Surviving IVA trusts – the ongoing saga

Kathryn Maclennan and Ian Tucker explore the possibility of pension mis-selling claims within the realm of IVAs.

The principles in Green v. Wright [2017] Bus LR 1070 are now well established and have routinely been applied by IVA Supervisors to PPI mis-selling claims. In the absence of any express provision to the contrary any trust created under the IVA terms will survive completion or termination. Since the cut off for PPI claims in 2019 there has been little scrutiny of what else, if anything, would fall into an ongoing trust.

Many IVAs catch claims vested in a debtor at the commencement of the IVA whether by bespoke wording or as a result of the IVA being an ‘all assets’ arrangement (as provided for in clause 27 of R3’s standard conditions for IVAs (v4).

‘Property other than excluded assets belonging to or vested in the debtor at the date of commencement of the arrangement which would form part of the debtor’s estate in a bankruptcy shall be subject to the arrangement and be an asset thereof.’

The key issue is what is excluded. By virtue of s11 of the Welfare Reform and Pensions Act 1999 (WRPA) a bankrupt’s ‘rights… under an approved pension arrangement are excluded from his estate’. A first glance it may seem odd to speak of pension mis-selling claims as a potential asset within an IVA. However, the rights that are excluded under the WRPA (the excluded rights) have to be distinguished from a right of action that is a misselling claim.

Why does this matter?

The area of mis-selling or negligent pension advice is now coming to the fore particularly via the Financial Services Compensation Scheme (FSCS), which pays compensation in situations where an authorised firm is unable, or is likely to be unable, to pay claims made against it for mis-selling/negligent advice.

If the claim is comprised within the IVA and the trust continues it is only the supervisor who can give valid receipt for any funds due as a result of that claim.

 Examples of a pension mis-selling claim

What amounts to a pension mis-selling claim is beyond the scope of this article, but a wide net was cast in the key case of Adams v. Carey as to the application of s27 Financial Services and Markets Act. The hallmarks of this case were the involvement of an unregulated introducer who:

  • recommended to Mr Adams that he invest in a specific (unregulated) product. In and of itself, this was unobjectionable, however the recommendation carrying with it advice that he transfer his pension from his existing provider to a specific SIPP – which was objectionable; and
  • arranged a transfer of pension funds from one SIPP to another – here completing the SIPP application form and assisting with AML checks – with the transfer clearly ‘bringing about’ the relevant investment; it was for that purpose.

Either ground (subject to the court granting relief) entitled Mr Adams to recover the money he transferred together with compensation for the loss that he suffered.

Claims will also frequently arise where a SIPP provider gives negligent advice, fails to give advice to unsophisticated clients in circumstances where it was under a duty to advise, or mismanages the investment.

Are pension mis-selling claims excluded?

This key question has yet to be considered by the courts.

Arguments that they are excluded:

  • the purpose of pensions being excluded is to prevent individuals retiring into penury, and to financial burden on the state;
  • a claim represents the pension monies and is often calculated by reference to the shortfall in the debtor’s pension pot; and
  • the wording of s11 is wide, referring as it does to ‘rights … under an approved pension arrangement’

Arguments that they are not excluded:

  • the statutory purpose underlying the Insolvency Act 1986, and so the definition of a bankrupt’s estate, is to make all of a debtor’s property capable of realisation, subject to certain specific exceptions, vest in the trustee;
  • as a matter of interpretation the cause of action, whether statutory, tortious or contractual sounds in damages. The damages, when recovered, would be out-with the wrapper of any pension scheme. They would not have the legal or tax treatment of monies inside a pension scheme but would be available to the individual to spend them as they saw fit. There would be no guarantee of meeting the policy objective of s11 and relieving the burden on the state;
  • if an individual recovered the monies, and was then made bankrupt, they would be a bankruptcy asset; and
  • the wording of s11 may be wide, but it requires interpreting according to its terms. it does not say rights ‘related to’ a pension scheme – only those under it.


Current and former supervisors of IVAs need to be live to this issue and their obligations to creditors inherent within the supervisor/trustee role. There should not be any assumption that just because the word ‘pension’ is involved in a claim the supervisor is automatically precluded from being involved. In many cases the converse will be true.

Litigation in this area is inevitable, and a clear resolution would be welcome.

Kathryn MaclennanIan Tucker

Kathryn Maclennan is a partner and head of insolvency at KBL Solicitors.

Ian Tucker is a barrister at Exchange Chambers.