 |
 |
 |
|
 |
 |
 |
|
|
||
|
 |
 |
 |
||||||||||||||||||||||||||||||||
| Glossary: |
|
|||||||||||||||||||||||||||||||||
A I B I C I D I E I F I G I H I I I J I K I L I M I N I
ABI Association of British Insurers AER Stands for Annual Equivalent Rate and usually specifies the interest paid from current, deposit or savings accounts. This new term replaces CAR (Compound Annual Rate) which denoted much the same thing. Acceptance Letter An offer of life assurance, setting out the terms Access to Medical Records Act 1988 The terms of this Act require an insurance company to obtain prior written consent from an individual before approaching any medical practitioner for a medical report pertaining to them. The individual has certain other rights including the right (subject to some restrictions) to see any report before it is submitted by the doctor. Accidental Death Benefit A provision that may be added to a life insurance policy which provides payment of an additional benefit in the case of death resulting from an accident. Accidental Death and Dismemberment Loss of life or limbs through accident. Insurance against such eventualities is generally available. Act of God An accident or event which happens independently of human intervention and due to natural causes such as storm earthquake etc. which no human foresight can provide against. Suggesting that an event was an "act of God" may be a defence in English law against a claim for liability since it may be held that it could not have been foreseen or safeguarded against. Actively at Work A clause in a group insurance policy that requires a new member or one with an increase in cover, to be at work (or on holiday i.e. not absent due to sickness, industrial action, etc.) on the day of joining/day of increase. Activities of Daily Living Everyday living functions and activities performed by individuals without assistance. These functions include mobility, dressing, personal hygiene and eating. The inability to undertake these activities may be used in some circumstances to define disability in insurance contracts. Actuary A professional trained in the technical aspects of insurance and its related fields, particularly in the mathematics of insurance, for example, the calculation of premiums and reserves. An actuary will use complex mathematical methods, often with the aid of computers, to provide analysis of claims data and other statistics. In certain circumstances insurance companies, pension schemes etc. are required to have documents, calculations etc. certified by an actuary. In this and other legal contexts the word means a qualified Fellow of the Institute or Faculty of Actuaries. ADD Accidental Death and Dismemberment Additional Borrowing Similar to a traditional current account overdraft. It is the extra money you can borrow on top of what you've already borrowed. Your Additional Borrowing = Your Agreed/Total Facility - Total Borrowing. Additional Voluntary Contributions Pension contributions over and above the pension scheme member's normal contributions, which secure additional benefits for the member or his or her dependants. ADL's Activities of daily living Advance Underwriting Describes a system used for underwriting members of some group schemes. Once an underwritten member is accepted for insurance at 'ordinary rates', they may increase their cover by a predetermined percentage in any year without the need for further underwriting. Advice Where an authorised adviser looks at your individual circumstances and advises on suitable products for your financial needs. AFPC Advanced Financial Planning Certificate - a professional qualification for financial advisers obtained by examination through the Chartered Insurance Institute. Holders are eligible for membership of the Society of Financial Advisers. Age Allowance Increased personal allowance for Income Tax for persons aged over 65. A further increase is available to persons over 75. Agent Someone who acts on behalf of another. Traditionally, insurance company salesmen have often been called agents. This has led to a certain amount of confusion since in some situations they are acting on behalf of the client and at other times they are acting on behalf of the insurance company: the distinction is not always clear. All Risks Extension of the cover provided by household insurance to damage, theft if outside the home, etc. in respect of individual high value items. Allocation rate This is the percentage of your payment that is actually invested (e.g. 75%) after initial charges have been taken into account. Alpha Alpha is the term used to describe the risk adjusted out performance of an investment. A large alpha indicates good performance relative to the market. Alternative Dispute Resolution A means of resolving disputes without resort to the Courts. Particularly used in relation to disputes between pension schemes, trustees and members. Amount Amount purchased or sold in Gift Fund Pools as a result of a contribution or miscellaneous activity. AMRA Access to Medical Records Act 1988 Analyst Person who studies particular stock markets or industry sectors and makes buy or sell recommendations regarding the shares of specific companies within them. These are arrived at through a combination of research, economic statistics and, frequently, visits to the companies themselves. For example, in 1998 alone, Flemings' analysts have made over 3,000 company visits around the world. (See also Fund Manager) Annual Percentage Rate (APR) This rate takes into account all the costs, interest charges, arrangement fees etc. Theoretically it allows you to compare mortgages on a like for like basis. However, you need to be careful as different lenders calculate it in different ways. Annual management fee A charge made every year for running your fund. It is usually a percentage of the amount you've got invested. Annual Report A voluntary report published by a foundation or corporation describing its grant activities. It may be a simple typed document listing the year's grants or an elaborately detailed publication. A growing number of foundations and corporations use annual reports to inform the community about their contributions activities, policies, and guidelines. (This annual contributions report is not to be confused with a corporation's annual report to stockholders.) Annual Volatility Volatility is one measure used to assess the risk of a portfolio as it helps to describe the likely range of returns achieved by the fund. In statistical terms it is the standard deviation of the return distribution. Greater volatility of monthly fund returns means that there is a wider range of likely returns in the future, or greater uncertainty regarding the fund return. Most investors would equate this greater uncertainty with greater risk. Annuitant The person entitled to receive payments from an annuity contract. Annuity A series of payments, possibly subject to increases, made at specified intervals until a particular event occurs. Most commonly an annuity will cease after a specified period or upon the death of the annuitant. Annuity Certain A contract that provides payments for a specified number of years, regardless of life or death of the annuitant. Approved Scheme A pension scheme that is approved by the Inland Revenue under the relevant legislation. Members and their employers are able to obtain certain tax advantages in respect of contributions and/or benefits. Annual Percentage Rate (APR) This is the compounded rate used to give a standard comparison of the amount of interest you are likely to pay on loans or outstanding credit card balances. 2. A statutory method of calculating the Annual Percentage Rate of charge to repay the total charge for credit over the period of the loan. 3. Allows customers to compare like with like when comparing costs between different lenders. Arbitrage Profiting from the differences in price when the same security, currency or commodity is traded on two or more markets. Arbitration A means of arriving at an acceptable agreement between two disputing parties. An independent person or body hears the arguments of both parties and makes a decision that is then binding on all concerned. Often conducted by members of the Institute of Arbitrators. Assets Another word for the investments which a unit trusts holds within its portfolio. Assignment The transfer of one person's interest in a legal right or duty to another person or organisation. Association of British Insurers An association representing some 450 insurance companies which account for over 95% of the business transacted by UK insurance companies. Is the forum through which UK insurance companies collectively liaise with Government Departments and other bodies. Brings insurance companies together to set industry standards and codes of practice. AUTIF The Association of Unit Trusts and Investment Funds, which is the industry trade body of unit trusts and investment trusts management companies. Average Apportionment of loss on an equitable basis. Average Annual Return Average Annual Return is used to compare returns over different periods on a consistent basis with the unit being years, hence per annum. Normally only returns over periods greater than one year are annualised. The average annual return is the rate that an investor would have earned in each year to achieve the total cumulative return over the period. Aviation Hazard The extra hazard of death or injury resulting from participation in aeronautics, usually as other than a fare-paying passenger in licensed aircraft. For insurance, this often requires an extra premium or the exclusion of certain risks.
