The government has announced proposals to reform the Debt Relief Order (DRO) regime to allow debtors with an approved pension access to the scheme.

The announcement follows a consultation that was launched in March this year following debt advice agencies expressing concerns that DROs, excluded some vulnerable people struggling with small debts.

Edward Davey, minister for employment relations, consumer and postal affairs, said: "This is good news for some of the most needy and vulnerable members of society who find themselves in inescapable financial difficulties. It is an important change. To deny people access to Debt Relief Orders because they have accrued some rights to a pension that they cannot yet access is simply unfair."

These debtors could not access the scheme because they had some pension rights, often of small value and not receivable for many years. The proposals will change the rules to allow those with rights to approved pensions access to DROs.

Debt Relief Orders were launched in March 2009 following research that identified that there were people in long term debt difficulties who had nothing to offer their creditors and who could not afford to make themselves Bankrupt. Delivered in partnership with the professional debt advice sector, DROs provide low cost, easy access to debt relief for those overwhelmed by relatively low levels of unmanageable debt.

They are designed to provide a fresh start for the most vulnerable people trapped in debt.

To use the DRO procedure individuals must meet a strict eligibility criteria of having assets valued at less than £300, debts no more than £15,000 and surplus income of less than £50 per month. Currently, if someone has a pension that is worth over £300, they are not eligible to apply, even if the pension is not receivable for many years.

Commenting on the forthcoming change Sue Edwards, head of consumer policy at Citizens Advice said: "We warmly welcome this announcement which will benefit those who fulfill most of the criteria for a DRO yet who were having their applications rejected because of very small pension funds, something that has been of great concern to us. However it is crucial that funding for face to face debt advice is continued if the most vulnerable people are to benefit."

Malcolm Hurlston, chair of the Consumer Credit Counselling Service said:
"For everybody in debt there needs to be a solution and the Debt Relief Order has already proved right for many of the least well off.  We are delighted the coalition government had moved swiftly to remove an anomaly which will open up the right solution to many more thousands of people in need."