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Protected Trust Deeds And Your Pension

Last week it was announced that a retired person in the UK owes, on average, £8180. Scottish pensioners owe more than the UK average, with the figure of £8890 emerging from MGM Advantage research. With debt increasingly being increasing prevalent amongst the retired in Scotland and elsewhere, we look at how Scottish protected trust deeds interact with retirement pension incomes and entitlements.

Many pensioners in Scotland have debts vastly in excess of the already considerable sum of £8890. As so many retired people live on reduced fixed incomes its’ sadly inevitable that debt will become a financial headache for some of them. Living on pension income isn’t necessarily a barrier to accessing debt help or debt relief. Options such as protected trust deeds are available irrespective of whether or not you are dependent (or partly dependent) on pension income.

One key factor for pensioners will be that protected trust deeds require that a contribution be made towards the debts. This contribution can be funded through the disposal of assets, but more typically protected trust deeds are funded from surplus income. It is therefore likely that protected trust deeds may not be suitable for persons living on the state pension alone. Pensioners with additional pension income and/or working income may find that they have sufficient disposable cash to fund a Scottish trust deed (or other similar contributory options like the debt arrangement scheme).

A worry for some with private pension income, or who intend to retire soon, is that entering into protected trust deeds will result in the loss of the funds that they have built up in their pension. With the exception of some very extreme and unusual cases, funds in pensions are typically out of the reach of the trustee of a protected trust deed. The income that you draw from a pension may be used to help repay your creditors, but the capital built up in the fund will almost always not be.

Persons entering into protected trust deeds do need to be careful about receiving retirement pension lump sums. Whether this is done voluntarily, or an employer automatically pays such a lump sum at a certain age, once the money has been paid a pensioner may be asked for a contribution from such a received lump sum by their protected trust deeds provider.

How about if you are currently working, thinking about starting protected trust deeds, but intend to retire during the course of the next three years? You’ll need to think through what the ramifications for your ability to make your trust deed payment will be once you replace your working income with pension income. This will need to be planned through with the protected trust deeds provider in advance to ensure that you are not starting a process which you’ll be unable to complete.

Whether you are reliant on pension income or not, protected trust deeds represent just one of the options for dealing with problems debts in Scotland. For further advice you may wish to visit our protected trust deeds forum where experts are on-hand to deliver advice on all of the options that might be suitable for your needs

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