Bank A business that holds money for its clients, lends money at interest and trades generally in money. Bank Giro Credit (BGC) A one-off cash or cheque payment to an organisation or individual. Processing a payment made using a Bank Giro Credit takes three working days. Bankers' Draft A guaranteed payment delivered to your home address by registered post. If we receive the request before 4 pm we'll send the draft to you on the same day. Base Rate The base interest rate determined usually by a country's central bank (such as the Bank of England) upon which all other lending or savings interest rates are based. Basic State Pension The standard pension which individuals over retirement age receive from the state (subject to National Insurance contribution conditions). The Basic State Pension is a fixed amount, not connected to earnings. Bed Breakfasting The former practice of selling shares one day and buying them back the following day so as to establish a realised loss (or gain) for tax purposes. The tax advantages were removed by the Finance Act 1997. Beneficiary The person who is or will be the ultimate recipient of a benefit. Examples could be someone named to receive a legacy under a Will or an individual nominated to receive benefit from a trust fund. Benefit Basis The benefit structure of a group insurance policy or pension arrangement. It defines the type and level of benefits for each category of membership. For example, life assurance cover for one category of employees might be 3 x salary and for another category of employees it might be 4 x salary (the categories must be clearly defined groups in terms of jobs carried out so as to ensure there is no illegal discrimination). Benefits The monetary amounts payable by the insurance company to a claimant, assignee, or beneficiary under the terms of an insurance policy. Benefits In Kind Benefits other than cash, provided to a person through their employment (for example, cars, or private medical insurance). These benefits are usually subject to tax. Inland Revenue rules normally allow their value to be included in the calculation of maximum pension benefits. Bequest A sum of money or other property available upon the donor's death. Bid Offer Shares, units in unit trusts and other investment vehicles are bought at one price and sold at another. The higher price is called the 'offer price' since this is the price at which the unit trust company or other institution offers the security for sale. The lower price is called the 'bid price' and is the price at which the investor can sell the security back to the institution in question. Bid-Offer Spread The difference between the prices at which you buy units from us and sell them back to us. The buying (offer) price is usually higher than selling (bid) price and the difference between them may vary within the limits of a formula laid down by the Financial Services Act 1986. Both offer and bid prices are quoted for each of our funds on the Daily Prices page. Bid Price The price at which you can sell a security or a unit in a unit trust. Bonds Otherwise known as fixed-interest securities, bonds are basically IOUs which are issued by governments, financial institutions and companies. Generally, the issuer undertakes to pay investors a fixed rate of interest for a fixed number of years (e.g. 7% for 5 years). The fact that the interest rate is fixed makes bonds attractive because their return is so predictable. Bonds are traded in open markets, in the same way as shares. Bonus An amount added to a basic figure. For instance bonus is added each year to a with-profit life insurance policy, thus increasing the amount ultimately payable when a claim arises. See also: Dividend Bridging Loan If a house purchase arrangement involves the sale of one property and the purchase of another it will normally be most convenient if the two deals are concluded simultaneously. If this is not possible and the purchase of the second property is to be concluded before the sale of the first is completed then additional financing may be necessary. This is a 'bridging loan' & it bridges the gap between the two transactions. Building Campaign A drive to raise funds for construction or renovation of buildings. Building Society A financial institution owned by its members (rather than by shareholders) which pays interest on deposits and lends money on the security of property to enable members to buy their own homes. The distinction between building societies and banks (which have historically offered a much wider range of financial services but often at a higher cost) is now much reduced and the main difference is often the question of ownership. Bulk Transfer The transfer of a group of pension scheme members and their scheme assets from one occupational pension scheme to another. Buy Back 1) A payment made to reinstate into SERPS a person belonging to a contracted out pension scheme. 2) Reinstatement of life assurance cover after a claim has been paid on critical illness under a policy that provides cover against critical illness and death. (Normally a policy of this type will cease on the claim being paid; the life assurance cover is then automatically cancelled.) Buy Out The purchase of an insurance policy for a pension scheme member in lieu of benefits from the scheme following the termination of pensionable service Buy-to-let This is when you buy a property to rent it out rather than live in.
Cancellation Clause A provision in an insurance contract that permits the insurer or the insured to cancel a policy at any time before its expiration date. Capacity The largest amount of insurance or reinsurance available from a company. It can also refer to the largest amount .of insurance or reinsurance available in the marketplace. Capital A lump sum of money. This usually refers to the amount you invest in a fund at the outset - e.g. your original capital. Capital Campaign An organized drive to raise substantial funds to finance major needs of an organization, including construction, renovations, or endowment. Capital and Interest Mortgage Your monthly payments are partly to pay the interest on the amount you borrowed, and partly to repay the amount you borrowed. At the end of the mortgage, the capital and the interest is all completely repaid. It is also known as a repayment mortgage. Capital Claims An organized drive to raise substantial funds to finance major needs of an organization, including construction, renovations, or endowment. Capital Gains Tax A tax on the realised value of capital gains. Applies only to individuals (a company may be liable to Corporation Tax on such gains). Capital Grant Grant to provide funding for buildings, construction, or equipment, rather than program or operating expenses. Capitalised Value Used in relation to group life policies that provide a pension for the spouse or other dependant of a member. The capitalised value is used for underwriting purposes and is an approximation of the lump sum that would be required to secure the pension. Carpet-Bagger A person who joins a mutual organisation (usually a building society or an insurance company) in the hope that the organisation may be converted to a limited company owned by shareholders and that in this event he will realise a substantial profit by receiving a cash amount or selling any shares allocated to him. (See also 'de-mutualisation'). Capped Rate Like a fixed rate, but the rate is guaranteed not to go above a certain level for a set period of time. It can, however, move downwards. 2. An arrangement that caps your mortgage rate for a specified period of time. On the first day of the month following expiry of the capped rate period, the interest rate will change to the then prevailing Standard Variable Rate. Cash Back A payment (either a fixed or a percentage of the mortgage amount) offered by some lenders as an incentive to borrow from them. Sometimes there are redemption penalties associated with these types of deals. Cash Surrender Value The amount of money received when a policyholder surrenders a life insurance policy with cash value. CAT Standards CAT stands for low Charges, easy Access and fair Terms. The standards were brought in by the government as an incentive to offer savers an even better deal, and to make it easier for you to spot the best value ISA's. Caveats Conditions attached to an insurance quotation. Cede To transfer all or part of a risk written by an insurer to a reinsurer. CGT Capital Gains Tax Challenge Grant A grant that is made on the condition that other funding be secured, either on a matching basis or by some other formula, usually within a specified period of time, with the objective of encouraging expanded fundraising from additional sources. CHAPS Payment (Clearing House Automatic Payment System) An electronic transfer of money between two bank accounts that will clear the payee's account on the same working day provided instructions are received before 3.15 pm. Charges Companies can charge for financial services in different ways, some more straightforward than others. CII Chartered Insurance Institute. A body controlling professional standards (educational, ethical etc) in the insurance industry. Claim Notification to an insurance company that payment of an amount is due under the terms of a policy. Claims Experience The relationship of claims to premiums for a period. Usually expressed as a percentage or ratio. Claims Reserve Amounts set aside by an insurer to meet costs of claims incurred but not yet settled. Clawback A practice whereby a pension scheme will offset an amount equivalent to the state pension against a target pension so as to arrive at the amount payable by the scheme. If commission is paid to an intermediary by a financial institution for the introduction of business and this does not stay in force for a certain pre-determined period a part of the commission may be repayable to the institution. This is known as 'clawback'. The practice is more prevalent among insurance companies. Co-Insurance An arrangement by which a number of insurance companies cover a particular risk. Collective investment Investments such as unit trusts and investment trusts schemes. Commercial Lines Insurance for businesses, professionals, and commercial establishments. Commission An amount paid by a financial institution to an intermediary for the placing of business. Normally calculated as a percentage of the amount paid (i.e. of the premium for an insurance policy or of the amount invested in a fund or used to purchase securities). Commission is also payable in a number of other situations where the payment for a service is a proportion of the value of the transaction (eg the provision of foreign currency, the sale of a house, etc). Committed Funds A portion of a donor's budget that has already been pledged for future allocation. Commutation The giving up of part or the entire pension that would be paid at retirement in exchange for a lump sum. Applied to any exchange of a series of payments to which someone is entitled for a lump sum. In the case of approved pension arrangements the amount that is commutable is strictly limited. Commutation Factors Factors used to determine the amount of pension to be given up in exchange for