The Guidelines issued by the Financial Services (FSC) on 23 April 2021, aims at providing a regulatory framework to any conversion or shift of defined benefit pension schemes to defined contribution pension schemes.

Prior to the conversion/shift, the scheme shall give a written statement of benefits and options to the members being affected by the conversion within 7 days of the communication exercise once the members’ entitlements and commuted values have been determined wherever applicable. The minimum information to be provided in the written statement is specified in Appendix 2 of the Guidelines. This will enable members to make an informed decision regarding the shift/conversion.

With regards to issues of underfunded defined benefit schemes, as per the Guidelines, sponsoring employers can either
• forthwith fund respective deficits or
• submit a contingency plan when deciding for a conversion or shift of the defined benefit schemes.

Access the circular here for more information on the Guidelines.