The Court of Appeal (CoA) addressed a critical question of the interplay between creditor rights and the protection of occupational pensions under English Law.
Background:
Mr. White was the owner and controller of Lloyds British Testing Ltd. which founded in 2002. He is also the only member of a small self-administered occupational pension scheme established twenty years ago. Pursuant to the 2006 Deed of Amendment, the scheme was to be governed by the terms of Standard Life's General Rules coded SAS71.
Upon reaching his normal minimum retirement age in 2017, Mr. White had to elect that £1 million of the amount available to him under the scheme should be designated as a Drawdown Pension Fund under Rule 6A(6) of the scheme’s rules. He had previously taken out a lump sum of £250,000, leaving £750,000 in the drawdown fund.
His company went into administration in 2016 and then into insolvent liquidation in 2017. The unpaid claims of creditors were in excess of £3 million and included a large number of small trade creditors. Manolete – a litigation funder – took an assignment from the liquidators of claims for breach of fiduciary duty owed by Mr. White to the company due to a series of substantial payments made in the 20 month period before the company went into administration.
In 2022, Manolete obtained a judgement against Mr. White for £996,014.22. Mr. White failed to make any payment towards the judgement debt, so Manolete applied to the High Court for an order requiring Mr. White to exercise his rights under the scheme and instruct payment of his pension to be made directly to Manolete.
The High Court sided with Manolete, ruling that Section 91 of the Pensions Act 1995 did not prevent it from making an order requiring Mr. White to draw down monies and use the pension pot to satisfy the judgement debt. Mr. White appealed.
Decision:
The CoA allowed Mr. White's appeal, overturning the High Court's order that required him to access and redirect his entire occupational pension fund to a designated bank account controlled by Manolete. After reviewing the legislative history and the purpose behind the provision, the CoA concluded that the order was prohibited by Section 91(2) of the Pensions Act 1995 as the order would effectively prevent Mr. White from receiving his pension for personal benefit.
The Court reaffirmed that the protective intent of Section 91 results in occupational pensions being generally immune from creditor claims, barring specific exceptions such as Section 91(5)(d). Indeed, the term ‘receiving’ their pension should be understood as being ‘for their own benefit’.
Lord Justice Snowden went further and held that, even if the order had not been expressly prohibited by the statute, it could never be just and convenient for the Court to craft an order for the purpose of evading a statutory prohibition.
Implications:
This judgement made it clear that pension pots lie beyond the reach of creditors unless one of the specific exceptions in Section 91(5)(d) applies. Section 91 of the Pensions Act 1995 contains a comprehensive protective intent which is very difficult to set aside. This decision highlights the central importance of pension security in the UK by guaranteeing retirees’ financial stability and insulating occupational pensions from creditors.
For creditors, it is now clear that they face a higher mountain in any future pursuit of pension funds. However, this ruling could also provide an incentive for directors to act in wilful breach of their duties in the knowledge that their pension scheme would be protected.