a lump sum benefit. Community Funds A type of foundation formed by broad-based community support from multiple sources: trusts, endowments, individual contributions, private foundations, or corporate grants. A community foundation generally makes grants only within a specified geographic area and is governed by a board representing the community it serves. Some community foundations offer donor-advised funds to contributors. Company Representative A financial adviser who can only advise on their own company's products. Compound Interest Compound interest is interest earned on interest and makes a huge difference to the value of long term savings. Say you've invested £100, which is earning 10% interest each year. Year 1, you earn 10% on £100 = £110 Year 2, instead of earning another 10% on your £100, you earn 10% on £110 = £121 Year 3, you earn 10% on £121 = £133.10 And so on, so longer you leave it, the more you benefit from compounding. Compulsory Purchase An annuity you buy with the fund built up in your personal pension scheme annuity. Compulsory Purchase Annuity Some approved occupational pension schemes produce a benefit at retirement that is expressed in cash terms rather than pension. The cash sum produced must then be used to purchase an annuity known as a 'Compulsory Purchase Annuity' (but see Commutation). Conditions Provisions in an insurance contract that state the rights and duties of the insured and of the insurer. Confirmation A court order confirming the validity of a Will and the identity of Executors. The equivalent under English law is Probate. Consequential Loss A financial loss occurring as the result of some other loss. Also known as an indirect loss. (eg a shop is destroyed by fire. The loss of the building, stock etc is a direct loss. The loss of ongoing profit because of the inability to continue trading is a consequential loss). Continuation Option Allows employees to continue their group insurance coverage under certain conditions after their employment has terminated (much less common today). Continuing Professional Development A formal procedure by which a professional body ensures that its members keep their expertise up to date with current developments. Applies to doctors, lawyers, accountants, financial advisers etc. Contract A legally enforceable agreement between two parties. Contracted In This describes a member of an occupational or personal pension scheme who is also a member of SERPS (or the scheme itself). Contracted Out This describes a member of an occupational or personal pension scheme who is not a member of SERPS (or the scheme itself). Contributions Committee A corporate group organized to make grant decisions usually with the guidance of a corporate foundation or contributions administrator. Typical responsibilities include setting and interpreting policy, approving an annual budget, and reviewing grant requests. Convertible Term Insurance Term insurance which can be changed into a permanent policy without further evidence of insurability or medical examination. Cooling Off Period A period allowed in certain circumstances during which a person who has entered into a contract (for example, an insurance policy or a personal loan) may cancel it without incurring any penalty. Corporate Bond Companies issue bonds to raise money and pay interest on the bonds. Usually bonds expire on a fixed date, when the company repays you. You can buy and sell bonds easily (like shares). Bond prices tend to change when interest rates change and are usually not as risky as shares because a company will pay off all it's debts (including bonds) before the shareholders get anything. Corporate Contributions A general term referring to charitable contributions by a corporation. Usually used to describe cash contributions only, but may also include other items, such as the value of loaned executives, products, and services. Corporate Foundation A foundation that receives its income from a profit-making company but is a legally independent entity. Usually this type of foundation carries the name of the parent company. Corporations may fund these foundations with a donation of permanent assets or with periodic contributions. (Also called a company-sponsored foundation). Corporate Giving Programme (Also called a corporate contributions program - see above.) Funding that is distributed directly by a corporation, rather than through a foundation. Often such a program is handled by the Public Affairs or Public Relations office. Corporation Tax A tax payable by companies on their profits. Cost Adjusting Factor Used in relation to group insurance in reference to rate-adjusting factors calculated by actuaries and based on claims experience, occupation, location etc. Cover Note A temporary certificate confirming that an insurance policy is in force. Used in motor insurance for taxation/registration purposes and in some other contexts such as life assurance to confirm that cover is effective on a temporary basis while further information is being gathered. CPD Continuing Professional Development. Credit Card A credit card gives you the power to buy goods or services now and pay for them later. It represents an approval by a bank or company to use their money. Credit card issuers are usually banks, even though the card may bear another company name or logo. The name of the issuer appears somewhere on the card. Trade names such as VISA and MasterCard are not actually card issuers. They are termed "membership associations." Banks use them for their payment processing services, policy setting and marketing assistance. Many different banks can package their own cards and different terms of credit using the logo and services of an association membership. Critical Illness Policy A Critical Illness policy will provide a lump sum payment to the insured should he or she be diagnosed as having one of a number of specified illnesses, conditions or diseases. Custom Excise A government department responsible for the collection of duties on imports, VAT and other taxes including Insurance Premium Tax.
Death Benefit A life insurance payment made upon the death of an insured person. Debit cards look like credit cards or ATM (automated teller machine) cards, but operate like electronic cash or a personal cheque. When a purchase is made with a debit card, the amount is automatically deducted from the associated account. No credit is extended to the cardholder and hence no debt or interest charge is incurred. Declination The rejection of an insurance application by an insurance company. Declining Grant A multi-year grant that becomes smaller each year, in the expectation that the recipient organization will increase its fundraising from other sources. Decreasing Term Insurance Life insurance which pays out a lump sum if you die within the term, but where the insurance sum assured reduces during the term. The earlier you die in the term, the bigger the payout your dependants get. Deeds Fee An administration charge made by lenders when you repay the mortgage to release the deeds of the property. Also known as a sealing fee. Deferred Annuity An arrangement by which a premium is paid in return for annuity payments that will commence at a future date. Deferred Period In relation to Permanent Health Insurance (PHI) / Income Protection, refers to the period between the commencement of illness, and the date at which eligibility for payment of benefit under the insurance policy would commence. In relation to a Deferred Annuity, refers to the period between payment of the premium and commencement of the annuity payments. Defined Benefit Pension Scheme Pensions scheme where the rules that define the benefits of the scheme are independent of the rules relating to contributions to the scheme. The benefit will usually be expressed as an amount of pension, often related to earnings and service. Deflation Deflation is the opposite to inflation and means that the money you have today will be worth more tomorrow. Unfortunately, it isn't as good as it sounds, because it makes people reluctant to spend, which is harmful for the economy. It is also very uncommon. Demonstration Grant A grant made to establish an innovative project or program which, if successful, will serve as a model and may be duplicated by others. De-mutualisation The procedure by which a mutual organisation owned by its members changes to a limited company owned by shareholders. This will often result in substantial windfall gains for the members (who are in effect the owners of a mutual organisation). Dependant An individual, a spouse or child or someone who depends on another for financial support and maintenance with regard to the normal necessities of life. Deposit Account An account with a bank or building society, which pays a variable rate of interest. Higher rates are often available if you are willing to give notice before withdrawing your money. Deposit Premium The premium deposit paid when an application is made for an insurance policy. Depreciation The decrease in value of property over a period of time due to wear and tear or obsolescence. Derivatives A collective name for futures, options and warrants. Direct Debit A procedure under which an organisation to whom a payment is due claims the amount directly from the bank account of its debtor. Disability Physical or mental condition that prevents a person from undertaking 'normal' duties of a job or the ordinary activities of life. For insurance purposes the word 'disability' will have a special and particular meaning which will be defined in the policy concerned. Disclosure The duty of any person applying for an insurance policy to tell the insurer all relevant information affecting the risk. The duty of an intermediary to inform his client if commission is being paid (and, if so, how much) in respect of the business being placed. Discounted Rate An arrangement which gives you a set reduction, or 'discount' off our standard variable rate for a specified period of time. At the end of the specified period your mortgage rate will change to the standard variable rate in force at the time. Sometimes there are redemption penalties associated with this type of deal. Discretionary Entrant A member of a group insurance plan who did not have an automatic right to membership under the eligibility terms of the policy. Discretionary Funds Grant monies which are distributed according to a donor's judgement of requests as they are received, rather than funds whose purpose is predetermined. Dismemberment Loss of limb or sight. Distribution The payments of any investment income generated by a fund, usually made either half-yearly or quarterly. You can choose to have each distribution paid to you or to reinvest it in the fund for greater capital growth. Dividend An amount returned to the holders of certain types of policy, by the insurance company, out of its earnings. An annual payment by a company to its shareholders out of accumulated profits. Donor Individual or organisation that makes a grant. Also called a grantor. Double Indemnity Payment of twice the policy normal benefit for specific kinds of losses under certain conditions. Dread Disease Policy Also called Critical Illness Insurance Policy (see under that heading).
