AAA Rating The highest credit Rating for a Bond or company….

APR Annual Percentage Rate. The figure next to this abbreviation shows you the total cost of taking out a loan, as a percentage, taking into account the term, interest rate and other costs….

Added Years (of Service) Buying a specific number of added years in a final salary scheme which will increase the service on which your pension is based….

Tax The highest rate of income tax in the UK….

Additional Voluntary Contributions (AVCs) When you top-up an occupational pension, by making extra contributions into a scheme that’s run by your employer, you make an ‘additional voluntary contribution’….

Adviser Charging An agreement between you and your financial adviser to pay him or her directly for the services you receive initially and ongoing. The payment may be made directly, say as fee, or taken directly from your investment as a matched deduction which will be…

Annual Management Charge (AMC) We take an Annual Management Charge for looking after your investment. The charge is the base charge and does not take into account any discounts that may be applied….

Annual allowance An annual allowance is the maximum amount of money you can put into your pension funds in a given tax year, and still claim tax relief….

Annual statement A statement from your financial services product provider sent to you once a year, showing how much, you’ve paid, what your plan is worth (and if it’s in relation to a loan, what you still owe)….

Annuity Rate The factor used to calculate the amount of income payable, following investment of a lump sum in an annuity….

Asset Classes The different types of assets available to investors. For example, equities, cash, fixed interest or property….

Assets Items that are owned by an individual such as property and investments. Money in a bank or building society account is known as a liquid asset. Assets may also be held in a fund….

Assignment The formal transfer of rights to another party. For example, the rights to receive the benefits of a life insurance policy to repay a debt/loan….

Association of British Insurers (ABI)The trade association for insurance companies in the UK….

Association of British Insurers (ABI) sectors The ABI Sectors are a system for the classification of life and pension funds. Every sector sets clear criteria that must be followed by funds wishing to belong to that sector. It ensures that life and pensions funds operating similar investment strategies…

Authorised firm An authorised firm is one that has permission from the Financial Conduct Authority (FCA) to carry out regulated activities….

Bankruptcy If you can’t pay your debts, you can declare yourself bankrupt – but you will lose control of your assets and income for a set period of time. The period of time is known as ‘bankruptcy’….

Base Rate An interest rate set by the Bank of England which is used as a benchmark by UK lenders….

Basic rate taxpayers You are a basic rate taxpayer if you are earning below the higher tax rate threshold….

Basic state pension This is the pension you receive from the government as a result of paying National Insurance (NI) contributions throughout your working life….

Basis Point A measure, which is often used in describing small percentages. Each basis point is equal to 0.01%, 25 basis points equals 0.25%….

Bear Market A market where prices are falling against a background of gloomy investors….

Benchmark A tool with which to measure a fund’s performance – often a market Index or model portfolio….

Beneficiary This is someone who benefits from a will, trust, pension fund or a life assurance policy….

Bid (Selling) Price The price you get when you sell shares, bonds or units in a unit trust. The price you buy shares, bonds or units in a unit trust is known as the Offer (Buying) Price. The difference between the two is often referred to as a Bid Offer Spread….

Blue Chip A leading company that is well established and tends to be regarded as relatively safe. Comes from the colour of the 2nd highest value poker chip….

Bond Lower to medium risk loans to the government or companies that pay you a fixed rate of interest….

British Government Stocks See ” Gilts “….

Bull Market A market where prices increase against a background of optimistic investors….

Business Relief Business Relief reduces the value of a business or its assets when working out how much Inheritance Tax has to be paid. Any ownership of a business, or share of a business, is included in the estate for Inheritance Tax purposes. You can get Business Relief of either 50% or 100% on some of an estate’s business assets, which can be passed on:

Buying (Offer) Price The price at which you can buy shares, bonds or units in a unit trust….

CPI The Consumer Price Index (CPI) is a measure of inflation used by the British Government for its UK inflation target. It measures changes in a ‘basket’ of goods and services purchased by households….

Cancellation Period The period in which you are entitled to change your mind and cancel a financial commitment. Any money already paid will be returned although there is a risk less may be returned – for example, if the value of an investment contract has fallen during the…

Capital The amount you invest in any type of savings or investment product.

