In the case of Manolete Partners PLC v White, the Court of Appeal has overturned a High Court judgment which would have required a member to draw down his entire pension fund from his small self-administered pension scheme (SSAS) in order to enable the member's creditor to enforce a judgment debt.  The Court of Appeal held that the High Court order breached section 91 of the Pensions Act 1995 which provides that no order can be made by a court if the effect would be that a member would be restrained from receiving a pension under an occupational pension scheme. 

As a result, it is now clear that a member cannot be required to put their benefits into payment or to opt for the maximum amount of benefit to be paid as cash for the purposes of making funds available to a member's creditors.

Background facts and High Court judgment

Mr White was the owner of a company and the only member of a SSAS established by the company for his benefit.  The company went into insolvent liquidation.  The liquidators had a claim against Mr White for breach of fiduciary duty.  Manolete Partners PLC (Manolete) took an assignment of the liquidators' claims against Mr White and obtained a judgment against Mr White for about £1 million.  After the judgment remained unsatisfied, Manolete obtained a High Court order which required Mr White to exercise such rights as he might have to draw down his entire pension fund and direct payment to a UK bank account in his own name.  To enable Manolete to enforce its debt, the judge also ordered Mr White to give Manolete details of the nominated bank account.  The main legal question was whether or not such an order would breach the prohibition in section 91 of the Pensions Act 1995 (s91) which prohibits a court from making an order " the effect of which would be that he would be restrained from receiving that pension". The judge considered that his order did not breach s91because the order required the pension fund to be paid into a bank account in Mr White's own name and therefore could not be said to have the effect of restraining Mr White from receiving his pension.  The judge considered that it made no difference that the order was motivated by the objective of enabling Mr White's pension fund to be used to satisfy a judgment debt against him.

The Court of Appeal decision

The Court of Appeal allowed Mr White's appeal, holding that the order made by the High Court was prohibited by s91.  It said that the purpose behind s91 was that a member's entitlement to pension should be immune from attachment to pay the claims of creditors (subject to limited exceptions not relevant to Mr White's case).  

The Court of Appeal considered it notable that s91 was drafted in terms that prohibited the making of an order "the effect of which" would be that a member would be restrained from receiving the pension saying that the court should look at the substantive real world result of any order which it is being asked to make. It should not simply focus on the form of the order in isolation.  The Court of Appeal considered that the reference to a member receiving their pension should be read as a member receiving their pension for their own benefit.

Our thoughts

In this case the member's pension rights were held within a SSAS.  The rules of such schemes will typically give the member a high degree of control over the form and timing of benefit payments.  However, had the High Court judgment not been overturned, this could have paved the way for the creditors of members of larger occupational pension schemes to seek court orders forcing members to take the maximum cash available to them as soon as possible to enable enforcement of a judgment debt.  The Court of Appeal's judgment clarifies that such orders are not permissible in relation to occupational pension schemes.