Earned Premium The portion of an insurance premium for which protection has already been provided by the insurer. Earnings Cap Since 1989 there has been an upper limit on the amount of salary that can be taken into account when calculating pensions arising from and contributions payable under an approved arrangement. This is known as the 'earnings cap'. In the current year (1999-2000) the amount is £90,600. Earnings Per Share A widely used indicator of the return on equity investments. Any figure quoted represents the total amount of a company's earnings (after deductions) divided by the number of ordinary shares it has issued. (See also P/E) Effective Date The date on which insurance under a policy will begin. Eligibility Date The date at which an individual becomes eligible for benefits. Eligibility Period A specified period of time during which potential members of a group insurance scheme may join without evidence of insurability. Eligibility Requirements Requirements imposed for eligibility for coverage, usually in a group insurance or pension plan. Eligible Employees Employees who meet the eligibility requirements for insurance set out in a group policy. Employee Benefits Benefits offered to an employee by an employer and usually paid for at least in part by the employer. Life, Health and Critical Illness insurance obtained by an employer on a group basis are examples of employee benefits. Employee Declaration A medical questionnaire issued to member of a group insurance scheme when the members benefit level requires the member to provide evidence of good health. This is usually the first stage of the Medical Underwriting process. Endorsement An amendment of an insurance policy that alters the provisions of the contract. Endowment A life assurance policy related to a mortgage designed to pay off the amount originally borrowed at the end of the mortgage term. An endowment policy will pay you a fixed amount on a set date or if you die before that date, in other words it's both a way of saving and life insurance. People often use endowments to repay interest only mortgages. The drawback of them is that it is often unclear how much you have to pay in charges and the plans are often very rigid, so if you start an endowment and then decide to cancel it, you might not get back what you paid in. Endowment Mortgage You only pay interest to the lender, but you also have to pay a monthly premium for an endowment policy that you take out with an insurance company. The endowment policy is designed to produce a lump sum either at the end of your mortgage term or at your death if earlier, to repay the capital you borrowed. You must remember though that the amount paid out is not guaranteed and may not be sufficient to repay the capital borrowed. EPP Executive Pension Plan. Equity A shareholding in a limited company. By extension, 'equities' is generally used to mean the whole range of shares traded on a Stock Exchange. The amount by which the value of a house exceeds the total of the loans secured by mortgage(s) thereon. Equities Another word for stocks and shares. Equity Release A type of remortgage where you own your home outright but wish to use it as security for new borrowing. Escalation Refers to the increase in benefit (usually annual) payable during the payment term of an insurance claim that is not settled via a lump sum payment. For example, claims under an Income Protection Policy might escalate annually in line with the Retail Price Index. Estate Strictly, an interest in land, but generally used to mean the total (land, chattels, investments, etc) owned by an individual. Ethical Investments Shares or similar investments (for example, holdings in unit trusts) in companies supposed to conform to a particular set of moral or ethical principles. Different ethical values have led to a proliferation of funds of this nature with different principles & for example, some will avoid investing in arms manufacture, and others will avoid tobacco companies. There is ongoing debate as to whether the following of such principles adversely affects the investment performance of ethical funds. Euro The European Single Currency. Ex Gratia Payment Latin for "from favour." A payment by an insurer to an insured for which there is no liability under the contract. Exchange of Contracts The point at which the buyer and seller have legally committed themselves to the sale and purchase of the property. Execution Only Where a customer buys a financial product without receiving advice on its suitability. Excess A fixed amount of money which the insured agrees to contribute toward the cost of a claim under an insurance policy. Exclusions Conditions or circumstances listed in the policy, for which the insurer will not provide benefits. Executive Pension Plan An individual occupational pension arrangement that is normally used for senior employees /executives. The rules of an occupational pension and not those of a personal pension govern an Executive Pension Plan. Exempt Approved Scheme An Inland Revenue approved pension scheme, which is established under an irrevocable trust and hence qualifies for tax advantages relating to contributions, income and capital gains from investments. Expense Ratio The ratio of insurance company operating expenses to premiums. Experience Rating Process of determining the premium rate for a group risk, wholly or partially on the basis of that group's claims experience to date. Express Money Transfer This is a foreign currency payment to an individual or organisation delivered electronically to a bank. It takes around 2-5 days, depending on the currency and destination.
Facultative Reinsurance A type of reinsurance in which the reinsurer can accept or reject any risk presented by an insurance company seeking reinsurance. Family Foundation A private foundation created to make charitable contributions on behalf of a particular family. The board is often limited to family members. Family Income Policy A form of term insurance. If the death of the insured occurs during the term an income will be paid from the date of death to the end of the term. Federated Fund Drive A centralised campaign whereby one organisation raises money for its member agencies. The United Way campaign and the Community Works are examples. Final Salary Scheme A particular form of defined benefit pension scheme (see under that heading). Benefit is calculated based upon the final salary of the member and years of service. Finance Company n. (also finance house) company providing money, esp. for hire-purchase transactions Financial Planning Certificate A professional qualification for financial advisers obtained by examination through the Chartered Insurance Institute. Holders are entitled to be Registered with the Society of Financial Advisers. Financial Services Authority The single regulatory authority for the UK financial services industry. Financial Year Year as reckoned for taxing or accounting, esp. from 6 April to 5 April every year (in the UK ). 1. Any year connected with finance, such as a company's accounting period or a year for which budgets are made up. 2. A specific period relating to corporation tax, i.e. the year beginning 1st April (the year beginning 1st April 1988 is the financial year 1988). Corporation-tax rates are fixed for specific financial years by the Chancellor in his budget; if a company's accounting period falls into two financial years the profits have to be apportioned to the relevant financial years to find the rates of tax applicable. Compare with fiscal year. Financier n. capitalist; entrepreneur. Fiscal Policy Influencing the direction of an economy through the use of taxation (See also Monetary Policy). Fixed Rate A guaranteed rate that is normally set just below the standard variable rate and is guaranteed for a certain period of time. If the standard variable rate falls below the fixed rate you will still have to pay the fixed rate. Once the fixed rate period ends you will normally pay the lender's variable rate. Sometimes there are redemption penalties associated with this type of deal. Flexible Benefits A program where employees can select from a range of benefits offered by their employer in order to meet their own specific needs. Flexible Mortgage A feature of some mortgages that gives you freedom to change the amount and frequency of your mortgage payments. Flow-through Funds Contributions to a foundation that are used primarily for direct grant making, rather than for endowing the foundation permanently. Most corporate foundations depend on these funds each year rather than on income produced from endowment funds. Footsie The popular name for the FT-SE 100 Share Index, the UK stockmarket's main benchmark index, which measures the daily share price performance of Britain's top 100 public limited companies, ranked by their size (See also Market Capitalisation). Foreign Draft This is similar to a bankers' draft, but is in a foreign currency. Foreign drafts take around 5 days to arrive depending on where it is sent. Foundation A private non-profit organisation with funds and a program managed by its own trustees and directors, established to further social, educational, religious or other charitable activities by making grants. A private foundation receives its funds from, and is subject to control of, an individual