a b c d e f g h i j k l m n o p q r s t u v w x y z

A

A-Day - The 6th of April 2006 marks the implementation of Pensions Simplification and intends to provide a single set of rules applicable to all types of pension arrangements.

ABI - Association of British Insurers, trade body through which insurance companies can air views on matters of common concern.

Accrual Rate - The rate at which your pension benefits build up as pensionable service is completed in a Final Salary Scheme.

Actuary - Someone qualified to consider financial issues, particularly ones involving probabilities such as life expectancy.

AER - Annual Equivalent Rate - The interest paid from current, deposit or savings accounts.

AIFA - Association of Independent Financial Advisers, industry trade body for financial advisers who are not tied agents.

AITC - Association of Investment Trust Companies, the industry trade body of investment trust companies.

Analyst - Person who studies a particular market or industry sector and makes recommendations to investors about investing in companies' shares.

Annual volatility - A measure used to assess the risk of a portfolio.

Annuity - This is the contract you purchase from an insurance company using a lump sum of money (e.g. the proceeds of your pension fund) to guarantee you an annual income for a period of time (e.g. for ten years).

APR - Annual Percentage Rate - The percentage you are charged over a year on the outstanding balance when you borrow money or make a purchase on credit.

Assets - Anything of value can be referred to as an asset, such as your home, jewellery or antiques. Within investments, assets are another word for investments in a unit trust portfolio.

AUTIF - The Association of Unit Trusts and Investment Funds, the industry trade body of unit trust and investment trust management companies.

AVCs - Annual Voluntary Contributions - Extra payments you can make in addition to your main occupational pension scheme contributions to boost your retirement benefits. AVCs can be paid either to your employer's scheme or to a separate arrangement. See also FSAVCs

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B

Base rate - The interest set by the Bank of England on which other banks base their rates.

Basic Rate Tax - The income tax paid on taxable income above a certain figure, currently 22%.

Basic State Pension - The single person's flat rate State pension paid when you reach state pension age (60 for women, 65 for men, although set to increase to 65 for women by 2020) if you have paid sufficient National Insurance contributions during your working life.

Bid-offer spread - The difference between the prices at which you buy units and sell them back.

Bid price - The price at which you sell units in a unit trust back to the investment manager.

Bond - A form of investment offered by an institution such as a building society, insurance/investment company or the government with the purpose of raising capital, in which the lump sum is repaid with interest at maturity. Bonds can be bought and sold on the stock market.

Bonus - An extra payment that with-profits policyholders may have added to their contract depending on the profits the company makes in any one year, or over a period of years.

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C

Capital - A lump sum of money.

Capital Gains Tax - The tax payable on profit made on the sale of assets or property other than your home.

Capital growth - An increase in the value of shares or other assets in a fund.

Capital and Interest Mortgage - A mortgage product where the payment you make each month covers the capital and interest on your loan.

Carry Back - Facility for members of personal pension schemes to have their contribution, or part of it, treated as being paid in the preceding tax year.

Carry Forward - The facility for members of personal pension schemes to carry forward any unused tax relief from any of the six years prior to the year in which the contribution was to be paid. Carry forward of unused relief was abolished in April 2001.

Cat Standards - Stands for (reasonable) Charges or Cost, (easy) Access and (fair) Terms and is a mark awarded by the Government to ISA's and mortgages which meet these standards.

Commission - A method of remuneration for the adviser, which is paid through the charging of the contract.

Contracting in/out - The process by which you can elect to stay in or opt out of the State Earnings Related Pension Scheme (SERPS).

Corporate bond - A form of investment offered by a corporation with the purpose of raising capital, in which the lump sum is repaid with interest at maturity. Corporate bonds can be bought and sold on the stock market.

Corporation tax - Applies only to limited liability companies and is chargeable on the company's profits.

Critical illness insurance - Pays a lump sum if you are found to suffer from one of a range of designated illnesses (normally including cancer, heart attack, and stroke among others).

