Those two limbs get muddled constantly, and a third one is not settled at all. What a protected trust deed is sets out the arrangement this all sits inside.

Here is the statutory route to the answer, where the word most in AiB’s guidance is doing real work, and the question this page will not pretend to answer.

Not where it is an approved pension arrangement you have not started drawing. The route runs through the definition of what a trust deed conveys, and then out into a different Act altogether.

The clause that does the work

The definition of a trust deed at section 228(1)(a) of the Bankruptcy (Scotland) Act 2016 conveys your estate other than the part of it that would not vest in a trustee, under this or any other enactment, were your estate sequestrated.

Section 167(1)(a) repeats the same formula. The words any other enactment are the door, and an adviser who checks only section 88(1) will get this wrong.

What comes through that door

Section 11(1) of the Welfare Reform and Pensions Act 1999 excludes rights under an approved pension arrangement from the estate where a bankruptcy order is made.

Section 13 of the same Act is headed “Sections 11 and 12: application to Scotland” and reads a bankruptcy order as the award of sequestration, and the estate as the estate for the purposes of the Bankruptcy (Scotland) Act 2016.

Those references to the 2016 Act were substituted for references to the 1985 Act with effect from 30 November 2016. Section 12 does the same job for unapproved arrangements, by regulations.

The chain in four links

The answer to the question people ask next follows from that. It does not differ between a sequestration and a trust deed, because the deed takes exactly what the sequestration would take.

Because the exclusion turns on the type of arrangement. AiB lists most personal and occupational pension plans among assets that do not vest, and an arrangement that is not an approved one is treated differently.

What most is doing

The wording in AiB’s guidance is careful rather than vague. An unapproved arrangement continues to vest unless the debtor obtains a court exclusion order or the trustee agrees that it will not.

AiB records that position in its bankruptcy guidance, relying on Cook v Accountant in Bankruptcy [2019] SC GLA 82. The same conveyance formula carries it into a trust deed.

The three states a pension can be in

The first and third rows cover the common cases. If you hold anything unusual, put the scheme name in writing to the trustee, and which debts cannot be included in a trust deed is worth reading alongside for the other side of the ledger.

Part 14 says nothing about pensions at all

That is worth knowing rather than alarming. The sections of Part 14 run from 162 to 193 and none of them deals with pensions, which is precisely why the exclusion has to come from the definition of what the deed conveys.

It is income, not estate, and the contribution is worked out from it. Section 168(5) applies the whole of your surplus income, meaning total income less allowed expenditure, for the benefit of creditors.

Why the distinction matters so much

The pot and the payments are governed by different rules. Protecting the first tells you nothing at all about the second, and this is the limb that costs people money.

AiB treats payments being received at the relevant date as income, relying on the same Cook decision. Section 168 then requires the deed to state that you will pay contributions from income at regular intervals during the payment period.

The assessment, and the floor built into it

The assessment uses the common financial tool, whose statutory power is section 89 of the 2016 Act, and the prescribed method is the Common Financial Statement.

Section 89(3) requires that the reasonable expenditure allowed for you is no less than any guaranteed minimum pension income. Sections 89(4) to (6) require an allowance for aliment and for relevant obligations, though it need not match a subsisting order.

Contributions cannot be drawn from Universal Credit, Social Security Scotland benefits or tax credits, although those are taken into account in assessing other income. How trust deed monthly payments are calculated sets out the whole calculation.

The published sources do not settle it, and this page will not guess. What is established is that rights under an approved arrangement you have not drawn are outside the estate the deed conveys, and that a pension already in payment is income.

What is established

• Rights under an approved arrangement you have not drawn are outside the estate the deed conveys.
• A pension already in payment is income, and the whole of your surplus income goes to creditors.

That is the whole of what the published sources establish on this question. Everything past it is set out below as a question rather than as an answer.

What is not established

How section 167(1)(b), which binds you to convey estate acquired in the four years beginning with the date the deed is granted, applies to money drawn from a pension during the deed is one of the things the published sources do not settle.

The bankruptcy answer runs through a debtor contribution order, and there is no such order in a trust deed. So the sequestration material does not transfer.

Anyone telling you that drawing a tax-free lump sum during a trust deed is safe is going beyond what the published sources support.

What to do instead

Get your trustee’s position in writing before you draw anything at all, and take independent advice as well. This is a decision that cannot be undone.

Drawing without telling the trustee also runs into the disclosure rules. Every asset must be declared whether or not the trustee intends to realise it, and AiB warns that deliberate non-disclosure may constitute a common law offence.

Nothing in Part 14 of the Act gives a trustee that power, because Part 14 contains no pension provision of any kind. That is not the same as a guarantee, because a trust deed is also a document with its own terms.

Read the deed itself

The statute sets the framework and the deed you sign fills it in. You are entitled to read every term before you sign and to ask what each one means.

Section 167(3) requires your trustee to give you a debt advice and information package and a trust deed information document, and to allow you adequate time to consider them. How you apply for a trust deed in Scotland sets out that stage.

If you are told otherwise

If a provider tells you that you will have to draw a pension to make a trust deed work, ask for that in writing. Then take it to a free money adviser before you go any further.

A free adviser has no stake in whether you sign. Whether to use a free debt charity or a paid debt adviser covers the difference.

Your trustee reassesses. AiB’s guidance requires the financial position to be reviewed at least annually, and a change in income is picked up in either direction.

What the review does

Where income rises or expenditure falls, the contribution should be adjusted. Where income drops, a material change of circumstances may warrant modifying the contribution or the repayment timeframe.

Section 180 requires the trustee to notify AiB of any modification to the payment period. What happens if you get a pay rise during a trust deed covers the mechanics of a review.

Tell the trustee rather than waiting

Retirement changes your income, your expenditure and often both at once. Reporting it when it happens is better than having it found at the annual review.

The sanction for not reporting is not a fine. Your discharge depends on a trustee statement that you met your obligations and co-operated, which what happens if you miss a payment on your trust deed explains.

Pension contributions are part of the expenditure your trustee assesses before the surplus is worked out, so whether a particular contribution is allowed is a decision on your figures.

How the expenditure side works

Expenditure is measured against trigger figures published as part of the Common Financial Statement, covering categories such as telephone, travel, housekeeping and other costs, with no trigger figure for rent or mortgage. AiB administers the tool and last revised those figures on 1 April 2025.

A trust deed trustee may allow expenditure above a trigger figure where satisfied that it is reasonable. Evidence is what makes that argument.

One caution about large contributions

Section 101 of the 2016 Act lets a trustee in a sequestration apply to the court to recover excessive pension contributions that have unfairly prejudiced creditors.

That is a sequestration provision rather than a trust deed one. It is quoted here as an indication of how the law views large contributions made while creditors go unpaid.

The list to take to the meeting

Getting the pension answer first costs nothing and can change which solution you choose. Which debt solution is best if you have a wage arrestment compares the routes.