family, corporation or other group of limited number. In contrast, a community foundation receives its funds from multiple public sources and is classified in the US by the IRS as a public charity. FPC Financial Planning Certificate. Fixed Rate The interest rate is fixed for a set period. Free Cover Level The maximum amount of benefit for which an insurance company is prepared to insure a member of a group insurance scheme without the member needing to provide evidence of good health. Freehold If you buy a property which is freehold it means that both the land and the property is yours, unlike leasehold where the land would not belong to you. Free Standing Additional Voluntary Contributions A scheme whereby an individual can make payment into an independent arrangement to supplement an occupational pension scheme as longs as the anticipated benefits from the two schemes together are less than the maximum permitted under the rules laid down by the Inland Revenue. Friendly Society Similar to a mutual insurance company. A Friendly Society, registered under the terms of the Friendly Societies Act 1974, is owned and operated for the benefit of its members. There are limits on the amounts which can be invested by members but tax privileges are available to policies within those limits. Some Friendly Societies now operate with separate sections for 'tax-exempt' and 'ordinary' business. FSA Financial Services Authority. FSAVC Free Standing Additional Voluntary Contributions. FT-SE This is an index compiled by the Financial Times and is made up of all the companies listed on the UK Stock exchange (currently around 835). The purpose of the index is to provide a benchmark of the performance of the stock market as a whole. This benchmark is often used to measure the effectiveness of a fund manager. An annuity which is payable for a fixed period regardless of whether the annuitant survives, and thereafter only while the annuitant is alive. Annuities guaranteed for 5 years are very commonly used in conjunction with pension arrangements. Fund General term for any investment vehicle which pools together the money of many small individual investors and invests it in certain markets and securities according to a defined set of investment aims and objectives. Covers such investments as unit trusts, investment trusts and pension plans. Fund Manager A fund manager is employed to invest money for (amongst other things) unit trusts and investment trusts. Fund managers aim to outperform their chosen index by buying shares, which they think will do particularly well. They can also choose to keep a percentage of their fund in cash if they're not optimistic about the outlook for the stock market. Naturally, fund managers get paid to do this, so charges for an actively managed fund tend to be higher than for an index tracker. Fundamentals Usually refers to the underlying economic factors affecting a particular market, country or sector and will include such aspects as industrial output, wages and raw materials costs, currency strength or weaknesses, trade balance and so on. Futures Short for Futures Contract, which is an obligation to buy or sell a specific amount of a commodity, currency or financial instrument at a particular price on a stipulated future date. The price is established between buyer and seller on the floor of an exchange, such as the London International Financial Futures Exchange (LIFFE), using an 'open outcry' system. The contracts themselves may be traded with third parties. (See also Options).
Gilts An abbreviation for 'gilt-edged securities'. These are bonds, loans etc issued by the UK government or UK local authorities and are generally considered to be one of the safer forms of investment. Although the interest rate on the underlying value and the price at maturity are guaranteed, the price will vary during the lifetime of a gilt; so there is some element of risk. GIV Gift inter-vivos. A gift made during a person's lifetime as opposed to a legacy, which passes on death. GMP Guaranteed Minimum Pension. GPP Group Personal Pension. Grace Period The specified period after a premium payment is due, in which the policyholder may make such payment, and during which the protection of the policy continues. Granny Bond A bond issued by the UK government with enhanced interest or tax privileges but restricted in availability to persons of pensionable age. Grant The award of funds to an organisation or individual to undertake charitable or tax-exempt activities. Grantee Individual or organization that receives a grant. Also called a donee. Grantor Individual or organization that makes a grant. Also called a donor. Gross A gross interest rate or dividend is one that doesn't take into account the tax you'll have to pay on that income. Gross Premium The actual premium paid by the policyholder before any tax relief or discount is taken into account. Group Contract A contract of insurance made with an employer or other entity not formed for the purpose of obtaining insurance that covers a group of persons identified by reference to their relationship to that entity. Several different types of insurance may be arranged on this basis, including life, critical illness, income protection, private medical, etc. Group Critical Illness Scheme A scheme that will pay a cash lump sum to members diagnosed as suffering from one of a range of specified illnesses and conditions. Group Health Insurance Health insurance written on a number of people under a single master policy, issued to their employer or to an association with which they are affiliated. Group Income Protection Group Income Protection Insurance (also known as Permanent Health Insurance, or PHI) gives sick and injured employees a replacement income, and provides the means for the employer to retain staff even when they are not contributing to the business. The benefit (typically) becomes payable when the company's sickness scheme ends and continues as long as the employee's absence lasts, right up to normal retirement age. Group Life Insurance Group Life is designed to pay a benefit, in either lump sum form or as a dependants' pension, on the death of the member. Group Permanent Health Insurance An alternative name for Group Income Protection. Group Personal Pension An arrangement between a provider and an employer to offer personal pensions to employees. Charges may be lower because of the numbers involved, and the employer may also agree to contribute. A GPP is not an occupational pension scheme. Guaranteed Growth Bonds Fixed term investments, typically between 3 and 5 years, where you invest a lump sum and are guaranteed either a minimum return or that you won't lose capital. Guarantee Period The period for which an insurer will guarantee a quoted rate prior to it being accepted. The period for which a guaranteed annuity will continue regardless of the survival of the annuitant. Guaranteed Income Bond A single premium insurance contract providing payments at regular intervals for a fixed period at the end of which the premium is returned. Guaranteed Minimum Pension The minimum pension which an occupational pension scheme must provide as one of the conditions of contracting out in respect of pre April 1997 service.
Health Insurance Insurance against financial losses resulting from sickness or accidental bodily injury. Included under this definition are accident insurance, disability insurance and accidental death and dismemberment insurance. Private Medical Insurance (to provide for the cost of private - ie not within the National Health Service - medical treatment also comes under this general heading). Hedging A strategy used to offset investment risk. Usually makes use of futures or options. Higher Rate Tax Under U.K. income tax regulations, bands of personal income are taxed at different rates. The highest rate of income tax is currently set at 40% and for 1999/2000 it is payable on taxable earnings above £28,000. Hire Purchase (HP) A method of buying goods in which the purchaser takes possession of them as soon as he has paid an initial instalment of the price (a deposit) and obtains ownership of the goods when he has paid all the agreed number of subsequent instalments. A hire-purchase agreement differs from a credit-sale agreement and sale by instalments (or a deferred payment agreement) because in these transactions ownership passes when the contract is signed. It also differs from a contract of hire, because in this case ownership never passes. Hire-purchase agreements were formerly controlled by government regulations stipulating the minimum deposit and the length of the repayment period. These controls were removed in 1982. Home Income Plan Home income plans allow elderly homeowners to use the equity tied up in their home to purchase an income and thus increase their standard of living. Homeowners can release this capital without having to sell their home. With a reversion plan, the home is sold to an insurance company that then pays a regular income to the owner. On the death of the owner, the house becomes the property of the insurance company. With an annuity plan, the proceeds of a new mortgage on the property are used to purchase a regular income via an annuity. On the death of the homeowner, the mortgage debt must be repaid. Home Service Insurance See: Industrial insurance.