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D

Death after Retirement Benefits - The pension and lump sum paid to the deceased member's spouse and/or other dependants where death occurs after retirement or after the member's normal retirement date if s/he is retiring late. These benefits depend on the options selected at retirement, i.e. provision is made for a spouse's pensions. Benefits may also be payable to the deceased's estate.

Death in Service Benefits - The pension and lump sum paid to the deceased member's spouse and/or other dependants where death occurs while still working for his/her employer, before his/her normal retirement date. These benefits are part of the employee benefits package and is generally applicable only to members of the employer's pensions scheme

Debit card - Operates like a credit card except that the normal amount is deducted directly from your bank account so that no debt is accrued.

Deed of Covenant - An agreement in a deed to transfer income from one person to another in a tax efficient way.

Defined Benefit Scheme - Also known as a Final Salary Scheme. This is the traditional form of company or occupational pension where your pension is calculated as a proportion of your salary in the last few years of work - with the proportion depending upon how many years you have been in your company scheme.

Defined Contribution Scheme - Also known as a Money Purchase Scheme. A scheme where the amount of a member's retirement benefits depends on the contributions paid into the scheme in respect of the member. The rate of the contributions is decided by the employer.

Distribution - Payments made to investors of income generated by an investment fund.

Dividend - The distribution to shareholders of a company's profits in proportion to the number of shares held.

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E

EMU - European Monetary Union - The process by which the national currencies of the European Union are being replaced by the Euro.

Endowment Policy - A long term savings plan with incorporated life assurance benefits.

Equities - The ordinary shares of a company.

ERM - Exchange Rate Mechanism - An agreement by which most EU countries maintain the exchange rates between their currencies within certain limits.

EURO - The currency adopted by some European countries in place of their national currencies, intended to replace the national currencies in 2002.

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F

Final Salary Scheme - Also known as Defined Benefit Scheme. This is the traditional form of company or occupational pension where your pension at retirement is calculated as a proportion of your salary in the last few years of work, with the proportion depending upon how many years you have been in your company scheme.

Fiscal Policy - Influencing an economy through taxation.

Fixed Rate Mortgage - A mortgage product where your monthly payments do not change over a certain agreed period.

Flexible Mortgage - A mortgage product where you can vary the amount you pay each month, reduce the term by making extra or increased payments and take breaks from your monthly payments.

Flexible Pension Plan - A pension product where you can vary the amount you pay each month and take breaks from your monthly payments.

FOOTSIE (FTSE 100) - The popular name for the Financial Times Stock Exchange 100, the main UK share index which represents the prices of the top 100 shares in public limited companies.

FSA - The Financial Services Authority, the main regulatory body of the financial services industry.

FSAVCs - Free Standing Additional Voluntary Contributions - Extra payments you can make into an individual plan, which runs alongside your company pension scheme, to top up your pension fund. The plan is independent of your employer's main pension scheme.

Fund - General term for an investment vehicle which pools the money of investors and invests it according to a defined set of investment objectives.

Fund Manager - A professional who takes decisions on what to buy and sell on behalf of a fund's investors.

Fundamentals - The underlying economic factors such as industry output, wages, cost of materials and fluctuations in currency which affect a market, country or sector.

FURBS - Funded Unapproved Retirement Benefits Schemes - This is an occupational pension scheme that is not designed to be approved. This type of scheme saves up assets to pay members' benefits, unlike an unfunded scheme. Most FURBS are top-up pension schemes.

Futures - A contract to buy or sell a fixed amount of currencies, shares or commodities at a fixed rate in the future at a fixed price.

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G

Gilt (Gilt Edged Security) - A fixed-interest bond or security issued by the British Government.

GPP (Group Personal Pension) - An arrangement made for employees of a particular employer to participate in a personal pension scheme on a group basis.

H

Hedging - A strategy designed to offset investment risk.

