 followed by 56 at £84. This is when I realised they were controlling, said I had to pay more as I was not paying council tax. Goes down when new bill comes in.
Sara (Debt Camel) says
I suggest you tell them that you would like to draw money from your pension pot to settle the IVA early and offer the sum of all your remaining IVA payments. Say that you will not be drawing any money unless they agree to this.
See what they say.
TONY says
Should I also mention that my Dr wants me to finish work Now, have an operation that I might not survive . The stress of them scrutinising my last few years could finish me off. Paying the IVA in full would confirm they will get all their money.
My IVA would show then as complete and my creditors would not be able to chase me.
Sara (Debt Camel) says
Yes, that is the reason why you want to end the IVA.
Tony says
Sarah ….. I did as you suggested and dipped my toes in the water with the IVA company. They were very nice …… almost too nice. They say they feel sure, but cant guarantee, that if I make the Full 5 years payment in One go, that the Creditors are likely to accept Full and Final. Can they decide after or during negotiations that they want to get hands on part of the remaining 75% ?My income for the next 12 months would drop because I would lose WTC and Housing Benefit.
I have a second option and that would be to take the remaining 75% minus emergency tax, and try to live long enough to get my State Pension in 17 mths time (66). My only source of income would be PIP due to the Caps.
The IVA company want a letter from Fund holder ,They told me to take money then they can make offer and I would pay
Option 1) pay up front full term of IVA .. end of.
Option 2) take my tax free to cover loss of benefits and continue with IVA
Sorry to bother you, but I feel attacked from all sides. I never asked for this, was not aware of its existence prior to IVA, it was HMRC who told me about it. It certainly was not mentioned in the 3 way HMRC/IVA live call !
Sara (Debt Camel) says
I suggest you say you don’t want to take the money out until it is agreed what is going to happen as this can affect not just your IVA but your benefits as well.
Ask them to propose Option 1 to your creditors and if they agree you will withdraw the money.
Tony Wood says
Thankyou Sara ….. will do
Sara (Debt Camel) says
To be clear, if you just take the money from your pension there is some risk, I can’t say how large, that your IVA form will claim that money and still say you have to carry on with the IVA payments. Thats why you want it agreed beforehand that you will only take it out if they will accept your offer to settle the IVA.
Tony Wood says
Perfect, that makes sense Sara. They have requested three months bank statements, doctors letter, letter from me explaining reasons plus letter from pension company. At this moment in time I will just send them pension update pointing out it is going down due to the world shares at the moment.
For some reason they say my IVA is over six, not five years. They say I need to make full six years payments at £84, £6,000 to be accepted along with my age and medical condition.
I will not touch it otherwise…….
Your a Star x
John Brown says
Could you tell me please if Purchase Life Annuities are protected from creditors? In the case of insolvency would a PLA be part of the bankrupt’s estate? If payments continue from the PLA to be paid to the official receiver and eventually pay off the debt would the PLA revert back to the person who bought it or is it lost for ever?
Sara (Debt Camel) says
Have you already bought a PLA? or are you thinking of doing this before you go bankrupt?
John Brown says
I already have one but I was concerned as to whether this would be exempt by the insolvency service if I were to go bankrupt.
Sara (Debt Camel) says
I am not aware of any particular rules about PLAs, my assumption is that they would be treated as normal income and so available to the Official Receiver as part of IPA payments for 3 years.
But if you have recently bought the PLA, the OR may object if it was thought you were using money that should have gone to your creditors. If at the time you bought the PLA your finances were ok, then you are unlikely to have a problem.
If you are 55+ (which most people who have bought a PLA are) then if you have any money in pensions schemes you need to take debt advice before going bankrupt.
And of course it is always a good idea for everyone to take debt advice about their options before going bankrupt. I suggest you talk to National Debtline on 0808 808 4000 about the PLA, your other pension arrangements, and the bankruptcy decision.
Bill says
Hi Sara, firstly can you advise me of the following? Are my war pension and disability pension all clubbed together for the purpose as income when agreeing to an IVA agreement
Sara (Debt Camel) says
My guess is an IVA firm will see them all as income.
