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A B C D E F G H I J L M N O P Q R S T U V W Y Z
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» A |
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ABI
Association of British Insurers
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Actuary
An Actuary is a person who will calculate the probability of future
events to measure risk to a Company or person. Their professional
body is the Institute of Actuaries.
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Additional Voluntary Contributions (AVC's)
These are pension contracts that enable members of Company Pension
Schemes to make further contributions within limits. An in-house
AVC is provided by the Company's pension scheme provider, whereas
a Freestanding (AVC) is provided by a third party provider.
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AIM Alternative Investment Market
The market for companies that are usually smaller or new companies
as opposed to the FT-SE All Share and FT-SE 100 companies.
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Allocation Rate
This is the rate at which an investment or pension contribution
is allocated to the fund. For example a 95% allocation rate will
in effect mean a 5% initial charge.
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Application Fee
This usually relates to mortgages which are fixed or capped and
is the rate used to secure that money upon application.
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APR
Calculates the costs of your mortgage. Most lenders have a different
way of calculating their APR. (Synonyms : Annual Percentage
Rate)
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Arrangement fee
Fees you pay to the Bank or Building Society in return for a mortgage
agreement. It could be a fixed, discounted or cashback fee. There
are five different type of fees: application fee, booking fee,
completion fee, drawdown fee and reservation fee.
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» B |
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Base Rate
This is rate at which Banks are prepared to lend money and is
a benchmark for other interest rates that tend to be of a certain
percentage above or below Base Rate. The Bank of England Base
Rate is set by the Monetary Policy Committee (MPC) which meets
on a monthly basis to decide whether interest rates will stay
the same or go up or down.
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Bid/Offer Spread
People buying into many collective investments such as Unit Trusts
and Pension Schemes will see two quoted prices, an offer price
which is the price they will buy the units or shares at and a
bid price which is the price they will sell. The difference between
the two is usually the initial charge on that investment.
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Blue Chip
This generally relates to larger companies that are perceived
to be safer and generally would apply to shares in the FT-SE 100
Index although this is not always the case.
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Bridging Loan
This is usually a loan for short-term purposes and can be used
in cases where people have not sold their existing home but are
buying a new home. Bridging Loans are generally offered by the
major and some of the smaller banks.
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BSA
Building Societies' Association. It is the Building Societies
trade organisation.
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Building Society
This is a mutual organisation with no shareholders and is therefore
owned by its members, which are usually borrowers and savers with
the society. Recent years have seen many Building Societies convert
from mutual organisations to Banks where the company is owned
by shareholders rather than members.
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Bulls and Bears
A Bull Market is generally an increasing market where people feel
optimistic about potential growth in the markets. A Bear Market
is generally a market where people feel pessimistic and feel that
the markets will not make growth or will suffer a decrease. A
further animal is a Stag Market where on new issues people will
buy at launch and sell immediately in the hope of making a quick
gain.
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» C |
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Capital and interest
Your payments re-paying the outstanding amount of the lap some
you borrowed and the interest of the amount you borrowed. (Synonyms
: Repayment mortgage)
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Capital and Interest Mortgage
This is where the borrower pays both interest and a part of the
loan over a pre specified period of time. (Synonyms : Repayment
Mortgage )
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Capital Gains Tax (CGT)
Unlike Income Tax, which is a tax on income, Capital Gains Tax
applies when gains are made on certain assets such as shares,
property (not usually your domestic property) and other goods.
Currently each individual in the UK has an annual allowance of
£7,500 of Capital Gain that can be made before tax is payable.
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Capped Rate Mortgage
This is a mortgage rate that has an upper limit on the interest
rate. If rates rise above that then the capped rate will be payable
- if rates are below that then the borrower will pay the variable
(lower) rate.
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Cashback
Amount of money you received from the lender after the completion
of your mortgage. It is either a fixed amount of money or an agreed
percentage (i.e. 6%) of the amount you borrowed.
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CCJ
County Court Judgement.
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CML
Council of Mortgage Lenders
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Collective Investments
A collective investment is a pooled fund, which gives a professional
fund manager control of the investments on behalf of private investors.