Capital gains tax (CGT) If the value of assets that you own increase in value, then you may need to pay Capital Gains Tax (CGT). For example, selling shares for more than you paid for them could involve paying some CGT. You get an annual allowance for capital gains and only pay CGT…

Capped Drawdown Forerunner to Flexible Access Drawdown which provides the means to take retirement benefits on a flexible basis by drawing income from the retirement fund as alternative to buying an Annuity. Benefits are limited by Government Actuary Department’s…

Child Trust Fund The Child Trust Fund (CTF) is a long-term savings and investment account for children. In December 2010, the Government decided to stop opening CTFs, but those which had already been set up by then are designed to make sure that your children have savings up…

Closed Ended Funds This describes a collective investment scheme which has a limited number of shares (or units). The shares are then traded on an exchange or directly through the fund manager to create a secondary market subject to market forces….

Collective Investments These pool money from many different investors into one fund, such as a unit trust, open ended investment company (OEIC) or investment trust….

Company Pension Schemes A pension scheme provided (sponsored) by an employer for its employees. Company pension schemes can be defined benefit schemes (final salary schemes) or defined contribution schemes (money purchase schemes)….

Consumer Prices Index (CPI) Measures the prices of a Fixed “basket of goods” bought by a typical consumer. Used as a measurement of inflation….

Contracted Out/In Contracting out was a system where employees gave up their right to additional state pension, firstly in the form or the state earnings related pension scheme (SERPS) then from 2002 in the form of the state second pension (S2P) In return workers and their…

Contributory Pension A company pension scheme where the employee contributes as well as the employer….

Conventional Annuity One type of conventional annuity is a guaranteed annuity. A guaranteed annuity is a pension annuity that guarantees to provide you with a regular income usually for the rest of your life in return for you paying over a lump sum from your pension fund. It can…

Convertible Term Assurance A life assurance policy which pays out if the policyholder dies within the period of policy, but also allows the customer to convert to another type of plan offered by that provider without requiring any proof of health at the time of conversion within…

Coupon The interest rate applied to the value of a corporate bond or gilt (see Government bond)….

Credit Rating Formal evaluation of a company’s loan­-repayment history and current ability to repay its financial liabilities. Awarded by agencies such as Standard & Poor’s and Moody’s. AAA grade is the highest….

Credit Scoring This is the system used by banks and other loan companies to judge whether you’re creditworthy when you apply to borrow money….

Critical Yield. The critical yield is the estimated annual investment return required each year to purchase an annuity to provide benefits of equal value to the estimated benefits provided by the existing scheme at retirement.

Crystallised Pension Crystallising your pension is the process of obtaining access to your pension savings to provide an income in retirement….

Defined Benefit Pension Scheme A company pension scheme where the pension an employee receives is linked to their length of scheme service and size of their salary as defined in the scheme rules. They are often referred to as final salary schemes….

Defined Contribution Pension Scheme A company pension scheme where the contributions made by the employer and employee are set and the final pension an employee receives depends on several factors including the size of their fund on retirement. This final fund is then used to buy an annuity or…

Defined contribution A company pension scheme where the contributions made by the employer and employee are set and the final pension an employee receives depends on several factors including the size of their fund on retirement. This final fund is then used to buy an annuity or…

Deposit Account A savings account from a bank or building society that pays interest on the amount of money held in it….

Deposits Money that is invested with banks, building societies and other organisations to earn interest….

Derivatives These cover products such as futures and options which are generally an arrangement to buy or sell a standard quantity of a specified asset on a fixed future date at a price agreed today. Also considered to be a financial instrument whose value is dependent…

Direct Debits These are payments that are made on a regular basis from your bank account on an agreed date. You arrange this with the company you’re paying, by giving them your bank details. For example, phone bills and utility bills are often paid by Direct Debit….

Discounted Gift Trust Allows the gifting of a lump sum for the benefit of another person(s) whilst retaining a lifelong income. There is an initial amount of the lump sum which is immediately outside the estate based on medical underwriting with the remainder subject to the seven…

Distribution When a company pays money (dividends) to its shareholders, or when a unit trust pays income to unit holders….

Diversification Spreading your investments to help reduce the risk within your portfolio….

Dividend A payment made by a company to its shareholders. The size of the payment is usually determined by the size of the company’s profits and is usually paid twice a year, although a company does not have to pay a dividend at all….

Dividend Yield The Dividend per share expressed as a percentage of the share’s market price….

Dividends These are payments that are made to shareholders by a company from any profits that the business has made….

Dow Jones Industrial Average (DJIA)A widely used Index of the US stock market. This is a weighted average of the prices of 30 Blue Chip New York Stock Exchange (NYSE) shares….

