Data Protection Act 1998
With reference to pensions the Data Protection Act 1998 (DPA 98) affords a scheme member the right to know what data is held about them. There are new provisions of the DPA 1998 with effect from the 24 October 2001 that apply to an employers pension scheme such as a final salary pension, small self administered scheme (SSAS) or contracted in money purchase scheme (CIMPs) and group personal pension (GPP) or group stakeholder pensions.

The provisions require that the scheme trustees become data controllers and are responsible for access and security of any scheme member personal data that is held on a computer system or in a structured filing system. They are also responsible to make sure that anyone who processes data on their behalf, known as a data processor, provides sufficient guarantees as to the confidentiality and security of data processed.

The scheme trustees must notify the informations commissioner that they are data controllers of their scheme and must tell scheme members the reasons why personal data about them is held and who the data can be passed to.


Death in service benefits
If the scheme member dies a tax free lump sum will be payable to a dependent or beneficiaries and in the case of a married couple this would almost certainly be the spouse. The tax free lump sum payable depends on each pension scheme rules but is typically four times the basic salary. On payment of this benefit there is no liability to income tax to the dependent.


Decree absolute
In divorce proceedings two decrees must be applied for to end the marriage, unlike nullity and judicial separation where only one decree is required. The initial process in a divorce petition will be to obtain a decree nisi from the court and for this to be issued the partner must show to the court that the marriage has irretrievably broken down.

The divorce will be final and the marriage ends when the decree absolute is granted, no earlier than six weeks and one day after the decree nisi. However, before the courts grant a decree absolute the parties must come to an agreement over the divorce and to specify arrangements for the children, if there are any. The couple may use offsetting to resolve the division of matrimonial assets and financial matters and this could take much longer than the divorce.

These ancillary relief proceedings may include pension arrangements where earmarking and pension sharing can be used in addition to offsetting. A pension sharing order can only be issued by the court against a members pension rights after the decree nisi, however, once the decree absolute is granted the pension sharing order cannot be subject to a variation of settlement order.


Decree nisi
To finalise judicial separation, nullity or divorce a partner will have to apply to the courts for a decree. In divorce proceedings this is completed in two stages, the first being the decree nisi. Their partner will have to acknowledge to the court that he or she does not oppose the divorce.

Once the court has granted the decree nisi the partner must wait six weeks and one day before applying to the court for the decree absolute. When the decree absolute is granted the divorce is final and the spouse is no longer married to their partner.


Deferred annuity
A deferred annuity have in the past been used for both a pension annuity (compulsory purchase annuity) connected with a pension fund or a purchased life annuity, but are more frequently used for immediately needs annuities. It offers an annuity that can be payable at some date in the future. The period between the start date and the maturity date is known as the deferred period and on maturity an income is paid for the rest of the annuitants life.

A deferred period is expensive as there is a cost of delay. During the deferred period it is usual for the annuitant to continue to pay regular premiums. In the event of the death of the annuitant during the deferred period, the premiums are typically returned to the estate and this may also include interest depending on the provider's terms. For purchase life annuities a cash option instead of the annuity can be offered.

A deferred annuity as part of an immediate needs annuity could be used when a relative enters a nursing home. If the prognosis is they will live for less than 2 years, then a deferred period of 2 years would be chosen. The estate would pay for the first two years of nursing home care and the deferred annuity would pay subsequent long term care costs for the rest of the annuitants life.

For many people conventional annuities from their existing provider offer "poor value for money". As deferred annuities are rarely offered by providers to individuals, one way to defer a conventional annuity purchase is income drawdown. With drawdown the individual can receive an income from the pension fund with the option to purchase a pension annuity up to a retirement age of 75. The individual can use the pension fund to buy pension annuities and has the option to search for the highest annuity rates using an open market option. However, learn more about annuities, compare annuity rates and before making a decision at retirement, secure a personalised annuity quote offering guaranteed rates.


Deferred pension
The Social Security Act 1973 (SSA 73) gave the scheme member the statutory right to the retirement benefits accrued in a previous employer pensions scheme prior to leaving. These can be left as preserved benefits until the normal retirement date (NRD) of the scheme and are referred to as a deferred pension. As a result of Social Security Act 1986 the members pension rights can be left as a deferred pension if the individual leaves with two or more years of pensionable service.

For a final salary pension the members deferred pension could be granted discretionary benefits by the scheme trustees and could be entitled to other benefits such as a widows pension. Since the Social Security Act 1990 all occupational pension schemes must incorporate indexation of accrued benefits in line with the retail price index (RPI) to retirement age. Since 6 April 1997 limited price indexation (LPI) has applied to approved schemes and exempt approved schemes for indexation of pension income after retirement age, including deferred pensions.

In a final salary pension deferral may result in the member benefiting from any surplus realised in the scheme. For an occupational money purchase such as an contracted out money purchase scheme (COMPS) scheme or group personal pension (GPP) indexation does not apply on deferral but the pension fund value will increase by the investment return on the underlying assets.


Defined benefit scheme
A pension scheme where the rules specify the benefits to be paid to the members at retirement is known as a defined benefit scheme. Both the employer and member can finance the scheme to meet the benefit obligations in the future from the contributions made and this is known as a contributory scheme. A non contributory scheme is where only the employer makes contributions to the scheme.

The benefits to the member will depend on the number of years of service, the final salary at the normal pension age (NPA) and the accrual rate of the scheme. The accrual rate will de determined by the employer and for existing schemes is usually a 1/60th for each full year of service by the member. The member will reach the Inland Revenue maximum benefits from a defined benefit scheme of 2/3rds final salary after 40 years of work.


Defined contribution scheme
A pension scheme where the rules specify only the rate of the contribution, such as a free standing additional contribution (FSAVC), stakeholder pension or money purchase scheme, are known as defined contribution schemes. These schemes could be funded by an individual as a private pension or established by a company as an employer pension.

In this case the pension will be called a group scheme with individual policy holders being the members and where the benefits accrued by the members belong to them. In the event of the member leaving service early, the benefits accrued including any employer contributions can be transferred to another provider or left in the group scheme. At retirement the individual can use the pension fund to buy a pension annuity and has the option to search for the highest annuity rates using an open market option. However, learn more about annuities, compare annuity rates and before making a decision at retirement, secure a personalised annuity quote offering guaranteed rates.


Dependents pension rights
The Inland Revenue maximum pension income paid to a surviving dependent or spouse is 2/3rds of the maximum members pension that would have been paid at the normal retirement age, assuming the members current pensionable earnings. A dependent can be a wife, husband or under-age child even if they are not dependent financially.

If the dependent is a child, the survivors' pension rights must stop at the age of 18 or when full-time education ends, if later. A dependent can be an unmarried partner such as 'common-law' wife, husband or partner of the same sex. The dependents pension income will be paid if death occurs after retirement and the pension will be increased by limited price indexation (LPI), which is in line with the retail price index (RPI) up to a 5% ceiling.


Designated professional body
A designated professional body (DPB) will be so designated by HM Treasury under section 326 of the Financial Services and Markets Act 2000 (FSMA). A DPB could include the Law Society and Institutes of Chartered Accountants that supervise and regulate exempt professional firms. A DPB must cooperate with the with the regulator, the Financial Services Authority (FSA), especially with regard to sharing information.