Can I pay into a pension while I'm on an IVA?

Yes, you can pay a reasonable amount of your income into a pension while you're on an IVA with Freeman Jones.

At the start of an IVA, your income and expenditure are assessed to see how much 'disposable income' you have available to repay your lenders. Disposable income is the part of your income left over after you've paid for essentials including your mortgage or rent, your Council Tax - and your pension.

Agreeing the amount you can pay into your pension

An IVA can only begin if the owners of 75% of your unsecured debt value agree to it. One reason they could disagree is if they felt your contributions into your pension were too high. After all, entering an IVA means you're committing to repay your lenders what you can afford.

However, lenders would rarely argue with reasonable payments into your pension while you're on an IVA. As a rough figure, a contribution of up to the value of 4% of your income would normally be acceptable while you're on an IVA - although different lenders can have different ideas about this.

If you applied for an IVA with Freeman Jones, you would have a dedicated team of experts helping you to negotiate financial matters with your lenders. It's your Insolvency Practitioner's job to create a reasonable IVA proposal that they think your lenders would accept. And it's their job to negotiate with your lenders if they don't accept your proposal.

If you retire during your IVA

If you retired during an IVA and you received a lump sum from your pension, it would be considered an asset and you could be asked to use it to repay your lenders more of what you owe them.

How an IVA could help

If you're concerned about an IVA affecting your pension, or any other financial implications it could have, remember that it is a debt solution to help people who cannot afford their unsecured debts. It helps people who are struggling with debts they cannot afford to repay them in a reasonable amount of time.

An IVA writes off outstanding debt upon successful completion.

Homeowners may prefer an IVA over bankruptcy because it can prevent the sale of their home: instead, they may be asked to release equity in the 54th month. Releasing equity increases the size of your mortgage, but is often a part of bringing an IVA to a successful conclusion.

Remember that an IVA is recorded on your credit report, making it more difficult and/or more expensive to borrow money or obtain services like bank accounts for six years.

By Lucy Bower.