The collapse of the world’s oldest travel company Thomas Cook has left thousands of workplace pension savers uncertain over what happens to their retirement savings.
Although the firm closed the door on the workplace defined benefit pension scheme some years ago, money in the funds of 13,000 current and former employees are impacted.
The good news for the 3,000 who have already retired is that their pensions should continue without any break or change in payment amounts.
For the other 10,000, the government’s lifeboat Pension Protection Fund is assessing what happens next.
The bad news is Thomas Cook’s pension fund is reportedly around £500 million light – although the scheme is £100 million more in funds than the PPF needs to take over.
Expected pension pay-outs reduced
For the 10,000 waiting to retire and depending on that cash, they can look forward to receiving 90% of their project pension up to a maximum £40,000 a year.
High earners with expecting bigger pensions are likely to get around 50% of their promised benefits.
“The trustees therefore are hopeful that the PPF lifeboat will, once the assessment period has ended, not be called on and benefits in excess of PPF levels will be provided from outside the PPF,” said a spokesman for the pension scheme.
“The trustees remain focused on protecting the accrued benefits of the members of the Thomas Cook Pension Plan and are in continual dialogue with a number of parties including the Pension Protection Fund and the Pensions Regulator to agree next steps.”
What happens to Thomas Cook DC pension?
Thomas Cook has four workplace defined benefit pension schemes that the PPF is assessing.
More recently, employees have paid into a direct contribution scheme. These pensions pay out on the based on the value of each saver’s funds and are unaffected by other workplace schemes.
The PPF has stepped in to rescue hundreds of at-risk workplace pension schemes, including after the collapses of big companies such as Woolworth, construction company Carillion and Farepak, the hamper firm.
The fund manages pensions for around 250,000 former employees of defunct firms.