Personal insolvency regime could put pension contributions at risk

Ireland’s workers who fund their own pension schemes have been told that their contributions are at risk if they seek a debt compromise under the new personal insolvency regime.
 
Under a new personal insolvency arrangement (PIA), Irish workers or the self-employed, who fund their own pensions, will be forced to halt these payments and instead divert this cash towards dealing with outstanding debts.
 
The new Insolvency Service of Ireland is due to open in June, when as many as 20,000 heavily-indebted workers are expected to initiate proceedings for a debt write-off compromise.
 
Jeremy Mitchell, of the Independent Trustee Company, confirmed fears that the self-employed and private sector workers will be worst affected.
 
"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," he said.
 
"The PIA agreement ensures who gets hit and will simply depend on the structure of their pension."
 
However, Mitchell confirmed that employees fortunate enough to have their employers make pension contributions on their behalf will not have to halt their monthly contributions to the fund.
 
A PIA is designed to last up to seven years, with the Insolvency Service setting out income guidelines on what people can comfortably live on.
 
Public sector workers, such as gardai, nurses and civil servants will not have to stop paying into their pension plan. With the State funding the bulk of any pension fund, workers are also forced to contribute as a condition of their terms of employment.
 
Lorcan O’Connor, Insolvency Service head, revealed the new office will be in a position to analyse payments made into pension schemes dating back three years. This is in order to pinpoint attempts to divert funds from lenders if someone is entering a formal debt arrangement.

Date published 16 May 2013 | Last updated 16 May 2013