Early Retirement When a member starts to take their pension before the normal retirement date of the scheme….

Employer Pension Schemes A pension scheme provided (sponsored) by an employer for its employees. Company pension schemes can be defined benefit schemes (final salary schemes) or defined contribution schemes (money purchase schemes)….

Endowment A life assurance policy that pays out a lump sum after a specific period or on the earlier death of the policyholder. They can be used as a vehicle for saving or to repay a mortgage. It is important to remember that an endowment is a medium to long term…

Enterprise Investment Schemes The Enterprise Investment Scheme (EIS) is an investment program offered by the British government. The EIS is designed to boost economic growth by providing tax relief to investors who invest their money in smaller, risky, and/or new businesses. It also helps these companies raise the capital they need to grow and mature. Companies must meet certain qualifications before they are allowed to reap the benefits of the scheme and money raised must be used for an approved purpose.

Equities Also known as shares or stocks, these represent a share of the ownership of a company. Shares can provide regular payments, known as dividends, and share price changes as the value of the company changes. Over the longer term, equities can offer greater…

Equity This is a term that’s used to describe a company’s issued stocks and shares. If you own shares in a company, you own some of the company’s equity. It can also be used to describe the amount, or value, of your home that you own. If you…

Equity Release Scheme Schemes that allow homeowners to release cash from the value of their property. There are two types of equity release schemes. A lifetime mortgage scheme allows you to raise money against the value of your property while you still own it and a home…

release Equity release is the process of using the value of your home to raise cash – releasing the equity. There are two main types of equity release scheme available: lifetime mortgage (sometimes known as equity release mortgages) and home reversion schemes….

Escalation When an annuity payment is automatically increased at regular intervals by a fixed percentage rate….

Estate Assets owned by an individual at death….

Estate Planning For inheritance tax (IHT) purposes, an individual’s estate is calculated as being his or her total assets less any liabilities at the time of their death. Proper estate planning could save your family hundreds of thousands of pounds, because IHT…

ETF’s Exchange traded funds are exactly as the name implies. When you invest in an ETF, you get a bundle of assets you can buy and sell during market hours, potentially lowering your risk and exposure, while helping to diversify your portfolio.

Ethical Funds These aim to make socially responsible investments (they do not invest in companies that have interests in socially unacceptable markets or produce harmful products or by-products, such as high levels of environmental pollution)….

Ethical investment Ethical investments are opportunities offered by businesses or funds that aim to avoid companies involved in some kinds of activities, but instead favour those involved in other activities. For example, companies trading in armaments, cigarettes, animal…

Executor An executor is a person, named in a will, who is charged with administering the deceased person’s estate and distributing the assets to beneficiaries….

FTSE 100 Index*An index of the share prices of the 100 largest companies (by market capitalisation) in the UK….

FTSE All-Share Index*An index of the share prices of more than 800 leading companies and investment trusts on the London Stock Exchange….

Family Income Benefit A policy which pays out in the event of the life assurance’s death, in regular instalments….

Federal Reserve Board (Fed)The US central bank….

Final Salary Scheme A company pension scheme where the final pension an employee receives is linked to the size of their final salary and the number of years, they have been a member of the scheme. They are also referred to as defined benefit pension schemes….

Financial Conduct Authority (FCA)The FCA is an independent body that regulates the financial services industry in the UK….

Financial Services Compensation scheme The Financial Services Compensation Scheme (FSCS) is the UK’s statutory compensation scheme for customers of authorised financial services firms. This means that FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against…

Financial and investment services These are the services, often offered by solicitors and independent financial advisers, relating to investment of a client’s assets, such as following a divorce settlement or a grant of probate….

Fiscal Policy A government’s spending and taxation policy….

Fixed Interest Securities More commonly known as “bonds” these are loans issued by companies or by governments in order to raise money. Bonds issued by companies are called corporate bonds, those issued by the UK government are called gilts and those issued by the US…

Fixed rate An interest rate that’s fixed is one that doesn’t move up or down for a set period of time….

Flexi-access drawdown A form of drawdown which allows you to take an unlimited amount of income or lump sums from a pension fund. This replaces flexible and capped drawdown, although existing capped drawdown plans are continuing….

Forward Priced If a fund is forward priced, it means that the fund gets the next available price after monies are invested….

Free-Standing Additional Voluntary Contributions (FSAVCs)This is a pension top-up policy for an occupational pension scheme, but it’s run alongside your employer’s pension scheme – usually by a pension company….

