DROs opened to
those with small pensions
Independent money advisers have welcomed the formal publication
on 23 rd March of a new Insolvency Service consultation aimed at
opening Debt Relief Orders (DROs) to people who have a small pension.
The consultation was launched by Business Minister, Ian Lucas
who attended Citizens Advice Bureau in Hackney on Tuesday, where
he heard first hand the problems that those in debt are facing. He said:
“Debt Relief Orders (DRO) are a low cost and effective way of
avoiding bankruptcy and since they’ve been introduced they have
already helped some of the most vulnerable people in debt sort out
their finances. Today we are consulting on a common sense change
to make these orders more accessible to the people they were
designed to help.”
The proposed changes are in response to concerns expressed by
debt advice agencies that vulnerable people with small amounts of
debt are still struggling because they are unable to obtain a DRO
because of the present “asset” value of their future pension.
Sue Edwards, Head of Consumer Policy at Citizens Advice said:
"We are really pleased the government has acted quickly
on this. Being ineligible for a Debt Relief Order because of a
small amount of money in a pension has been a major issue for some
of our most vulnerable debt clients who could otherwise benefit
from the fresh start a DRO could offer"
Malcolm Hurlston, chairman Consumer Credit Counselling Service said:
“One in eight of our clients are denied access to DROs, often
due to a small pension fund which is unlikely to be realised for
many years. Action taken quickly to change the eligibility rules
in favour of these clients will benefit many vulnerable people
desperately trying to get back onto a sound financial footing.”
Steve Johnson, Chief Executive of AdviceUK, said:
“Our advisors have seen growing number of clients who are
prevented from applying for a Debt Relief Order because of the way
in which pension funds are treated. Change is urgently needed to
ensure that these vulnerable consumers can benefit from the relief
from unmanageable debt that a DRO affords.”
Sallie Johnson, Professional Development Manager for the
Institute of Money Advisers said:
“The IMA joined other partners within the ‘free to the client’
debt advice sector to carry out a joint piece of research which
showed that the vast majority of people who were excluded had very
small pension funds and had a considerable number of years before
they could be accessed. We very much welcome this consultation and
hope that the outcome will allow a fairer access to this debt
relief measure.”
Debt Relief Orders were introduced in April 2009 following
research that identified that there were people in long term debt
difficulties who had nothing to offer their creditors and who
could not afford to make themselves bankrupt.
Delivered in partnership with the professional debt advice
sector, they provide low cost, easy access to debt relief for
those overwhelmed by relatively low levels of unmanageable debt.
They are designed to provide a fresh start for the most vulnerable
people trapped in debt.
There are strict eligibility criteria of assets less than £300,
debts no more than £15,000 and surplus income of less than £50 per
month. Currently, if someone has a pension that is over £300, they
are not eligible to apply.
Full details of the consultation document may be found here:
http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/DROconsultationComplete.pdf
Ins/Coms/86
Notes to Editors
1. The Insolvency Service administers the insolvency regime
investigating all compulsory liquidations and individual
insolvencies (bankruptcies) through the Official Receiver, to
establish why they became insolvent. The Service also authorises
and regulates the insolvency profession; deals with
disqualification of directors in corporate failures; assesses and
pays statutory entitlement to redundancy payments when an employer
cannot or will not pay employees; provides banking and investment
services for bankruptcy and liquidation estate funds; and advises
ministers and other government departments on insolvency law and
practice.
2. Further information about the work of The Insolvency Service
is available from www.insolvency.gov.uk
3. Media enquiries should be directed to: Denise Rawls, Press
Office Manager, Telephone: 020 7674 6910 or Ade Daramy, Press
Officer, Telephone 02 7596 6187 Insolvency Service, 21 Bloomsbury
Street, London WC1B 3QW
Contacts:
Ade Daramy
Phone: 020 7596 6187
ade.daramy@insolvency.gsi.gov.uk
Lynne Nasti
Phone: 020 7674 6910
lynne.nasti@insolvency.gsi.gov.uk