Collective investments include products such as Unit Trusts, Investment
Trusts and Open End Investment Schemes (OEICS) and most are usually
geographical or thematical such as UK Smaller Companies or American
Equity.
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Completion day
The day you become the owner of the house/flat.
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Contents insurance
Insurance policy, that protects your possessions from any kind
of disaster (theft, fire...). Some Insurance companies give you
the option to cover your possessions (bicycle, watch, jewellery)
even when you are away from home.
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Corporate Bonds
A Corporate Bond is in effect an IOU issued by a company, paying
usually a fixed rate of interest over a set term. These are similar
in many ways to Gilts but are issued to private companies rather
than the British Government.
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Coupon
This is generally accepted as the title for the normal rate of
interest that is paid by a Bond or Gilt.
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Critical Illness
This is similar in many ways to Life Assurance cover but rather
than paying out on the death of the policy holder will pay in
the event of the diagnosis of a critical illness such as cancer,
heart attack or stroke.
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» D |
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Deferred Period
This is the amount of time before the benefit of a policy for
accident, sickness or disability commences payment.
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Discounted Mortgage
This is where the variable interest rate is discounted, usually
for a set period of time, although sometimes over the period of
the mortgage. The rate will vary as the variable rate changes.
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» E |
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Equities
These are more commonly known as ordinary shares in companies.
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Ethical Investments
Now more commonly known as Socially Responsible Investment (SRI).
These are investments where the fund manager will take an ethical/environmental
view on companies before deciding to include them in the portfolio.
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» F |
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Final Salary Schemes
This is a company pension scheme where the benefits payable to
the employee are based on salary and years of service. These are
often known as defined benefits rather than defined contribution
schemes.
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Financial Adviser
There are two main types of financial advisers, Independent Financial
Advisers and Tied Agents (Company Representatives). Independent
Financial Advisers have access to the entire market place to choose
the most suitable products and services for their clients whereby
a Tied Agent is restricted to the products of their sponsor company.
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First Time Buyer
This is a person who is obtaining their first mortgage or buying
their first property.
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Fixed Rate Mortgages
These are mortgages where the rate of interest payable by the
borrower is fixed for a set amount of time and will not fluctuate
with fluctuations in variable rate of the mortgage.
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Flexible Mortgage
These are mortgages where the borrower can chose to over-pay and
under-pay or take payments holidays. Some flexible mortgages incorporate
one account for savings and their mortgage.
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FT-SE
This is the index of the UK Stock Market and it comprises the
FT-SE 100 which is the 100 largest companies the FT-SE 250 which
is the companies 101 to 350 the FT-SE 350 which is the 350 largest
companies and the FT-SE All Share which is an index of all the
companies listed on the stock market.
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Fund Manager
This is the person or people responsible for deciding on asset
and stock allocation in a collective investment.
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» G |
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GILTS
These are Bonds issued by the British Government as a way for
the Government to raise money. Gilts will generally have a fixed
rate of "interest" known as the Coupon and will usually be for
a fixed term upon which date they will be paid by the British
Government. Gilts are commonly considered the safest form of investment
long-term.
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Gross
This is the pre-tax figure where net is the figure after tax.
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Group Personal Pension (GPPP)
This is in effect a collection of individual personal pension.
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Guarantor
A Guarantor is a third party who will be responsible for any loans
or debts in the event of the default of the borrower.
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» H |
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Home Income Plan
This is a way of a person (usually having reached retirement age)
to raise money or an income by giving up ownership of their house
in exchange.
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Home Insurance
Insurance taken out to protect the value of the property against
fire, theft and other perils.
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» I |
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Income Tax
This is tax payable on income from either employment or from investment.
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Index Tracker Fund
These are passively managed than actively managed funds and are
controlled by a computer, which aims to match a particular index
for example the FT-SE100 or FT-SE All Share. Because of the lack
of fund management, charges on these funds are usually lower than
actually managed funds although they lose the advantage of professional
fund management.
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Inheritance Tax
Tax payable on the death of a person at a rate of 40% above the
nil rate band - this has previously been known as death duty.
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Interest Only Mortgages
With this type of mortgage the borrower pays only the interest
on the loan and does not repay the capital to the lender each
month.
