Corporate insolvency can be an emotionally challenging process, just as it is a financially complex procedure, as valued employees could be left out of work, and retirees’ company pensions may also be hit.
The Pension Protection Fund exists to ensure those nearing retirement are not excessively disadvantaged due to their employer going out of business; however, up until now, those who have worked for the same company for their entire careers have been somewhat neglected by the system.
For example, an employee who had stayed in the same job for 40 years and contributed to a workplace pension worth £50,000 throughout that time would have had their compensation from the PPF capped at £31,380.
New rules allow the cap to be raised by 3% for each year of long service, counting from the 21st year upwards.
That would mean, in the example given above, the total payout to the individual would be £45,000, almost as much as their original pension would have paid.
It is one measure that should make corporate insolvency a little fairer on those employees left behind, and could mean fewer sleepless nights for company directors whose businesses have collapsed through no fault of their own.
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