Pensions Are An Issue For Debt Relief Orders
Applications for the new Debt Release Orders which were introduced by the UK government in April have been much lower than was expected by the major debt management providers. A number of reasons have been suggested for this, and one of the most popular amongst industry insiders has been pensions.
A Debt Release Order is a debt management solution which became available this April, aimed at people with lower levels of debt and income than those eligible for IVA’s . To qualify for a DRO a person needs to owe less than 15,000, be unable to pay their debts and own assets of less than 300.
Pensions have become an issue with DRO’s as unlike in more established forms of insolvency, a pension is seen as an asset. With over 99% of pensions having a value of over 300, almost any kind of pension will disqualify a person from applying for a DRO.
Many in debt industry see this oversight on behalf of the government, as both IVA’s and bankruptcy do not usually involve pensions in any way shape or form. Many industry professionals are blaming the inclusion of pensions as a major reason why DROs have been so unpopular.
Reasons which have been suggested for the poor performance of debt relief orders include the low charges which companies are allowed to charge for Debt Relief Orders, and the limited number of organisations and commercial companies which have be allowed to process Debt relief orders. Also with current economic troubles, creditors are considerably more likely to agree an informal solution to people debt problems.
Whatever the truth of the matter, the poor performance on DRO against industry predictions has been notable. Mark Sands of KPMG stated that they had predicted that the uptake of Debt Relief Orders to come nowhere near their initial estimate of 150,000 before the end of the year.
