Monday 14 October 2019

Pension contributions at risk under new personal insolvency debt deals

Lorcan O’Connor: Insolvency Service can go back three years to check on payments
Lorcan O’Connor: Insolvency Service can go back three years to check on payments
Charlie Weston

Charlie Weston

THE self-employed and workers who fund their own pensions have been warned that their pension contributions are at risk if they seek a debt deal under the new personal insolvency regime.

But politicians, public servants and many bank workers are unlikely to be impacted if they seek to have mortgages and other debts restructured and written off under a new personal insolvency arrangement (PIA).

Under a PIA, workers and the self-employed who make their own pension contributions will have to halt these payments, according to Jeremy Mitchell of the Independent Trustee Company.

Instead, these people will have to divert any money that was going to build up a retirement fund, to deal with their debts.

The new Insolvency Service of Ireland is expected to get up and running next month, when around 20,000 heavily indebted people are set to apply for debt write-off deals.

But Mr Mitchell said the way the new system will work out will punish many workers in the private sector and those who work for themselves.

"Certain workers will be allowed to continue to fund for their retirement while others will be forced to stop and divert their pension saving to the banks and other creditors for seven years.

"The PIA agreement ensures who gets hit and will simply depend on the structure of their pension," Mr Mitchell said.

He said that those lucky enough to have their employers make their pension contributions for them will not end up having to halt their monthly contributions to their fund.

A PIA can last up to seven years, with the Insolvency Service setting out in income guidelines on what people can live on.

But workers in the public service, such as gardai, nurses and civil servants, will escape being told to stop paying into a pension.

Mr Mitchell said with these workers the State funds the bulk of the pension, with workers also forced to contribute as a condition of employment.

And people who work in banks and other large companies where the employer funds most of the contributions to a defined benefit pension will also escape being hit.

Lower and middle-income workers who 100pc fund their own pension will be the biggest losers, the Independent Trustee Company executive said.

Insolvency Service head Lorcan O'Connor said the new office can examine payments made into a pension scheme going back three years to see if there has been an attempt to divert funds from lenders if someone is entering a formal debt deal.

Irish Independent

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