UK Pension Lifeboat to Protect Thomas Cook Pension

When British travel company Thomas Cook collapsed last week after 178 years in business, it left not only thousands of travelers’ in limbo, but it did the same for thousands of employees who are members of the company’s pension.

The Pension Protection Fund (PPF), the UK’s safety net for defunct companies, said it would step in to help protect the pensions of participants in Thomas Cook’s defined benefit plans.

“We understand this is a very difficult time,” said the PPF in a statement, “but if you’re a member of a Thomas Cook defined benefit pension scheme you can be assured that your pension is protected by us.”

The company said the plan is now expected to move into the PPF’s assessment process. The assessment process, which can take as long as two years, will review the plan’s assets and expected liabilities to determine what level of pension benefits the plan will be able to pay in future.

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During this time, the trustees will retain overall responsibility for running the plan, while members’ benefits will be paid in accordance with PPF compensation levels. At the end of the process, the plan will either transfer into the PPF, which would become responsible for paying benefits to all members, or the plan may be able to secure benefits at or in excess of PPF levels through an insurer if the plan’s funding levels are determined to be sufficient.

In a letter to members of the company’s pension plan, Thomas Cook said the liquidation of the company will lead to several changes to the governance and functioning of the pension plan.

“The plan is reasonably well-funded and we hope to be able to pay benefits in excess of the levels guaranteed by the PPF,” said Thomas Cook. “But we cannot be sure until the process is concluded.”

The company said that benefits secured prior to Sept. 23 will continue to be paid during the assessment period as normal, although the benefits will be in line with PPF compensation levels. Retired members over their normal pension age, or members who retired on the grounds of ill health, will continue to receive their pension in payment in full, however, possibly with lower levels of future pension increases.

Meanwhile members receiving pensions who had not reached their normal pension age as of Sept. 23, including members who retired early, will have their pension adjusted to 90% of the pension in payment prior to Sept 23. Members who retire during the assessment period will receive their full pension if they reached their normal pension age before Sept. 23, otherwise members who were below their normal pension age at that date generally receive 90% of their entitlement.

Thomas Cook also reassured its pensioners that the assets of the plan are separate from the Thomas Cook Group, and therefore the insolvency practitioners have no access to it. However, the company said the planned merger of the various pension plans it sponsors will no longer be in place, and each plan will go through the PPF assessment period individually.

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Tags: Insolvency, Pension Plans, Thomas Cook

The possible impeachment of President Donald Trump, according to conventional Wall Street wisdom, is a non-event for the market, which cares more about economics. But suppose, over the long term, the market’s reaction isn’t so blasé after all.

What if Trump’s entanglement in a Washington political battle thwarts resolution of the US-China trade war? There’s little doubt that the trade conflict is harming the US domestic economy. Manufacturing in the US has slumped, which many ascribe to the dispute, along with a world economy that is also slowing. And the American workforce isn’t growing as fast, with job gains coming in below expectations.

The market seems almost hardwired to trade developments. When Trump announced that a deal with Beijing was imminent, stocks climbed. When he did an about face and slammed the Chinese with new tariffs, they slid.

Stocks dipped Sept. 24 when House Speaker Nancy Pelosi opened the impeachment inquiry, then rebounded the next day, only to fall some more—mainly due to bad economic news.

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Impeachment could harm investor sentiment if it scotches the chances for a trade agreement or leads to worsened tensions. If Beijing believes Trump has been harmed politically from the scandal around his call to the Ukraine’s leader about digging up dirt on Democratic presidential aspirant Joe Biden, then it may perceive no need to negotiate over the trade war.

“How much will China be willing to negotiate if they see a weakened president?” asked Art Hogan, chief market strategist at National Securities Corp. in a CNN interview. Chris Krueger, managing director at the Cowen Washington Research Group, told the network that the impeachment struggle could be a distraction for Trump that hinders any trade talks.

The two modern object lessons on stocks during impeachment come from the travails of Richard Nixon, over the Watergate scandal, and Bill Clinton’s lying about his relationship with a White House intern,.

For Nixon, from the beginning of the House impeachment inquiry in October 1973 to his resignation in June 1974, the S&P 500 fell 26%. In Clinton’s case, from the inquiry’s start to his acquittal in the Senate, the index rose 28%.

The difference, as many astute observers have noted, is that the economy was going to hell when Nixon was under scrutiny, but it was booming amid Clinton’s dire straits.

The economy will be at the heart of the 2020 election campaign. Democrats argue that the current buoyant economy (which is showing a few cracks), is propelled by the 2017 tax cut, a sugar-high that is now wearing off. Republicans say the economy should remain fine because Trump’s tax and regulation reductions will continue to boost it.

Should the economy sour anew, with China as the cause, stocks surely won’t do well.

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Tags: China, Donald Trump, Stock Market, Trade War, Wall Street