BUT if you have a disability, you should also be allowed additional expenses for the cost of that disability. If you are unsure how large these should be, you should talk to a “free sector” debt adviser – not one of the IVA firms that only provide IVAs. Those IVA firms make all their income from selling IVAs and many do not act as though they have your best interests at heart.
StepChange is a good free sector debt advice agency that also sets up some IVAs for those clients where it is their best option. I suggest you talk to StepChange.
Unless you have assets to protect eg a house with equity, you should not be considering an IVA.
steven says
Hi i have a iva just over a year in i just been informed that a pension i transfered into was a scam and been told i can claim it back.
my question is dose that have to go to iva or can i re invest it in to a work pesion i have or dose it all go to the iva
Sara (Debt Camel) says
This claim would be from the FSCS?
Steven says
What dose that mean I can or can’t ?
Sara (Debt Camel) says
If your refund would be from the FSCS, you need to find out if it can be paid into your pension or if ti will be paid to you in cash outside your pension.
steven cookson says
it will be paid by solicitor acting on my behalf to me in cash i think but i want to then invest in back into my pension as i thought i was already doing earning money for when i retire
Sara (Debt Camel) says
you need to find out if there is an option to have it paid directly into your pension – this may not be possible but it is worth asking.
If it is paid to you in cash then it will probably be claimed as a windfall by your IVA firm – you need to talk to your IVA firm about this. If it is large, that may hopefully end your IVA?
Even if it not claimed by your IVA firm you may have difficulty in putting it back into your pension as there are limits of what you can put in each year.
Terri kane says
I have the same finished my iva over a year ago , and my miss sold pension is going to then , and taking money from it
Sara G says
Hi Sara, I have a claim, via a no win/no fee agent, through the FSCS for a mis-sold pension. I have no other provision for my old age, ie no other pension plan in place. Is the IVA firm (Step Change) likely to take all the compensation off me? My concern is that I currently receive WTC, housing benefit, PIP and Carer’s Allowance. Obviously, all those will disappear if I get monies from the FSCS (as presumably it is paid via PAYE). If Step Change take all those monies as well, I will have virtually no income, will not be able to afford to pay the IVA, which will then mean it fails and I am back to square one, laden with debt.
Sara (Debt Camel) says
Can I ask how old you are? And why you have an IVA not bankruptcy?
Sara G says
Hi Sara, I’m 57. I have an IVA because when I contacted Step Change on 2016, they advised me this was the best route. It is due to end in May 2022.
Dee8214 says
I’m 55 in 0ctober and 2yrs into an IVA what would happen if I draw down a small pension pot £2.5k that I have ? Thanks
Sara (Debt Camel) says
Unless there is a specific clause in your IVA allowing this, the money would be claimed as a windfall by your IVA firm. You should almost certainly not do this before your IVA ends.
Dee8214 says
Ok thanks the other thing I was thinking of was I also have 2 other pensions approximately 50k if I were to cash these would I be able to ask for settlement figures from my creditors and do you know if the Iva administrator would charge a fee? My debt at the moment is approx 30k
Sara (Debt Camel) says
You cannot settle the debts in an IVA direct with the creditors. You could say to your IVA firm that you are prepared to take money out of your pension if your creditors will accept a full & final settlement offer. You need to make it clear that you are not proposing to settle the IVA debts in full. If you do this you must not take the money out until your creditors have voted on this proposal.
Can I ask if paying the IVA is causing your hardship? If it is, have you looked at getting the payments reduced?
Are you buying or renting?
If making the payments is not causing you difficult, then it will often be a great deal simpler and cheaper for you to simply carry on making them. Taking money from a pension now may result in you paying extra tax. And settling your IVA early does NOT improve your credit score or make it easier to get a mortgage.
Dee8214 says
Thanks Sara the payments are manageable I currently rent – how long does the Iva stay on record for once it’s ended? Do you know if the Iva company can imposes a fee if I Ask them to offer a settlement?
Sara (Debt Camel) says
Your IVA will stay on your credit record for 6 years from the start date, even if it is settled early.
