Can an IVA Take my Pension?
If you’re in debt, an IVA might help. It’s a formal agreement that can make repayments more manageable and write off some debt. But it’s a legal commitment, so it’s important to understand the details before going ahead.
If you’re over 55, you’ll need to think about how your pension fits in. In some cases, it could be affected.
This guide explains when an IVA might impact your pension, and what to look out for—so you can make the right choice for your situation.
What’s The General Rule With an IVA? #
An IVA usually lasts 5 to 6 years. It rolls all your debts into one monthly payment you can afford. While it’s running, you won’t deal with creditors or face bailiffs—so long as you stick to the plan.
After the IVA ends, and six years from when it started, you can start to rebuild your credit.
The key thing to know: an IVA can help clear your debt, but only if you keep up the payments. If you don’t, your IVA might fail. That means creditors can chase you again—so it’s vital to be sure you can stick to the terms before you start.
What About My Pension Plan? #
Since 2015, people over 55 can access some or all of their pension. This change gives more choice—but it can also raise questions if you’re in an IVA.
Most IVAs include a clause saying your pension is protected from creditors. That means your pension pot shouldn’t be touched.
But turning 55 during your IVA can create grey areas. If that happens, speak to your insolvency practitioner. They’ll explain how your arrangement works and whether any updates are needed.
In most cases, your pension is already protected. If not, a clause can usually be added to make sure it is.
Receiving Pension Payments When Your IVA Begins #
If you’re already getting pension payments, they’ll count as part of your income. Your insolvency practitioner will use this to set a monthly payment that covers your debts but still leaves you enough to live on.
Some creditors might ask you to cut back or stop your pension contributions during the IVA. But a good insolvency practitioner will speak up for you.
Most creditors want to recover what they can—but they also know your pension matters. With the right support, it’s often possible to agree a fair plan that lets you keep paying into your pension while dealing with your debt.
Can Creditors Take My Pension? #
In general, your pension is safe from creditors - especially with an IVA. All parties agree on a monthly payment amount, which doesn’t include money from your pension. As long as you meet your monthly IVA payments and let your IVA provider know if you’re struggling, you should be able to leave your pension until you reach retirement age.
Can I Use A Lump Sum From My Pension Pot to Pay Off an IVA? #
Some people use their pension to help with big costs—like moving home, paying for care, or clearing debts. If you want to use your pension to pay off your IVA early, this is called a ‘full and final offer’. It can help you close the IVA sooner. But there are a few things you’ll need to think about first.
What About When Retirement? #
If you rely on your pension for retirement, think carefully before using it to pay off your IVA.
You’ve saved for years to give yourself some peace of mind later in life. Using that money now could leave you short later on. Take time to look at your full financial picture. Make sure this choice won’t leave you struggling down the line.
How a Full and Final Settlement Might Impact Your Finances #
You can usually take some of your pension as a tax-free lump sum. But anything over the limit might be taxed. This could affect your finances for months—or even years.
If you claim benefits, your payments might go down too. It depends on your situation, so it’s best to check before making any decisions.
Things to Consider #
An Individual Voluntary Arrangement (IVA) can be a helpful way to deal with debt. For some, it’s the right option. But it’s not a quick fix—and it won’t suit everyone.
Before you decide, here are a few key things to think about.
Could My Pension Be Classed As A Windfall? #
If you’re thinking about using your pension to settle your IVA, it might help—especially if monthly payments are a struggle.
But be careful. Some IVAs include a pension clause. If yours does, taking money from your pension could count as a windfall. That means your creditors could ask for the full amount you still owe.
Always check with your insolvency practitioner before touching your pension. You may not even know the clause is there.
Missing a Monthly Payment #
Your IVA is based on what you can afford—factoring in your income and essential costs. But if you miss a payment, your insolvency practitioner could end the agreement.
If you’re struggling, don’t panic. You can ask for a payment break. You’ll need to show why you can’t pay right now.
If your creditors agree, you’ll get time to recover—then carry on with your IVA as planned.
Would You Like to Explore Your Options? #
At IVA Advice, we help set up Individual Voluntary Arrangements between people in debt and their creditors.
Our team gives straightforward support—so you can deal with your debts without putting your pension at risk.
We’ve worked with people from all walks of life. Whatever your situation, we’ll listen and help you explore your options.
Get in touch for free, no-pressure advice. We’ll explain how an IVA could affect your credit score, what your payments might look like, and answer any questions you have.