Fund Manager An individual who is employed by a company to manage money. It is a fund manager’s aim to buy shares or other assets such as property or bonds that they believe will increase in value or provide a level of income….

GDP (Gross Domestic Product) A measure of the value of all goods and services produced in an economy in a year….

General Investment Account An account which can hold various investments outside a tax-free environment….

Gift A transfer of money or property to another party. There are limits to the value and number of gifts you can make without any immediate or future inheritance tax liability….

Gilts These may also be called gilt-edged or Treasury bonds. They’re bonds that are issued by the UK government. They’re regarded as being very low-risk, secure investments because it’s the government that promises to pay you back….

Green Investments This is another name for “ethical investments”, or “socially responsible investments”….

Gross Earnings Earnings before income tax and other deductions are taken….

Gross Income Reinvested Any income that the fund produces (e.g. interest and dividends) is reinvested back into the fund and is not liable for UK tax….

Gross Interest The amount of interest you receive without any income tax or charges deducted….

Gross Pension Contribution A payment to a pension scheme deducted from earnings before the deduction of income tax….

Group Personal Pension If you work for a company, you may have a Group Personal Pension. It’s the name given to a group of personal pension plans offered by employers to employees….

Guarantee period This is the minimum number of years from the start of your annuity in which income will continue to be paid, even if you die during that period. The maximum guarantee period you can select is 10 years and it must be included at the start….

Guaranteed Minimum Pension The minimum pension which a company final salary pension scheme must provide in respect of contributions paid between April 1978 and April 1997, as a condition of contracting out of the State Earnings Related Pension Scheme….

Guaranteed Pension Annuity This is our conventional annuity – please see conventional annuity. It guarantees to pay a regular income usually for life. Your income can always stay the same, increase each year by a fixed percentage or change each year in line with the Retail Prices…

Hedge fund Hedge funds are a high-risk investment: they comprise a complicated set of strategies that aims to make attractive returns on the stock markets….

Home Reversion Plan The sale of part of or your entire home to a reversion company in return for a lump sum, regular income or a combination of the two. You can continue to live in your home until you die or go into long-term care. When your home is sold the percentage, you…

Home reversion schemes With a home reversion scheme, homeowners sell their home at a substantial discount of its value. They give up ownership and the right to any future increase in the property value, but they can continue to live in the property. These plans are available for…

ISIN An international security identification code….

Illustration An example of the potential growth you may expect to receive from an investment. The growth rates used are set by the industry regulator, Financial Conduct Authority (FCA). It is important to remember that the actual return received could be higher or lower…

Income Money received by an individual for example as a salary or from investment. Cash deposits and bonds will provide income in the form of interest. Most UK shares will provide income in the form of dividends….

Income Drawdown Enables people with a certain type of pension to draw an income and/or cash lump sums from their pension fund rather than buying an annuity and to take income direct from their pension fund….

Income protection Income protection is an insurance policy that pays you a monthly income if you’re unable to work due to illness or injury, until you can return to work, or you retire, whichever is the sooner….

Independent financial adviser Independent financial advisers (IFAs) are professionals who give financial advice about products and services across the whole market….

Index In the stock market, an index is a device that measures changes in the prices of a basket of shares, and represents the changes using a single figure. The purpose is to give investors an easy way to see the general direction of shares in the index. Examples…

Index Linked The linking of a payment such as a pension to an inflation index – for example the Retail Prices Index (RPI) – with the aim of keeping pace with inflation….

Indexation Another name for index tracking. An investment strategy designed to produce a rate of return in line with a specific financial index. This term is also used to describe automatic increases in pension contributions….

Individual Savings Account (ISA)A savings vehicle that allows customers to invest in equities, (stocks and shares) or save cash without having to pay any income or capital gains tax….

Inheritance Tax (IHT)Inheritance Tax is paid if a person’s estate (their property, money and possessions) is worth more than a certain amount when they die. This is called the ‘Inheritance Tax threshold’….

Initial Charge A charge made by an investment provider or IFA to cover the cost of setting up an investment….

Interest When you give your money to a bank, to look after, you may receive an amount of money on top in return. That percentage is known as interest. You also must pay interest on loans or mortgages when you borrow money….

Interest Rate The amount of money a customer can earn on an investment or is charged for borrowing money. It is usually expressed as a percentage of the total amount invested or borrowed….