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I

IDD - Initial Disclosure Document - This explains; the Regulator's role, the levels of service available, the renumeration options available, confirms the firm's regulated status and provides the details of who to contact in the event of a complaint and details of the Financial Services Compensation Scheme.

IFA - Independent Financial Adviser - A professional financial expert who must by law give impartial "best advice" on financial companies, markets and products. IFA's are completely independent and can recommend the products of any company. An IFA must also offer a pure fee paying renumeration option, therefore the cost's of the adviser's remuneration are not being bourne by the charges applied to the contract.

IMRO - Investment Management Regulatory Organisation, the body that regulates the management of unit trusts.

Income Drawdown - Facility by which you can draw an income from your pension fund while keeping the rest fully invested until the age of 75 at the latest.

Income Tax - Tax payable if you have income above the minimum level taxable in the UK.

Index - The means of measuring movement of statistics over a period of time used as a benchmark by unit trust managers.

Index-linked - Aims to counter the effects of future inflation by increasing premiums/benefits by a set rate each year, i.e. in line with RPI (Retail Price Index) or NAEI (National Average Earnings Index). Generally, the rate of increase each year will be capped, i.e. by RPI or 5%, whichever is the lesser amount.

Inflation - The amount in percentage terms by which prices rise or fall year on year.

Inheritance Tax - Tax payable after you die on the value of your assets in excess of a certain threshold value (£275,000 tax year 05/06).

Initial Charge - A charge levied by your investment manager to cover administration and sales commission when you invest in a fund.

Interest-only Mortgage - A mortgage product where you make a monthly interest payment and rely on the a savings plan to pay off the capital at the end of the mortgage term. Interest-only mortgages require sufficient funds to be available at the end of the mortgage term to repay the full mortgage balance. Endowment policies were traditionally used as repayment vehicles for interest-only mortgages. However, these as well as other repayment methods are vulnerable to stock market fluctuations and variable investment performance, as such these contracts provide no guarantee of sufficient monies being available at the end of the term to repay the mortgage.

Investment Trust - A company, quoted on the Stock Exchange which invests in other companies' shares.

ISA - Individual Savings Account - Tax-efficient savings/investment vehicles introduced by the Government in 1999 to replace TESSA'S (Tax Emept Special Savings Account) and PEP's (Personal Equity Plan).

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J

Joint life - Joint life plans cover two (or more) people, usually a husband and wife. Benefits can be paid following the first death, or following the death of both.

K

Keyman insurance - This provides cover, in the short term, against the loss of profits a company is likely to suffer following the death of a key employee.

L

Liability - A debt, or amount of money, owed to others.

Listed company - A company whose shares are quoted on a recognised stock market.

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M

Managed exit - The point at which management and other investors enjoy a return on their investment, by selling the business either on the stock market, to a competitor, or to another institution such as a VCT. A Managed exit will be initiated according to a careful strategic plan which is often compiled with professional advice.

Management Accounts - Accounts which are prepared for use when managing the business.

Market Capitalisation - The value of a company measured by the total stock market price of its shares, calculated by multiplying the number of shares by the current market price of a share.

Menu - Fees and Commission Statement - This explains the Regulator's role, the renumeration options available and the maximum costs of renumeration.

Micropal Star Ratings - Micropal is an independent Mutual Fund analyst which monitors all the UK's unit trust and OEICs and awards stars on a scale of 0-5, with the highest scores being awarded to the best performing funds.

Monetary Policy - Influencing an economy through control of the money supply.

Money Purchase Scheme - Also known as Defined Contribution Scheme. A scheme where the amount of a member's retirement benefits depends on the contributions paid into the scheme in respect of the member. The rate of the contributions is decided by the employer.

Multi-Tie Agents - i.e. as per tied description but able to offer products from a limited number of pre-specified providers.

Mutual company - A company which has no shareholders but is owned instead by its with-profits policyholders.

