Approval of the Bankruptcy (Desastre) (Pensions) (Jersey) Regulations 2006.

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A decision made (05/10/2006) regarding Approval of the Bankruptcy (Desastre) (Pensions) (Jersey) Regulations 2006.

Subject:	Approval of the Bankruptcy (Désastre) (Pensions) (Jersey) Regulations 2006
Decision Reference:	MD-E-2006-0173		Exempt clause(s):
Type of Report: (oral or written)	Written		Person Giving Report (if oral):	n/a
Telephone or e-mail Meeting?	n/a		Report File ref:
Written report – Title	Approval of the Bankruptcy (Désastre) (Pensions) (Jersey) Regulations 2006
Written report – Author (name and job title)	Paul de Gruchy, Director Finance Industry Development
Decision(s): To approve the Regulations and have the Regulations lodged au greffe for debate at the earliest opportunity.
Reason(s) for decision: The Regulations will permit a bankrupt to retain certain benefits (provided they are not excessive) that he may have accrued under pension arrangements. This is in accordance with the public policy that people should be encouraged to make their own pension provisions, and that contributions that people make to pensions should not be viewed – by either debtors or creditors - as being available to meet day to day liabilities.
Action required: The Director, Finance Industry Development to advise the Publications Editor and the Greffier of the States to lodge the Regulations at the earliest opportunity.
Signature: Senator P.F.C.Ozouf (Minister)		Date of Decision: 5 October 2006

Approval of the Bankruptcy (Desastre) (Pensions) (Jersey) Regulations 2006.

MINISTER FOR ECONOMIC DEVELOPMENT

BANKRUPTCY (DÉSASTRE) (PENSIONS) (JERSEY) REGULATIONS 200- (the “REGULATIONS”)

1 THE ISSUE

1.1 The Bankruptcy (Désastre) (Amendment No.5) (Jersey) Law came into force on 1 August 2006. One of the provisions of that amendment was a new article permitting the States to pass regulations relating to the treatment of pension rights held by a person who is the subject of a désastre.

1.2 It is recommended that the Regulations be approved and lodged for debate by the States at the earliest opportunity, so that the treatment of pension rights of a bankrupt may be set out clearly in statute.

2 BACKGROUND

2.1 Under the Bankruptcy (Désastre) Law (the “Law”), upon being declared insolvent, all of the property of a debtor becomes available to satisfy his creditors. Following the introduction of the Amendment, this general principal is subject to any regulations the States may pass in relation to a debtor’s pension arrangements.

2.2 The rights that a debtor may have to a pension are a complex matter. Most obviously, the rights may be contingent upon the debtor reaching a certain age that may be many years in the future, and so any attempt to “liquidate” those pension rights is likely to incur significant penalty fees and is unlikely to secure significant assets. In addition, there is a public interest issue insofar as it is not clear that it is desirable to deprive an insolvent person of their rights to a future private pension, particularly given the demographic changes occurring in society and the resultant challenges in the long-term funding of the States pension.

2.3 The Regulations propose taking a similar approach to this matter as that taken in the UK. The Regulations propose that, when the Viscount takes in the assets of a debtor in a désastre, certain pension benefits should be excluded from the debtor’s estates. These are, in brief, pension schemes approved under the Income Tax (Jersey) Law, those granted by a foreign government to its employees, or annuities purchased in relation to either of those arrangements. In addition, where the debtor has other pension rights (for example, a private pension that he accrued while resident in the UK), the Viscount may enter into an agreement with the debtor in relation to how those assets are to be affected by the désastre: usually with a view to ensuring that the needs of the debtor and his family are adequately catered for in retirement.

2.4 It should be emphasised that the Viscount will continue to have a power, under Article 17D of the Bankruptcy Law, to recover excessive pensions contributions from a debtor. In other words, while the Regulations will permit a debtor to retain a modest pension that he or his employer has funded, there is no “loophole” that could be used by a person facing bankruptcy to place their assets into a pension and out of the reach of creditors. Any attempt would fall foul of the Law

3 RECOMMENDATION

3.1 It is recommended that the Regulations be approved and lodged au greffe for debate by the States at the earliest opportunity.

PAUL DE GRUCHY

Director, Finance Industry Development

4 October 2006

ANNEX

Bankruptcy (Désastre) (Pensions) (Jersey) Regulations 200-