Some members of the Thomas Cook pension scheme could have their entitlements cut by 10%
For Thomas Cook employees it is a worrying time with thousands of them now facing unemployment.
Thomas Cook has collapsed after mounting debts forced the company into administration, leaving 21,000 employees now facing redundancy.
Whilst employees of the firm now face an uncertain future, the pensions lifeboat scheme, the Pension Protection Fund (PPF) has stepped in to assess the Thomas Cook pension scheme.
What will happen to Thomas Cook pensions?
What happens to members will depend on which plan they have saved into - a defined benefit pension scheme (DB) or a defined contribution scheme (DC).
There are four Thomas Cook DB pension schemes and one DC pension.
DB pension schemes pay out a guaranteed income for life. The amount they pay is linked to the number of years the recipient worked for a particular employer or the amount they earned.
The good news for members with a DB scheme is that they will be protected by the safety net of the Pension Protection Fund.
The PPF steps in when a firm goes bust to protect the pensions of employees and the assessment process usually lasts between 12 to 24 months.
Those who are officially retired or who have passed the retirement age will continue to receive their pension payment in full.
However, those who are not retired or retired early will lose around 10% of their pension and will also be subject to an annual cap.
This is set by the government and is currently £40,020 for those over 65 and £36,018 for those who have not retired yet.
DC pensions build up a pot with contributions from you and your employer which are then invested to give you a return when you retire.
Members with a DC pension also have nothing to worry about as money already saved in the scheme is held by a third party and is safe.
A PPF spokesperson says: “Following the confirmation that Thomas Cook has entered administration we await notification that the associated schemes have entered PPF assessment.
"We want to assure members of Thomas Cook’s defined benefits pension schemes that their benefits remain protected by the PPF at what must be a very worrying time for all concerned."
For more information, check the website specially set up to deal with Thomas Cook pension holders: http://thomascookpensions.co.uk
Error in article
“Pension Proteciton Fund (PPF)“,
“‘DB’ pensions build up a pot with contributions from you and your employer which are then invested to give you a return when you retire.”
I believe there is an error here with the spelling on ‘protection’ and I also the above paragraph is referring to DC pensions not ‘DB pensions’.
I just think it’s important to get the details right.