Extension of debt help to small pensions

It is proposing changing the eligibility criteria for a Debt Relief Order (DRO) so that people with small pension pots can take them out.

DROs were introduced in April last year as a low-cost alternative to bankruptcy for people with debts of less than 15,000, assets of less than 300, rising to 1,000 if they had a car, and less than 50 surplus income a month.

But insolvency practitioners complained that many people were being prevented from taking out one of the orders because they had built up a small pension pot, pushing the value of their assets above 300.

Business Minister Ian Lucas said: "Debt Relief Orders help people who would otherwise be trapped in poverty to get back on their feet.

"Following representations from independent money advisers, I'm proposing a common sense change to ensure that vulnerable people with a very small pension pot are treated fairly. The Government will consult on this change shortly."

Only around 2,000 DROs were taken out during the first three months following their introduction, after they took longer to process than was initially anticipated.

But by the final three months of last year, take-up of the orders had more than doubled to 5,348.