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Investment Trusts
Investment Trusts are listed companies whose sole objective is
to invest in shares of other companies. They are pooled investments
and are classed as closed funds whereby they have a fixed amount
of available shares. Investors are then able to buy and sell shares
to other investors.
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IPT Insurance Premium Tax
This is tax levied on certain general insurance products and currently
stands at a rate of 5%.
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ISA Individual Savings Account
This is the replacement for PEPS and TESSAS and was launched in
April 1999. ISAS can be Maxi whereby up to £7,000 is invested
with one provider or can be Mini whereby money is invested up
to £3,000 in equities, up to £1,000 in Life Assurance and up to
£3,000 in cash.
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ISA
Individual Savings Accounts (ISA) It is a simply way of tax-free
investment.
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» J |
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Joint Tenants
This is the legal term for the owning of property or land by two
or more people who are classed as co-owners of the property.
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LTV
Loan To Value
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» M |
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MIRAS (Mortgage Interest Relief at Source)
This was interest relief on mortgage payments and stopped on the
5th April 2000.
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Money Purchase (Pension Schemes)
These are company pension schemes whereby the amount of benefit
is dependent on the amount of money invested in the scheme and
the growth achieved over the period. Unlike final salary schemes
they are not directly dependant on years of service and final
salary. Upon retirement a percentage of the fund can be used to
produce a tax-free lump sum and the remainder is used to buy an
annuity which is a pension income for the rest of the annuitant's
life.
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Mortgage
A Mortgage is a loan secured on a property and is usually used
to purchase the property. A re-mortgage is where the homeowner
moves their mortgage with out moving house.
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Mortgage Indemnity Premium
This is an insurance policy which is written for the benefit of
the lender and protects them against financial loss in the event
of the borrower defaulting on the mortgage. In most cases this
is paid by way of the lump sum premium and paid at the time of
taking out the mortgage or added to the mortgage advance.
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Mutual Fund
This is the collective term for collective investments and is
an American term. They are pooled investments and are the equivalent
of UK Unit Trusts and Open Ended Investments Companies.
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» N |
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National Savings
National Savings is an organisation that raises money on behalf
of the Government. National Savings come in a variety of guises
including Income Bonds, National Savings Certificates and the
popular Premium Bonds.
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Negative Equity
This is where the value of a property is less than the amount
of the borrowing (mortgage) on the property.
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Net Asset Value
This usually applied to an investment trust (a type of pooled
investment) and is the calculation of the total value of assets
net of liabilities. This differs from the total share value.
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» O |
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OEICs Open Ended Investment Companies
These are very similar to Unit Trusts and many Unit Trusts are
converting OEICs because of the simplicity for the investment
companies and shareholders.
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OPAS
Occupational Pension Scheme Advisory Service This is the Government
Authority that deals with pension schemes.
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Option
An Option is a derivative that gives the option-holder the right
to buy or sell a commodity at a specified price at a certain time
or within a certain period of time. Options differ from futures
in that with a future the future holder is obligated to go ahead
with the transaction whereas the option is simply an option to
take that up if they wish.
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Ordinary Shares
Ordinary Shareholders are owners of a quoted company. They are
the most common type of shareholding (other types include preference
shares) and entitle the shareholder to a share of any dividends
that are paid out from the company.
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» P |
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Pensions
A Pension is in simple terms a savings plan designed to provide
an income for the member when they retire. They can be personal
and company schemes as well as the modern stakeholder pension
scheme.
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PEPs
PEPs were predecessors to ISAs and finished in April 1999. No
further investments are allowed into PEPs although existing PEP
holders can keep their plans running. PEPs can be transferred
to another PEP without losing the tax status.
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Permanent Health Insurance - PHI
This is an insurance scheme designed to replace a percentage (usually
50 or 65%) of a person's earned or self-employed income in the
event of them being unable to work due to accident sickness or
unemployment after a defined period of time. This is long term
accident sickness insurance and is designed to pay usually until
the specified retirement date. Benefit paid out is free of tax.
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Personal Investment Authority (PIA)
This is the Government Body responsible for regulating financial
institutions and advisors. The PIA is due to be replaced by the
FSA (Financial Services Authority) on 30th November 2012.