You will essentially gain nothing from settling your IVA early unless you have some reason to think that your situation will dramatically improve in the next 3 years? Honestly this is probably a seriously bad move for you… You could talk to a debt adviser about this – not your IVA firm. try National Debtline on 0808 808 4000.
Some firms do add on a charge for an early settlement offer but most don’t.
Andy says
I entered into a five year IVA, which originally was due to finish in Dec 2022, but will be extended by three months, as I have taken three payment holidays. Next year I turn sixty and am eligible to claim for my Royal Navy & Civil Service pensions. I will receive a one-off lump sum, plus monthly payments for the former pension. Not sure about the latter. Do I have to inform the IVA company of this extra “income” and can they increase my payments accordingly?
Sara (Debt Camel) says
Can you delay taking the pension until your IVA is complated? Because otherwise they will claim the one off lump sum for your creditors (unless there is something in your IVA to say your pension is excluded?)
Andy says
Many thanks for your reply.
I have to apply for said pensions, so yes I presume I can delay claiming them for a year. I wont lose any money, it will just be back dated.
To be honest I don’t know whether pensions are excluded or not. I cannot find any mention of them in any paperwork I have. However, I am going to ask them to send me a copy of Terms & Conditions/IVA agreement to see if there is anything mentioned. The thing is (and it is something that has just struck me), at least five years ago the pension age was increased from 60 to 65 in my job as a civil servant, so maybe they figured that I wouldn’t get it until 65 and therefore no need to mention it in any agreements. I’m loathe to ask them specifically as I don’t wish to flag it up.
Andy
Sara (Debt Camel) says
It is very unlikely that pensions were excluded unless you had had a discussion with the IVA firm about wanting to do this – it would have needed a change to the standard T&Cs in your favour.
I have to apply for said pensions, so yes I presume I can delay claiming them for a year. I wont lose any money, it will just be back dated.
That may well be correct but it may be worth checking with your pensions?
It sounds like the safest option is not to start drawing either pension until your IVA has been completed and you have the certificate. The lump sum is like to be claimed and the monthly payments would be treated as income and increase your IV A payments for the remaining few months.
Andy Collins says
Hi Sara,
Earlier last month (Nov) l contacted my IVA company over my annual income/expenditure review, which is normally due in December. I had done one earlier in the year, as l’d had a pay rise and was informing them as such, as per contract obligations. I was told as l’d done one earlier in the year l didn’t have to do another, plus l had only three (3) payments left to make. I was informed that once l’d made my final payment it would take several months before l would get my certificate. I was also informed that after my final payment l did not need to inform them of any increases in wages, regardless of having a completion certificate. My question to you is, on that basis, is it “safe” for me to apply for my pensions, after they have received my final payment?
Andy
Sara (Debt Camel) says
No, not unless your IVA has told you in writing that you can do this and it will be ignored for your IVA.
Otherwise wait until you have the IVA completion certificate.
Andy Collins says
Hi Sara,
Spoke to my IVA people yesterday and was told, once they receive my final payment, l have fulfilled my obligations as agreed. They will issue me with a letter saying so, which covers me until l get my certificate. As far as they are concerned, l need not inform them of any changes to my finances, as all payments will have been made
Jennifer wood says
I have had an accident and will be medically retired, i have 30mths left on iva. If the iva takes my lump s3will i still be able to claim universal credit
Sara (Debt Camel) says
Do you have a house with a mortgage? How much have you been paying to your IVA a month?
Do you have to take a lump sum on your retirement or could you use it to take a bigger pension?
Billy says
Last year I entered into an IVA owing £27000 on various Dept’s,it was agreed by myself and creditors that a pay a reduced some of just under £14000,£192 per month over 6 years,on January 2023 I can cash in 25 percent off my pension (around £9000,),by then I will owe them just under the £9000,am I paying off the from the £27000 or the £14000,if I decide to cash in,,many thanks
Sara (Debt Camel) says
How are the £192 a month payments going – easy or a struggle? Has your income gone up?
(These questions may sound irrelevant but they aren’t.)
Tom says
I am currently liasing with PayPlan and they have suggested to me an Iva.
