How will an IVA affect my pension?

The primary aim of an Individual Voluntary Arrangement (IVA) is to address your Non Priority debts at a level you can reasonably afford within your monthly budget. However, whilst reaching an affordable monthly contribution to the IVA takes into account all of your essential living costs, those being the costs you have to cover in order to safeguard your property, and keep food on the table etc, there needs to be an understanding that you will prioritise your debt repayments ahead of other payments such as pension contributions – known as ‘discretionary’ expenditure.

Having said that, creditors are fully aware and accept that it may be necessary to maintain a certain level of pension contribution each month in order to ensure that your pension fund is sufficient to provide for you in retirement, and therefore a Protocol agreed between the creditors and the Insolvency profession allows for the following:

· Where a debtor is aged below 55 at the date of entry into the IVA, only minimum contributions to the pension scheme should be allowed. This does not mean therefore that all contributions must cease or that the pension should be frozen, but more that there is an acknowledgement that such contributions should be reduced in order to boost the contributions into the IVA and thus clear more of your debts.

· Where the debtor is aged 55 or above at the date of entry into the IVA, an average of the last 6 months’ pension contributions should be allowed, subject to a contribution limit of £75 above the minimum pension contribution allowed by the scheme per month. This recognises the need at this time of life to keep topping up the fund before retirement.

Of course, once out of the IVA, there is nothing to stop you then increasing the contributions to the pension thereafter.