Mutual Fund - An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets in accordance with a stated set of objectives. Shares are issued and redeemed on demand.

MVA - Market Value Adjustment - may be applied to With Profit contracts on encashment or transfer, where the value of the investment/policy exceeds the proportionate value of the funds underlying assets. The penalty is applied to bring the encashment/transfer value in line with the investor's share of the value of the underlying assets. Some contracts incorporate MVA free dates.

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N

NASDAQ - Index of the leading technology stocks in the USA.

National Insurance - Payments made out of earnings by employees, employers and the self-employed to the Government that entitle you to a state pension and other benefits.

National Insurance Rebate - The amount by which employers' and employees' National Insurance contributions are reduced for employees who are contracted out of SERPS by virtue of membership of an occupational pension scheme. Alternatively, it is the payment made by the Department of Social Security as minimum contributions to a personal pension scheme.

Negative Equity - This is when the market value of your house is less than the amount outstanding on your mortgage.

Net Yield - The return on an investment after tax has been deducted.

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O

Occupational Pension Scheme - A legal contract set up by an employer to provide pensions and/or other benefits for one or more employees on retirement, death or leaving pensionable service.

OEIC - Open Ended Investment Company - Managed funds which hold a portfolio of investments which you can buy into. They issue shares instead of units and normally quote a single price.

Offer Price - The price at which you buy units from a unit trust manager.

Offshore Funds - Funds based outside the UK for tax reasons.

OMO - Open Market Option - Your right at retirement to buy an annuity from a provider other than the one who has administered your pension fund.

OPAS - The Occupational Pensions Advisory Service, voluntary organisation which advises on problems with any type of pension scheme other than state schemes.

OPRA - The Occupational Pensions Regulatory Authority, body with wide ranging powers set up to regulate the occupational pensions industry

Option - In investment terms, a contract giving the right to buy or sell commodities, currencies or shares at a fixed date in the future at a fixed price. In pension terms, the choice of how to take your fund (e.g. lump sum and pension or pension) and the right at retirement to buy an annuity from a provider other than the one who has administered your pension fund.

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P

PAYE - Pay As You Earn - Where income tax and National Insurance contributions are collected from your salary, before it is paid to you, by your employer and passed to the Inland Revenue.

Pension Forecast - A service provided by the Department of Social Security which tells you what your state pension is worth.

Pensions Ombudsman - An independent arbitrator for pension disputes with statutory power to enforce his or her decisions.

PEP - Personal Equity Plan - Tax-efficient savings plans replaced by ISA's in 1999. You can no longer invest in a new PEP but you can still transfer the funds to a new provider.

Permanent Health Insurance - Insurance which replaces income lost due to long term illness or injury and pays relative to the size of your salary.

Personal Pension Scheme - A form of individual pension plan. Eligibility and maximum contribution levels vary depending on your individual circumstances, i.e. age, earnings, employment status etc.

Phased Retirement - The facility to use small segments of your pension to buy annuities as and when you need more income rather than buying one annuity annually with your whole fund.

PHI - Permanent Health Insurance - Insurance that pays a level of income in the event of long term sickness or disability

PLC - Public Limited Company - Any company with a share capital of at least a fixed amount.

PMI - Private Medical Insurance - Insurance which will pay for the cost of medical treatment in accordance with the policy cover.

Portfolio - A collection of assets, i.e. cash, property, shares, ISA's, PEP's and unit trusts etc. These are held by an individuals for investment purposes.

Price/Earnings Ratio - Calculated by dividing the market price of a company's ordinary shares by its earning-per-share figure as an indicator of the company's performance potential.

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Q

Qualifying (life policy) - a type of insurance policy that can have tax benefits.

Quartile - Most UK funds are grouped into sectors and each sector is divided into four quartiles with the best performing funds being in the top quartile.

R

Return - The amount by which the value of your investment increases.

Rights Issue - New shares sold by a company to raise capital.

