Number of people going insolvent falls

The number of people being declared insolvent in England and Wales fell last year to its lowest level for nearly a decade.
During 2014, just shy of 100,000 people were declared insolvent, either through bankruptcies, debt relief orders or individual voluntary arrangements (IVAs). It was the fourth consecutive annual fall, and the lowest figure since 2005.
As far as companies were concerned, there was an annual fall of nearly a quarter in the number going into administration, to 1,790.
Graham Horne, the Insolvency Service’s interim chief executive, said: “Today’s figures show the lowest number of personal insolvencies for some years.
“It is also good to see that more debtors have been able to reach agreements with those to whom they owe money through the use of IVAs.
“Corporate insolvencies have also dropped – especially the number of administrations, which are at their lowest since 2004.”
Steve Rees, of debt management company Vincent Bond & Co, said: “There were a total of 99,196 individual insolvencies in 2014 – a 1.8% decrease compared with 2013.
“While this news is good, it is not as impressive as last year’s results which saw a 17% decrease. This unfortunately shows the rate of insolvencies falling is lessening.”
Mark Sands, of Baker Tilly, said the fall in personal insolvencies was down to a number of factors.
“One notable trend is that creditors are increasingly engaging with debtors to find resolutions, so offers of informal repayment plans are increasingly being accepted over formal insolvency processes,” he said.
“We expect this downward trend in personal insolvencies to continue throughout 2015, although longer term the outlook is less certain.
“With continued low interest rates and falling inflation creating a feelgood factor, there is a danger that many will overextend themselves, and we are already seeing a significant rise in unsecured lending.”
Another warning came from Mr Rees, of Vincent Bond & Co, who said forthcoming changes to pensions could have an unexpected impact on those in debt.
“The expected changes to pensions which will come into effect in April may bring about an unexpected downside for people struggling with debt, as banks may be able to access the money in a pension pot to settle debts, leaving people with little or no pension for their retirement,” he said.
“The pension changes mean people will be able to access the money in their pension pots from the age of 55. This new access to money means that those wrestling with a debt problem and are of the age to withdraw from their pension pot may be tempted to withdraw early to pay off their debts.”
Brian Johnson, of chartered accountants HW Fisher & Company, welcomed the fall in the number of business casualties, but added: “A few warning lights remain stubbornly on. While company liquidations are back down to pre-crisis levels, seven years of pain mean some sectors remain very fragile.
“Many SMEs that supply large firms are being forced to accept ever-longer payment terms for their work, especially in the construction and retail chain sectors. This is putting a severe strain on cash-flow for businesses that are already under pressure.”