IFA Independent Financial Adviser. IHT Inheritance Tax. Illustration An estimation of the returns you might get from an investment, based on standard growth rates and taking charges into account. The actual returns you get may be higher or lower than this. Immediate Annuity An annuity under which payments commence straight away, in contrast to a deferred annuity, under which the payments do not commence until later (possibly many years later). IMRO The Investment Management Regulatory Organisation which regulates the management of our unit trusts. Income Draw-Down An option available to members of small self-administered pension schemes, personal pension schemes and recently extended to occupational scheme members with money purchase benefits or AVC's. An annuity does not have to be purchased at retirement and can be delayed up to age 75. In the meantime the individual can 'draw down' income from his pension investment. This can be a high-risk approach to pension provision and is subject to PSO regulation. Income Policy A Life Insurance contract that provides income on a monthly or other periodic basis, as opposed to a policy which pays proceeds in a lump sum. Income Protection Insurance Income Protection Insurance (also known as Permanent Health Insurance or PHI) provides a monthly income during periods of long-term illness or disability. Income tax This is tax you pay on the income you earn each year above a certain amount. As well as your salary, income tax is also charged on interest and dividends you receive. The amount of tax you pay depends on the amount of money you earn and on your allowances. Indemnity Payment to reimburse a specific quantifiable monetary loss or expense incurred. (Of commission) Paid in full at commencement of a contract on the assumption that this will remain in force for at least a certain minimum period. If the contract is terminated within this period part of the commission may be required to be refunded. Independent Financial Adviser A broker or other intermediary authorised to sell or advise on the policies offered by any insurance company, as well as other financial service providers. Independent Foundation A private foundation that is no longer controlled by the original donor or donor's family. Index A means of continually measuring the movement of a particular set of statistics over periods of time. Most unit trust fund managers measure their fund's performance against that of an appropriate 'benchmark' index with the aim of at least matching its progress or, better still, beating it. Index linked Insurance where the level of cover increases in line with an index of prices or earnings. Index Tracking An index tracking fund aims to follow a particular index as closely as possible. It does not aim to beat it. It invests only in the companies that make up that index. Index tracking removes the need to employ fund managers, which means charges tend to be lower. Indexation A method by which benefits are increased at periodic intervals by a factor derived from an index of prices or earnings. Individual Savings Account A means of saving which gives exemption from tax on benefits. Savings can be through cash, stocks and shares or insurance but must be arranged through one or more 'ISA manager(s)'. There are limits to the amounts which can be contributed. Industrial Insurance Whole of life and endowment insurance with relatively low value (under £1000 sum assured). Historically, the premiums were collected by an insurance company agent at the policyholder's home. However, these may now be paid by monthly bank transfer. The legislation governing this type of insurance is less formal than for 'ordinary branch' and if an insurance company transacts both types of business it is required to keep them segregated. Inflation The amount in percentage terms by which prices rise or fall year on year. In the UK , the primary measure of this is the Retail Price Index ( RPI ); the underlying rate of inflation is the RPI with mortgage repayment figures stripped out. In Force Business Life or Health Insurance that is current and for which premiums are being paid or for which premiums have been fully paid. Inheritance Tax This tax is payable at the time of death, on any items (money or otherwise) where ownership changes on death or within 7 years before. There is no inheritance tax on the first portion of the deceased person's estate and transfers between husband and wife are exempt. There are other exemptions and the rules governing these can be complex. In-kind Contribution Support in the form of goods or services rather than a cash contribution. Inland Revenue The Inland Revenue is the government department responsible for the assessment and collection of direct taxation on income, capital gains, stamp duties, corporation tax and inheritance tax. Inland Revenue Limits Limitations on benefits and contributions applied to an approved occupational pension scheme in return for tax relief. Instant Access Accounts where you don't lose interest even though you withdraw money without giving the bank notice. The One account gives you instant access to your funds. All you have to do is write a cheque, arrange a transfer or use your Switch or VISA cards. Insurable Interest A principle of insurance that states that someone may only take out insurance if they stand to suffer a financial loss from an event covered by a policy. Insurance An agreement under which individuals, businesses, and other organisations, in exchange for payment of a sum of money (a premium), are guaranteed indemnity for losses resulting from certain events or conditions specified in a contract (policy). Insurance Premium Tax UK tax imposed on most non-life insurance premiums. Insured A person or organisation covered by an insurance policy. Insurer The party to the insurance contract who promises to pay losses or benefits, usually an insurance company. Intermediary A person or organisation that offers advice and arranges policies for clients. Under UK regulations, intermediaries must be either (1) "Tied", whereby they represent only one company in the case of life business or a limited number of companies for general business, or (2) "Independent", whereby there is no limit on the number of companies with which they can deal. Interest only method One of two ways used to pay off your mortgage, the other being the Repayment method. Your monthly payments are solely used to pay off the interest you owe on your borrowings. This means, you'll have to make provision to pay off the amount you actually borrowed at the end of your mortgage term, for example using an ISA, a pension or an endowment. Internal Revenue Code The laws governing taxation in the United States , administered by the Internal Revenue Service. Internal Revenue Service (IRS) The federal agency in the United States with responsibility for regulating public charities and foundations, as part of its authority under the Internal Revenue Code. Intestate Dying without having made a Will. If a UK resident dies intestate there are rules as to the distribution of the estate, which have to be followed whether or not they coincide with what the deceased person would have wished. Investment Income The portion of a company's or an individual's income which is derived from its investments, including interest and dividends on stocks and bonds. Investment Management Regulatory Organisation (IMRO) A regulatory body which governs the way investors money is handled and invested. Investment Trust Unlike a unit trust, which is 'open-ended', an investment trust is effectively a company which, for a management fee, invests the pooled money of small investors in securities for stated investment objectives. An investment trust is 'closed-end' in that it has a fixed number of shares that are traded like stock, often on many different exchanges. Visit the Flemings website for more details. IOB Insurance Ombudsman Bureau See: Ombudsman. Irrevocable Trust A trust arrangement that cannot be revoked by the creator. ISA Stands for Individual Savings Accounts which the Government introduced on 6th April 1999. ISAs replaced PEPs and TESSAs - no further investments are allowed into the latter, though you can retain existing investments within them tax-free. ISAs offer similar tax-free benefits to PEPs but you can hold a wider range of investments.
Joint Funding A grant project supported by more than one donor, each of whom may provide monies for a specific component of the overall project or who may contribute to a common pool of funds. Joint Life Annuity An annuity contract that pays a benefit throughout the joint lifetime of two people.
Key Person Insurance Insurance designed to protect a business against the loss of income resulting from the disability or death of an employee in a key position. Knock for Knock An arrangement between motor insurance companies where each company pays for its own clients' claims and does not cross claim from the other company, even if the driver at fault is insured with the other company.