Intestate / Intestacy This refers to a person dying without a valid will. Upon death the person’s assets are distributed according to the law, regardless of the person’s intent when they were alive….

Investment Bonds An investment bond gives you the potential for medium to long-term growth on your money, over 5-10 years or more, along with fund management expertise. You also get access to a mixture of funds, which are looked after by professional investment managers. Of course like any investment, the value can go down as well as up so you might not get back what you put in.

Investment Certificate A document showing details of units held within a unit trust or shares or bonds….

Investment Grade A credit rating given to a Government or Corporate bond that indicates that the agency giving the rating (e.g. Standard & Poors) believes that the issuer has a relatively low risk of default. Bonds with credit ratings of AAA, AA, A or BBB are considered…

Investment Trust A company that invests in the shares of other companies, or other assets such as property or bonds. When investing in an investment trust, customers own shares in the investment trust rather than owning the shares it invests in….

Joint-Life Annuity An annuity that pays you a regular income for life and then when you die usually pays your dependant a regular income for life too….

Junior individual savings accounts (JISA) Junior individual savings accounts (JISA) offer a choice of thousands of funds that can be held tax efficiently. Parents of children under 16 that do not have a Child Trust Fund can open a JISA in the child’s name….

Junk Bond A high­-risk Bond of below Investment Grade, issued by a company or government….

Life Assurance An assurance policy that pays out a lump sum or instalments on the death of the life assured….

Life Fund A pool of money and/or assets such as property or shares held by a fund into which all life assurance policyholders’ premiums are paid and from which claims are made….

Lifetime Mortgage This is a loan secured against the value of your property that can be converted into a cash lump sum or income, without the need to move. You can also do this using a home reversion scheme. These types of plans are sometimes referred to as equity release….

Lifetime allowance A lifetime allowance is the maximum amount of money that you can accumulate as pension savings throughout your lifetime and still benefit from tax relief. If the amount you save exceeds the lifetime allowance, then you will have to pay tax on these savings….

Lifetime annuity A lifetime annuity will give you a regular income for the rest of your life. You buy an annuity with the cash sum that’s built up in your pension fund, so that you can have a regular income during retirement. There are different types of annuities to…

Limited Company A British term for a corporation, a limited company is a business entity that limits the liability of shareholders to the extent of their investment….

Limit If you are an employee, the lower earnings limit is the point at which your earnings start to build up entitlement to state pension benefits. The ‘primary threshold’ is the point at which you start to pay National Insurance contributions….

Main Residence Nil Rate Band An Additional threshold, on which, before IHT is due on top of the Nil Rate Band….

Maintenance payments Payments made from one individual to another to provide support following divorce etc. These can be protected….

Market Value Reduction (MVR)If you take money out of a with-profits fund, an adjustment may be made to the value of the withdrawal if the value of the underlying assets is less than the value of your plan including bonuses. This adjustment is known as a market value reduction….

Maturity The specified date when a policy comes to an end and the policy benefits are paid. In the context of fixed interest investments (bonds), this means the lifetime of the bond….

Member A person who has been admitted to membership of a pension scheme….

Monetary Policy Committee (MPC)The MPC is a committee of the Bank of England which meets monthly to vote on whether changes to interest rates should be made….

Money Purchase Annual Allowance When an individual flexibly access their pension. The Annual Allowance is reduced to £4,000….

Money Purchase Pension A pension scheme where the contributions made by the individual (and their employer in respect of a company pension scheme) are set and the final fund is then used to buy an annuity. These are also known as defined contribution schemes….

Money laundering The government has introduced tough money laundering laws in a bid to combat international crime and terrorism. This means that solicitors and other professionals need to check that you are who you say you are when you first instruct them. They may also ask…

Mortgage protection insurance Accident, sickness and sometimes unemployment insurance (or payment protection insurance) is a policy that’s used to help pay for your mortgage if your income is reduced due to certain circumstances….

National Insurance Contributions A tax paid by most employers and employees to the UK government. For the employed it is deducted from income by the employer on a scale related to income levels. The self-employed pay contributions based on profit and like the unemployed may pay a flat-rate…

Negative Equity When the amount left outstanding on the mortgage is greater than the value of the related property….

Net This is the sum you have remaining when there is nothing else to be deducted….

Net Interest Interest received on a savings account after tax and charges have been…

Net Pension Contributions Pension contributions taken from bank accounts or after-tax salary. Tax relief is claimed back from HMRC by the pension provider….

