The Regulator has published a statement on hybrid schemes, “Understanding and managing your hybrid scheme”.
The Regulator is concerned that many hybrid schemes are very complex and are not always fully understood by their trustees and administrators. Specific problems identified by the Regulator include:
- lack of governance: trustees may be spending insufficient time on the DC element of their hybrid scheme;
- unclear or incorrect member communications;
- incorrect benefit calculations ;
- inaccurate funding levels and inappropriate investment strategies ; and
- insufficient knowledge of steps/ issues on winding-up.
The statement includes action checklists for trustees, administrators and advisers.
For the purpose of this statement, hybrid schemes include:
- separate DB and DC sections under one trust;
- DB scheme with a DC underpin;
- DC scheme with a contracted out element on a DB basis or vice versa; and
- DB scheme with a DC top-up.
The Regulator’s statement can be found here