Land Registration A record, held by the Land Registry, which lists the registered owner of a plot and whether there are any legal charges upon it. LAPR Life Assurance Premium Relief. Lapse The termination of an insurance policy due to non-payment of premium(s). Lapsed Policy A policy terminated for non-payment of premium(s). Late Entrant These are individuals who wish to join a group insurance scheme beyond the date at which they were automatically eligible for membership. Lease n. Contract by which the owner of property allows another to use it for a specified time, usu. in return for payment. -v. (-sing) grant or take on lease. New lease of (US on) life improved prospect of living, or of use after repair. [Anglo-French lesser let, from Latin laxo loosen]. The grant of an interest in leasehold land (see below at Leasehold Land ). It must give exclusive possession of the land and be for a fixed term. To be a legal lease it must be created by deed, unless it is for less than three years, take effect on possession (i.e. start immediately), and be for the best rent obtainable without taking a premium. A lease that is not a legal lease may, however, be valid in equity as an agreement for a lease. This must be registered or any rights under it may be lost on the sale of the freehold or of a superior lease. A lease generally constitutes a bargain between the landlord and tenant, containing rights and obligations on both sides. It may come to an end on the expiry of the term; alternatively it may be ended earlier, by the tenant surrendering it to the landlord or by the landlord ending it for the breach of some condition (e.g. failure to pay the rent or leaving the premises in disrepair). A lease may be assigned to someone else; for example, a leasehold flat may be sold for a capital sum. The new tenant will then take over the responsibilities under the lease. A repairing lease is one in which the tenant is obliged to pay for all repairs and is usually bound to leave the property at the end of his lease in the same condition as he found it at the start of the lease. Leaseback (Renting Back) A method of raising finance in which an organization sells its land or buildings to an investor (usually an insurance company) on condition that the investor will lease the property back to the organization for a fixed term at an agreed rental. This releases capital for the organization, enabling it to be used for other purposes. Leasehold If you buy a property that is leasehold it means that you own the property but not the land the property is on, unlike freehold where you would own both. Leasehold Land Land held under a *lease. The land will eventually revert to the freehold owner, although there has been some statutory modification of this right to repossession (e.g. in the Rent Acts). This is the most common way for blocks of offices to be owned. The landlord maintains possession of the common parts and creates separate leases for each office. The ownership of each office may subsequently change as leases are assigned. Leasing Hiring equipment, such as a car or a piece of machinery, to avoid the capital cost involved in owning it. In some companies it is advantageous to use capital for other purposes and to lease some equipment, paying for the hire out of income. The equipment is then an asset of the leasing company rather than the lessor. Sometimes a case can be made for leasing rather than purchasing, on the grounds that some equipment quickly becomes obsolete. Legal Charge The legal document held by the Land Registry that identifies who has a claim on your property. The main lender will normally be identified as the first charge (i.e., have first claim to the property) but there may also be other charges registered (i.e., second, third, etc.). Level Premium Rating method in which the premium level remains the same throughout the life of the policy. Level Term Insurance A type of term policy where the cover remains the same from the effective date until the expiration date. Life Annuity A contract that provides an income during the remaining lifetime of the purchaser. Life Assurance Premium Relief Income tax relief on life assurance premiums. The March 1984 Budget stopped this relief for new policies, but life policies that commenced before this date can continue to receive the relief. Relief is granted by means of a deduction from the premium, which is paid to the insurance company net of this deduction. The insurance company later claims the balance from the Inland Revenue so the amount paid and, if appropriate, invested on behalf of the policyholder is the full gross figure as shown in the policy document. Life Insurance Any insurance relating to a risk depending on human life. This includes contracts providing payment on the insured person's death, endowments providing payment either on survival to a specified date or on earlier death and annuities which are paid throughout the annuitant's lifetime but cease on death. Limited Price Indexation Occupational pension schemes are required to provide Limited Price Indexation on all pensions benefits accruing after 5 April 1997. The annual LPI increase is 5% per annum or the increase in the Retail Price Index, if less. Lloyd's The London-based insurance market, best known for marine and aviation cover. The name is taken from Edward Lloyd who owned the coffee shop in Tavern Street from where the market began in 1689. Loading The extent to which an individual is charged more than the "standard" or "average" rate for their insurance. Long Term Care Insurance A health-insurance variation designed to cover the costs of long term care at home or in a nursing home. Long Term Disability Insurance Insurance to provide a reasonable replacement of a portion of a person's income lost through serious illness or injury. Loss Adjuster A Loss Adjuster is an independent third party who may be used by an insurance company to assess the value of a claim, particularly if there is a disagreement between the insurer and the insured. Loss Assessor A Loss Assessor is a professional who can be employed by a claimant to value a loss and present the insurance company with a supporting case for this valuation. Loss assessors are most often encountered in respect of claims under home contents or buildings insurance. Low Cost Endowment A savings plan which includes decreasing term insurance. It pays out at the end of the term, and also if you die within the term. Usually used to pay off an interest only mortgage. Lower Earnings Limit The minimum amount that must be earned in any period before National Insurance contributions are payable. L LTV Loan to Value. This is the amount of the mortgage expressed as a percentage of the value of the property, or the price you are paying for the property. So a £60,000 mortgage on a £80,000 property would mean a LTV of 75%. Lump Sum A settlement whereby the beneficiary receives the entire proceeds of a policy at once rather than in installments.
Managed Fund A pooled investment fund which is actively managed. Often, investment is only possible through a linked life insurance policy issued by the insurance company which is managing the fund. Market Capitalisation The value of a company as measured by the total stockmarket price of its issued and outstanding shares. This is calculated by multiplying the number of shares by the current market price of a share. It is also widely used as a definition of company size - hence, big corporations are usually referred to as large cap stocks (See also Small Caps). Matching Gifts Programme A corporate contributions program that will match contributions made by employees, retirees, and their spouses to qualifying nonprofit organizations. Specific guidelines regarding the type of organizations included, donor eligibility, and the dollar amount which will be matched are established by each corporation. Matching Grant A grant or gift made with the specification that the amount donated must be matched from other sources on a one-for-one or some other prescribed basis. Maturity Date The date on which a payment becomes due at the end of the term of an endowment policy or a fixed term security or loan. Maturity Value The amount payable to the insured at the maturity date of an endowment policy. MER Medical Examiners Report. A report by a doctor who is required to examine the individual concerned especially for the purpose. Used for underwriting purposes. MIB Motor Insurers Bureau. Micropal Star Ratings Independent investment funds analysts Micropal continually monitor all of the UK 's unit trusts, measuring the balance between each fund's performance over three years against the up or down movements in its unit price (i.e. the volatility). They then award stars on a scale from 0 to 5 , with the highest number going to those funds with the lowest volatility - and therefore risk - in relation to their overall performance. Five stars is the top award. MIRAS Mortgage Interest Relief at Source. The mortgage lender will reduce the monthly payment required from a borrower by the amount of tax relief applicable to the interest on the loan. The lender can claim the balance from the Inland Revenue. Monetary Policy Influencing the direction of an economy through control of the money supply (See also Fiscal Policy). Money Purchase Scheme A pension scheme providing benefits determined by the contributions made in respect of a member and the investment return on those contributions. At retirement the accumulated fund is used to purchase an annuity. All personal pensions (and some occupational schemes) are 'money purchase schemes'. Morbidity Relative incidence of disease and accidents in a well-defined class or classes of persons. Morbidity Table Actuarial statistics showing the frequency and duration of a sickness. Mortality Table A statistical table showing the probability of death (death rate) at each age. Mortgage A loan used to buy your house, where your house is used as security until you've paid off the loan (usually after a fixed period). There are three main types of mortgage: A repayment mortgage - you pay off the loan by instalments of capital and interest so that after the agreed period you have paid off all the loan An interest only mortgage - you pay only interest on your mortgage and make other arrangements to repay the capital, like an endowment policy. A flexible mortgage allows you to make overpayments and take payment holidays. Mortgage Deed This is the legal document that you sign to say that the lender has a legal charge over your property. Mortgage Indemnity Premium (MIP) Insurance that covers the lender in case your property is repossessed and the lender cannot get the money. Motor Insurers' Bureau The Motor Insurers' Bureau is a body funded by motor insurance companies, which deals with claims for injury compensation when the driver at fault is not insured, or cannot be traced. Mutual A commercial organisation owned by its members (as opposed to being owned by shareholders). Examples are Building Societies and some life insurance companies.