Nil Rate Band An allowance everyone receives on death before IHT is due….

Non-Contributory Pension A company pension where the employee does not make any type of contribution. It is entirely funded by the employer….

Normal Retirement Date Refers to the date at which a member of a pension scheme normally becomes entitled to receive his/her retirement benefits….

Notice of Coding A notice of coding shows your tax code if you are going to pay through the PAYE system. It is usually sent out in January or February for the tax year beginning 6 April….

Occupational Pension Scheme A pension scheme provided (sponsored) by an employer for its employees. Occupational pension schemes can be defined benefit schemes (final salary schemes) or defined contribution schemes (money purchase schemes)….

Offer (Buying) Price The price you buy shares or units for in a unit trust. The price you get when you sell shares or units in a unit trust is known as the Bid (Selling) Price. The difference between the two is often referred to as a Bid Offer Spread….

Offer to Bid In the context of measuring performance, offer to bid refers to the comparison between the original purchase cost or offer price – usually of a unit trust – and its current bid price, the price you receive if you sell. This measures the actual return you…

Offer to Offer In the context of measuring performance, offer to offer refers to the comparison between the original purchase cost or offer price – usually of a unit trust – and its current offer price. This measures how the investment has performed without taking account…

Offshore The concept of ‘offshore;’ has no strict legal definition. Broadly speaking, though, it refers to jurisdictions that offer concessionary taxation regimes compared to major ‘onshore’ centres, such as the UK or US. Additional…

PAYE (Pay As You Earn)HM Revenue & Customs’ system for collecting income tax from the pay of employees as they earn it….

Pension A savings vehicle used to provide an income in retirement….

Pension Annual Allowance The amount an individual can contribute to a pension….

Pension Annuity This is a type of annuity usually bought with the proceeds of an HMRC registered pension scheme. Find out more about pension annuities in our guide. See also Conventional Annuity, Guaranteed Pension Annuity, Income Choice Annuity and Enhanced Annuity….

Pension Commencement Lump Sum A tax-free lump sum, % of the value of the pension pot….

Pension Credit A benefit for people who have a relatively low income, even if they have some savings and modest retirement income and can be paid on top of a state pension scheme….

Pension Fund General term used to describe the investment fund built up in a pension plan and used at retirement to provide a continuing income….

Pension Transfers Refers to the process by which the current value of a pension plan can be transferred from one registered pension scheme to another registered pension scheme. The value is normally transferred direct from one employer or pension provider to another….

Pensionable Earnings Earnings on which benefits and contributions in a pension scheme are calculated….

Pensionable Service Period of service with a company that is used in the calculation of pension benefits in a defined benefit/final salary scheme….

Personal Equity Plans (PEPs)Forerunner to ISA, From April 2008, Personal Equity Plans automatically became Stocks and Shares ISAs (see the glossary definition of Individual Savings Account)….

Personal Pension A private pension that you can take from job to job. The other main types of personal pension schemes are group personal pensions (GPP), stakeholder pensions and self-invested personal pensions (SIPPS)….

Personal allowance A personal allowance is the amount of income that you can earn each year before you start paying tax….

Policy A document giving all the details of the agreement between the policyholder and the insurer….

Policy Conditions The term of a policy, which sets out the rights and responsibilities of the parties involved….

Policyholder Generally taken to mean the owner of the policy….

Pooled Investments Investments such as unit trusts, where a number of people put their money together to enable them to buy a wider range of investments, thereby spreading the risk of volatility….

Potentially Exempt Transfer Gifts on which inheritance tax will not be payable unless the donor dies within seven years….

Power of Attorney The authority to act for another person in specified or all health and financial matters, if that person is incapacitated….

Premium The periodic payments a policyholder makes to an insurance policy or the amount of money an individual pays into a saving or investment product, as either a lump sum or a regular payment….

Price to earnings ratio (P/E)The performance of companies is measured by their Price to Earnings (P/E) ratio. The price is the current share price, and the earnings are the profit that the company earns in one financial year for each single share….

Private Equity Investments Private equity (PE) describes investments that represent an equity interest in a privately held company. Any business that is not a public company is part of the substantial private company universe, which includes millions of businesses compared with the few thousand that are public companies. That also means a large part of the private universe is startups and small businesses, along with some more established companies that have not yet gone public or choose to remain private.