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Personal Loans
This is a loan from a financial institution such as a bank that
may be secured on property or may be totally unsecured. Generally,
personal loans are for a shorter time periods than mortgages which
are technically taken out over 25 years.
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PRI Retail Price Index
This is another word for inflation, which is a measure of increase
in prices over a period of time.
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» Q |
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Qualifying Policy
This is usually a life assurance based savings plan that has to
be written for a minimum of 10 years and must fulfil certain qualifying
policy criteria to ensure the final payout is tax free.
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» R |
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Re-Mortgage
This is where a borrower changes their mortgage lender without
moving home.
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Repayment Mortgage
This is where the borrower pays both interest and a part of the
loan over a pre specified period of time. (Synonyms : Capital
and Interest Mortgage)
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Retirement Annuity Contract (RAC)
These are the old style personal pension plans also known as Section
226 contracts. They share many similarities with personal pensions
and were available up until 1988. People with existing contracts
can continue to pay into them but no new contracts can be taken
out after this time.
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» S |
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SERPS (State Earnings Related Pension Scheme)
This is secondary state pension that was introduced in the 1970's
to provide an additional pension on top of the state pension scheme.
The Government now allow employees to contract out of the State
Earnings Related Pension Scheme and have a payment from National
Insurance Contributions paid into their own personal pension (known
as an Appropriate Personal Pension). This is due to be replaced
by the secondary state pension (SSP) in 2011.
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SFA (Securities & Futures Authority)
This is the regulatory organisation for companies dealing directly
with stocks and shares, futures and options.
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SIPPs (Self Invested Personal Pensions)
These are a type of personal pension where the pension holder
has the ability to invest in the number of qualifying investments
such as shares, Units Trusts and commercial property.
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Stamp Duty
This is a tax levied on property purchase above £60,000 and on
share dealing
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Surveyor
A surveyor is a member of the Royal Institute of Chartered Surveyors
who is qualified to carry out valuations and surveys of both residential
and commercial properties. When taking out a mortgage most lenders
require a survey to be carried out by a qualified surveyor.
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SVIR
Standard Variable Interest Rate
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» T |
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TESSA (Tax Exempt Special Savings Account)
These are typically Bank Accounts that qualified for interest
free of tax providing the original investment and net interest
are not touched over a 5 year period. These are no longer available
but exiting TESSA holders can keep their investments and may transfer
into a TESSA only ISA account (TOISA) to preserve the tax free
status of their investment.
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» U |
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Unit Linked
This is an investment whereby the value of that holding is directly
related to the value of the underlying shares on the holding.
The value will fluctuate dependant on how the markets for the
underlying funds perform.
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Unit Trust
This is collective investment whereby investors' money is pooled
with other investors' money to produce a balanced investment portfolio.
Units Trusts can usually be held under ISAs and PEPs.
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Variable Rate Mortgage
Unlike fixed and capped mortgages a variable rate mortgage will
have an interest rate that changes typically as base rates fluctuate.
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Venture Capital Trusts
These came into being in 1993 to encourage private investors to
invest in smaller and unquoted companies. The Government offered
investors incentives to invest in Venture Capital Trust by terms
of 20% tax relief on initial investment, the ability to roll over
Capital Gains Tax and providing qualifying rules were met the
ability to take tax free income and capital growth from the VCT.
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Will
A Will is a legal document which states what your wishes are when
you die. If you die without a Will then you die intestate which
means that the State has certain criteria to determine where your
estate will be passed.
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With - Profits
Unlike a Unit-Linked investment or savings plan, a with profits
investment or savings plan grows by the addition of regular (reversionary)
bonuses together with a terminal bonus that is usually paid upon
encashment. With-profits is the traditional way of saving or investing
money but has lost out in popularity to unit-linked products in
recent times. A with-profits investment is usually considered
a lower-risk investment than a unit linked investment.
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Yield
Yield is income you receive from an investment such as Stocks,
Shares or Unit Trusts. The Yield will mean the amount of income
you get as a percentage of the original investment.
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» Z |
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Zeros
A share class for investment trusts that produce no income but
have a hurdle rate to achieve a desired level of capital growth.
These are proving more popular in recent times as a low risk way
of achieving a lump sum in the future.
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