Risk - The implications and possible pitfalls associated with the market as a whole, a particular type of investment, fund or contract, an example of a risk regarding investments; 'the value of the investment may fall as well as rise', or 'past performance is not a guide to future performance'.

RPI - Retail Price Index - The official measure of inflation calculated by weighting the costs of goods and services to approximate a typical family spending pattern.

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S

Scrip Issue - The issue of new share certificates to existing shareholders to reflect an accumulation of profits on a company's balance sheet.

Securities - The general name for stocks and shares.

SERPS - State Earnings Related Pension Scheme - A state pension in addition to the basic state pension based on earnings, to be renamed State Second Pension (S2P).

Shares - A stake in a company which entitles you to vote at annual meetings and benefit from the company's profits in the form of a dividend.

SIPP - Self Investment Personal Pension - A form of individual pension plan. Eligibility and maximum contribution levels vary depending on your individual circumstances, i.e. age, earnings, employment status etc. A SIPP permits a broader range of investment opportunities.

Small Caps - Another name for small companies.

SOFA - The Society of Financial Advisers, the professional and educational body for financial advisers. It awards qualifications for progressive levels of examination achievement.

SSAS - Small Self Administered Scheme - Small Self Administered Scheme, an occupational scheme where the members are trustees and are directly responsible for administering the fund and paying out the benefits. Some funds are invested in assets other than insurance premiums.

Stakeholder pension - New low cost pension schemes introduced by the government in 2001 to encourage people to make provision for their financial future. They are aimed at those who may not have been able to afford a personal pension and were not eligible for an occupational or group scheme.

Stock market - The marketplace for the sale and purchase of shares, government bonds and other securities.

Switching - Moving an investment out of one fund and into another.

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T

Tax Harmonisation - The process whereby the tax rates in the countries of the European Union are being equalised to make trade easier and ensure that no country has a competitive advantage over another.

Term Assurance - A life assurance contract with a fixed term and a sum assured which is paid out only if the life assured dies within the term specified.

TESSA - Tax-exempt special savings accounts replaced by ISA's in 1999. You can no longer invest in a new TESSA but you can transfer your existing TESSA into a TOISA (TESSA Only Individual Savings Plan) to retain it's tax efficient status, however, you are not able to add any more capital to the account.

Tied Agent - Financial advisers who have an agreement with one particular company to recommend its products. They can range from self employed individuals to banks and building societies and can give you advice on your financial circumstances but they cannot survey the whole market for you.

Total Return - The combination of capital growth and reinvested income at the end of any given period.

Transfer Value - The value of an existing pension or investment which you are able to transfer to another provider.

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U

Unit Linked Policy - An insurance policy in which the benefits depend on the performance of units in a fund invested in shares, bonds and property.

Unit Trust - An investment contract which invests in a variety of different stocks and shares and is divided into units which are issued to its members instead of shares.

V

Variable Rate Mortgage - A mortgage product where the amount of the monthly payment goes up or down in accordance with variations in the interest rate, based on the Bank of England rate.

VAT - Value Added Tax - A form of indirect taxation levied on goods and services.

Volatility - The degree by which share prices in a particular market or sector go up or down.

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W

Whole Life Policy - A life insurance policy which pays a specified amount on the death of the life assured.

Winding Up - The legal termination of a pension scheme.

With Profits Policy - This policy aims to provide a smoothed investment return through the application of bonuses. The calculation and application of bonuses is subject to the underlying performance of the funds assets, therefore there is no guarantee that bonuses will be added in the future.

Working Capital - The amount of money tied up in the day to day operations of the business.

Work-out solutions - An informal reorganisation of the business and settlement of its affairs outside of formal insolvency proceedings.

X

XD - Ex-Dividend - The interval between the announcement and payment of the next dividend or, in the case of a unit trust, the next income distribution.

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Y

Yield - The annual dividend or income from an investment.

Z

Zero Rated - Goods or services that are taxable for VAT but with a tax rate of zero.

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