RPSM03104515 - Technical Pages: Protecting pension rights from tax charges: Enhanced protection: Relevant benefit accrual: Hybrid arrangements

Relevant benefit accrual in hybrid arrangements

Under a hybrid arrangement only one type of benefit will ultimately be provided. However the type of benefit provided will not be known until benefits are actually provided. So a hybrid arrangement could end up providing benefits as either other money purchase, cash balance or defined benefits (depending on what benefits have been promised).

Where one of the potential benefit options under a hybrid arrangement is other money purchase benefits (money purchase benefits that are not cash balance benefits) there are two possible relevant benefit accrual tests that may apply to the arrangement. These are

• the test for other money purchase arrangements – see RPSM03104510, or
• the test for defined benefits or cash balance arrangements – see RPSM03104520.

Contributions to these arrangements may continue after 5 April 2006 without immediate loss of enhanced protection. However if, when benefits crystallise, the hybrid arrangement is later found to be an other money purchase arrangement the contributions paid after 5 April 2006 will cause loss of enhanced protection. Protection will be lost at the point the hybrid arrangement becomes an other money purchase arrangement.