Private Funding Circles Private Funding Circles provide bespoke funding to various private clients and non-personal entities. They are a syndicated loan constituted of investment from a number of clients or lenders to the proposed borrower(s). This may be a private client, company or other non-personal entities such as a trust. Each lender is contractually committed to this syndicate and all individual lenders will effectively act as one throughout the lifespan of each project.

Private medical insurance This is a type of insurance policy that pays for you to receive private medical treatment. It’s also known as private health insurance….

Probate Probate is the process of obtaining legal authority to deal with the affairs of someone who has died and getting the will certified so that the executors can carry out the wishes and instructions contained within it in order to wind up the estate….

Protected Rights Protected Rights are a type of pension fund. The pension fund is built up by money coming in from the government for those of you who, have been in the past or still are, “contracted out” of the State Second Pension, now commonly known as S2P. All…

Purchased Life Annuity This is a type of annuity bought with a lump sum of money from personal savings or investments. Part of the annuity is deemed to be interest paid on the capital and is taxed. The other part is considered to be a return of capital and so is not liable to tax….

Qualifying years Qualifying years are those tax years in which you’ve paid a certain amount of National Insurance contributions. A minimum number of qualifying years must be built up during your working life to qualify for the full basic state pension….

RPI The Retail Prices Index (RPI) measures the change in the cost of a basket of retail goods and services….

Recession A fall in economic activity. Technically, for an economy to be in Recession, it must have endured two successive quarters of falling GDP….

Redemption Date The date on which the borrower will repay the money used to buy a Bond or Gilt ….

Reduction in Yield The impact on the total costs you pay will have on the investment return you might get. The total costs take into account one-off, ongoing and incidental costs….

Regular Bonus Bonus that is added to a with-profits investment during the course of the policy….

Regulated This means the portfolio or fund must conform to the regulations laid down by the financial authority it is trading in (i.e. in the UK the FCA protects the investor and provides structure around the products), financial service providers and markets….

Repayment mortgage This is a mortgage that pays off both the capital and the interest at the same time. Pay all the repayments and the mortgage will be fully repaid at the end of the term….

Retail Prices Index (RPI) A monthly indication of the average price changes to a particular ‘basket’ of consumer goods and used as a general indicator of price inflation….

Retirement Date This is the date that you choose to retire….

Return A measure of performance. It is the total of increase in value and any income received over a given period, expressed as a percentage against the price paid….

Risk In investment terms, the balance of potential loss and potential gain as perceived by the investor. In insurance terms, the likelihood of a claim being made on a policy during the term….

SERPS (State Earnings-Related Pension Scheme)SERPS was replaced by the State Second Pension in April 2002. Prior to that date part of an employee’s National Insurance contribution went into the scheme, which was paid on top of the basic state pension on retirement. It was dependent on a…

Salary Sacrifice A tax-efficient method of increasing the money paid into a pension scheme by giving up existing salary or proposed salary increases, so that the sum forgone can be used as an additional company contribution into a pension scheme….

Section 226 (Retirement Annuity Contract) In effect, an old form of pension. Prior to 1 July 1988, people not in a pensionable employment (employment where no pension scheme exists or where a scheme exists but was not joined) or people who were self-employed, were able to qualify for tax relief…

Securities A term used to describe stocks and shares….

Selling (Bid) Price The price at which you can sell shares or units in a unit trust. The price at which you can buy shares or units in a unit trust is known as a Buying (Offer) Price ….

Seven year clock A gift by an individual made above the annual gift allowance must live for seven years for the gift to remain outside that person’s estate….

SIPP Self-invested personal pensions (SIPPs) work in a similar way to a standard personal pension. However, some schemes give you a much wider choice of investments – which you manage yourself or with the help of a financial adviser.

Small Gifts Allowance An annual inheritance tax (IHT) allowance….

Solicitor A professional who provides legal advice and services to individuals and businesses on a wide range of issues, for example divorce, conveyancing, contract law and employment law….

SSAS A small self-administered scheme or SSAS is a bespoke occupational pension scheme created specifically for an employer. It gives its Members considerable flexibility and control over the investment policy and underlying assets.

Stamp Duty Land Tax You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England, Wales and Northern Ireland. SDLT no longer applies in Scotland….