I have 65,009 unsecured debt made up of loans, cards etc
I am full time working , have a mortgage of 130,000. I am 53
struggling now meeting payments with cost of living, energy rise, mortgage interest rate rise etc
However in just a little over 2 years I can drawdown from my pension tax free approx 100,000 and pay off my mortgage, that was the plan!
Do I start a dmp or an Iva ? I’m confused
can anyone offer first hand experience to help me
I think reading previous posts an Iva is right for me as a homeowner for protection but seems extreme to be tied into it for so long if my financial situation changes in 2 years time
Should I start a temporary Dmp with a view to settle my debts in 2 years time
I only have £100 disposable income a month to pay towards my debts now
Any advice much appreciated
Thank you
Sara (Debt Camel) says
did you tell PayPlan about your pension idea?
how much are Payplan suggesting for a monthly IVA payment?
your mortgage – is it currently on a fixed rate? when does that end? is this repayment or interest-only?
are you currently behind with any bills and have you missed any payments to the unsecured debts?
Tom says
Hi Sara
Yes I explained that to PayPlan and the advisor is going to get advice from IVA practitioner
They are suggesting £60 month payments
Mortgage is fixed until next December and is a repayment currently 814 @ 2.79%
I have missed several unsecured loan payments this month and not. With mortgage or ctax
Sara (Debt Camel) says
Is £60 all you can afford at the moment? Does the budget drawn up by the adviser take account of your energy bills rising in April? And council tax, broadband, mobiles etc…
£60 a month may sound great at the moment but will not be affordable when your mortgage rate goes up several hundred pounds next year. You CANNOT start an IVA on this basis.
£60 a month would also not be acceptable to your creditors unless you release money from your pension – at that point are PayPal expecting that you will repay your unsecured debts in the IVA in full? If they are, this sounds like a dreadful option for you. You won’t get any write off. PayPal pocket their large fees.
I am going to suggest an alternative for you to look at, then I think you should discuss this with a different debt advicer, one that does not provide IVAs so you can get an independent opnion:
– sign up to a DMP paying £60 a month at the moment
– look into affordability complaints against the loans, cards and overdrafts that you owe Some people have lent you massively more than is sensible… see https://debtcamel.co.uk/tag/refunds/ for more about thee with templates you can use. With any luck some of the debts may be decreased by affordability complaints.
– some may be sold to debt collectors which will be very good news as debt collectors are far more likely to accept a low offer to settle the debt. So in a few years you can offer to take money from your pension to settle the debts at a large discount.
– you will get defaults and have to deal with your creditors. But they aren’t likely to rush to court as you have so little spare income. And at least you avoid insolvency on your credit record for 6 years.
I suggest you call National Debtline on 0808 808 4000 about this approach.
Tom says
Thank you for your advice
The £60 I believe did not take into account rising costs in the future
I will not go down the IVA route as you recommend.
I will look into the DMP route and try and hang on for the next 2 years best I can , do you think that is possible in your experience?
Thank you
Sara (Debt Camel) says
I don’t know, what can you do to cut your expenses or increase your income? Do you have a spare room – a lodger would be tax free income?
But you can pay a token £1 to unsecured creditors if that’s all you can afford, or even nothing… don’t offer them more than you can afford now and cut that as soon as you need to. Do talk to National Debtline about this.
Shaun says
Hi I’ve been in an Iva for nearly 2 years paying £211 a month on debt of around £18000 , in 9 months I’m due around £9000 paid into a private pension from my parents , can my debt management take any money from this pension Please , I’m hoping not as I want my parents to take most of it through helping me out over the years as I’ve been back and forth living with them after 2 marriage break ups .
Sara (Debt Camel) says
What do you mean by “I am due around £9000” – do you mean that is the point at which you can choose to take money out of your pension?
Alison says
My IVA was written off in February due to being on benefits, I was 55in April. I didn’t know I had a pension as I moved around alot and forgot about it untill they traced me last year, if I take a lump some will I have to pay any to the IVA even though it’s finished ?
Sara (Debt Camel) says
who was your IVA firm?
when did your IVA start?