Stamp duty This is a tax that’s levied on the transfer of certain kinds of assets: it’s imposed by HMRC, who need to ‘stamp’ documents to complete the purchase of such assets. Home buyers must pay stamp duty on properties with a value…

Standing Order Similar to Direct Debit, a standing order is a means of authorising your bank to make a single or regular payment to an individual either on a limited time basis or an ongoing basis. A Standing Order can only be set up and varied by the customer with their…

State Pension Your basic State Pension is based on your National Insurance contributions. You may also qualify for the additional State Second Pension if you are employed, based on your earnings and National Insurance contributions….

State Pension Age The State Pension Age is the date when you are eligible to receive a State Pension….

State Second Pension The State Second Pension is an additional pension that’s paid on top of your basic State Pension. It was called SERPS until 2002. Self-employed people are not entitled to a State Second Pension….

Stock Exchange A market where stocks and shares are bought and sold….

Stock Market A place where shares or other securities are bought and sold, for instance the London Stock Exchange….

Stockbroker A stockbroker is a professional who buys and sells stock (shares) on behalf of clients. Only registered stockbrokers can buy or sell shares on the stock exchanges….

Stocks and Shares Both terms mean the same thing: companies’ stocks and shares that can be bought and sold. Owning a share in a company means owning a part of that company or owning some of that company’s stock….

Structure Products. Structured Products can be loosely defined as a savings or investment product where the return is linked to an underlying asset with pre-defined features (maturity date, coupon date, capital protection level). They belong to the rage of products with ‘non-traditional’ investment strategies. asset with pre-defined features

Sum Assured The guaranteed amount paid on death under a life assurance policy. Depending on the policy held, this sum might be increased through the addition of bonuses….

Surrender Value The amount of money that will be paid to a policyholder if they discontinue a policy before it matures. The benefits the customer usually receives are reduced because of the effects of the charges….

Taper Relief The purpose of taper relief is to reduce the amount of tax you have to pay to account for the effect of inflation….

Tax Credit A state benefit paid to employees through the tax system, which has the effect of increasing net income….

Tax Relief The UK government encourages you to save for your retirement by giving you tax relief on pension contributions. Tax relief works by reducing your tax bill or increasing your pension fund….

Tax-efficient investing Tax-efficient investing is the process of investing in such a way as to minimise the amount of tax paid. This could mean using tax-efficient investments such as ISAs or making contributions to your pension….

Term Assurance A simple life assurance policy that pays out on the death of the customer during the time period in years specified by the policy….

Terminal or Final Bonus A discretionary bonus that may be added to a with-profits policy out of a life fund’s surplus profit. This bonus would be payable at the end of the term of the policy (at maturity), or when a claim is made e.g. death or surrender….

Testate A person who dies having made a will is described as testate….

Trust An arrangement whereby one person or persons (trustees) agree to take care of assets and to use those assets in particular ways for particular people (beneficiaries)….

UFPLS (Uncrystallised Funds Pensions Lump Sum)Since the 6 April 2015, from age 55 you can take all of a pension fund as a single or series of cash lump sums….

UK Gilts A bond issued by the British Government….

Uncrystallised Pension The name for a pension where the benefits have not been taken….

Unearned Income Income received from sources such as interest on savings accounts, dividends from shares and bonds that has not been earned by working….

Unit trusts These are ‘open-ended’ investments in which the underlying value of the assets is directly calculated by the total number of units issued multiplied by the unit price less the transaction or management fee charged and any other associated costs….

Unit-Linked Where the value of the saver’s fund is linked to the value of the units of the fund it is invested in. (The value is directly dependent on the performance of the underlying asset)….

Unitised With-Profits A form of with-profits fund where the investor buys unit whose value increases in line with any declared regular bonuses and to which a final bonus may be added when the units are cashed in….

Unregulated This means the portfolio or fund does not need to conform to regulations….

Valuation A statement (verbal or written) confirming a plan’s worth….

Venture Capital Trust (VCT) A venture capital trust is designed as a way for individual investors to gain access to venture capital investments via the capital markets. They aim to seek out potential venture capital investments in small unlisted firms to generate higher than average…

Whole-of-Life Policy Life assurance a customer pays for throughout the whole of their life that pays out when they die. On some whole-of-life policies, premiums stop at a certain age….

Will A document drawn up to administer an estate on death….

With-Profits Bonus An amount that is added to a with-profits life assurance policy. It can be added within the term of the policy (regular) or at the end of a policy (final)….

Yield A measure of the return on an investment compared to the price paid for it. This is normally expressed as an annual percentage. There are several types of yields….

Yield Curve A graph showing the relationship between short-­term and long-­term Yields for a given type of asset, usually Bonds ….