National Insurance A form of taxation which you pay as you earn, used to fund certain state benefits. National Insurance Contributions An additional form of "tax" paid by most employers, employees and self-employed people. The money collected is (broadly) used to pay for social security benefits. Class 1 Contributions are paid by employers and by employees with earnings above the lower limit. Class 2 Contributions are paid by the self-employed at a weekly flat rate. Class 3 Contributions are voluntary and are paid by those who do not earn enough to require Class 1 or Class 2 contributions to be made. Class 4 Contributions are paid by the self-employed. National Savings The Department of National Savings is part of the Treasury and sells investment, savings and deposit products to raise extra finance for the government. The products are designed as medium to long-term vehicles and are sold "over the counter" at post offices. Net Interest received from a bank or building society account after basic rate tax has been deducted. If you're a higher rate taxpayer, you will have to pay more tax. Net Income Income distributions are paid with a 20% tax credit. If you are liable to lower rate or basic rate income tax, you will have no further liability to tax. If you are a higher-rate taxpayer, you will have an additional income tax liability. If you are a non-taxpayer, you may be able to use the tax voucher supplied at the time of the distribution to support a tax repayment claim. Wherever you see a gross income figure quoted, it means that no tax has been deducted (e.g. as with a PEP investment). Net Relevant Earnings A definition of 'pensionable income' used in determining the maximum contributions to a retirement annuity or personal pension scheme that qualify for tax relief. New-for-old Insurance cover for property or equipment where an item lost or destroyed is replaced by the equivalent new item without deduction for age or wear and tear of the old item and regardless of price inflation. No Extended Tie In This means that at the end of your fixed, capped or discounted rate period, you will not have to pay an early redemption charge if you pay off your mortgage early. Non-Cancellable A contract that the insured has the right to continue in force so longs as premiums are paid. The insurer cannot make changes to or revoke the insurance during this time. Non-contributory A term applied to employee benefit plans or insurance schemes when the employer pays the full cost and the employee is not asked to contribute. Non-profit - Nonprofit (Also Not for profit and sometimes Charitable). A term describing the Inland Revenue (in Britain) and the Internal Revenue Service (in the US) designations of an organisation whose income is not used for the benefit or private gain of stockholders, directors, or any other persons with an interest in the company. A nonprofit organisation's income must be used solely to support its operations and stated purpose. Normal Retirement Age The age at which an employee holding a particular position normally retires from service. Normal Retirement Date The normal date of retirement applicable to a member of an occupational pension scheme and specified in the rules of the scheme.
Occupational Disease Impairment of health caused by continued exposure to conditions inherent in a person's occupation or a disease resulting from the nature of an occupation. Occupational Pension Scheme A pension scheme set up by an employer for employees. It is run by Trustees and usually provides life insurance as well as pension benefits. The pension earned by the employees is usually based on a percentage of final salary or on the amount paid in (money purchase basis). An occupational pension can either be contributory (where members contribute to the fund) or non-contributory, which is entirely paid for by the employer. Occupational Split Used in relation to group insurance with reference to the occupational split of the company's workforce E.g. 50% clerical / 50% manual. OEIC Pronounced as "oiks", this stands for Open-Ended Investment Companies. Although not dissimilar to unit trusts and investment trusts, an OEIC is basically a company which can be self-contained or it can form an "umbrella" over a range of individual funds (sometimes referred to as sub-funds). Instead of units, an OEIC issues shares and these can be of different classes - for example, for income accumulation, for income distribution, or classes where income is paid gross or net of lower-rate income tax. Save & Prosper's New Europe Fund is an OEIC. Offer Price The price at which you can buy a security or a unit in a unit trust. Offshore Funds Collective investment funds that are based overseas, often in 'tax havens' or other locations with particular tax advantages. Ombudsman An independent official to whom grievances can be aired, free of charge. Ombudsman is a Swedish word meaning citizen's representative. The Insurance Ombudsman Bureau aims to increase confidence in Insurance by offering an independent resource for resolving disputes between insurance companies and their customers. Open-Ended Investment Company An investment company that works in a similar way to a unit trust except that an OEIC is a limited company. Most OEICS operate as umbrella funds, where the OEIC is authorised and can then set up multiple sub-funds without the need for individual authorisation of each sub-fund. Operating Support Contributions toward an organisation's day-to-day, on-going expenses, such as salaries or wages, utilities, office supplies, etc. Opinion Status Enquiry A reference given by a bank or building society to confirm a customer has run their account responsibly. Opting Out The decision by an employee to leave or not join an occupational pension scheme provided by his/her employer. Options An agreement to buy or sell at a specific price at a specific date in the future. There are basically two kinds of option: a call option gives its buyer the right to buy a specified number of shares at a particular price before a specified date. The opposite of a call option is a put option, which gives the buyer the right to sell a specific number of shares at a particular price within a specified time period. In practice, call and put options are rarely exercised; instead, investors buy and sell options before their expiration, trading on the rise and fall of premium prices. Overdraft When the amount of money withdrawn from a bank account is greater than the amount actually available in the account the excess is known as an 'overdraft' and the account is said to be 'overdrawn'. If agreed in advance by the bank this is essentially a form of loan facility. If not agreed in advance by the bank penal charges may be incurred.
P/E Price/Earnings Ratio. Calculated by dividing the market price of a company's ordinary shares by its earnings per share figure. The ratio reflects the market's expectation of the future earnings of a company in relation to its current earnings; in other words, its performance potential. Paid Up Insurance Insurance on which all required premiums have been paid. Paid Up Scheme A pension scheme where contributions have ceased, but which has assets that are held and used by an administrator in accordance with the scheme rules. Partial Disability A disability which is less than total (according to the particular definition relating to the contract in question) but still sufficient to hamper the individual in his or her occupation. PAYE Pay-As-You-Earn method of income tax collection. Payment holiday A feature offered by some mortgages that allow you to miss monthly payments on your mortgage. Payment holidays are particularly useful if you have some other major expense - like a new baby or a wedding - to cater for! Payout Requirement Private foundations are required by law to pay out at least five percent of the fair market value of their assets each year in grants and administrative expenses. Pension A continuing income that is usually associated with the post-retirement period of a person's life. Pension Scheme A vehicle by which an individual can make pension provision. This may be either collective or individual and with or without the involvement (by means of contributions or otherwise) from the individual's employer. Pension Schemes Office A division of the Inland Revenue which oversees the approval of pension schemes for tax relief purposes. Pensionable Earnings The earnings on which benefits and/or contributions for a pension scheme are calculated. Pensionable Service The period of service with an employer that is used in calculating pension benefits from an occupational pension scheme. PEP Personal Equity Plan. Introduced in 1987 by the then Chancellor Nigel Lawson, over 3 million people in the UK invested in a PEP before they were replaced by ISAs in April 1999. Although you can no longer open invest in a new PEP you can still transfer your existing PEPs. Per Capita Per person, by or for each individual. Per Mille Per Thousand. The Premium Rate for some types of group insurance is quoted per £1000 of benefit. Permanent Health Insurance Permanent Health Insurance will pay you an income if you become ill for a long period or if you become disabled and can't work. Permanent Total Disability Disability from which the individual is unlikely to recover at any time in the future. Some insurance contracts may specify that permanent is to be taken as meaning 'extending to normal retirement date'. Persistency A term used to refer to the length of time insurance remains continuously in force with a company. Personal Equity Plan A Personal Equity Plan allows individuals to enjoy the profits from stockmarket-related investment free of income tax and capital gains tax. PEPs were introduced in 1987 but from 6 April 1999, new investment in PEPs is no longer possible. However, existing PEPs can continue in existence and for up to five years. Personal Investment Authority A Self-Regulating Organisation (SRO) set up under the Securities and Investment Board (SIB) with responsibility for regulating retail financial services. Personal Lines Insurance designed for individuals rather than businesses or organisations. Personal Loan An amount of money borrowed from a bank or other lender by an individual. Personal Pension Plan 1. A pension plan which produces income and possibly a tax-free lump sum on retirement or death. Personal pensions commenced in July 1988 and are designed to allow anyone who is either employed but not a member of an occupational pension scheme or self-employed to make provision for a pension in retirement. Personal pensions can be used to 'contract out' of the State Earnings Related Pension Scheme. Employers can normally contribute to the personal pension of an employee. Employees who are members of an occupational scheme cannot contribute to their own personal pension plan. 2. Personal pensions are a way of making your own pension provision if you are not a member of an employer's scheme. The return from a personal pension or part of it can be used to pay off the capital sum of a mortgage at the end of the mortgage term usually 25 years or, sometimes, earlier. They have the benefit of being tax efficient but to find out if they are suitable you should discuss with your financial adviser. Philanthropic Advisor An individual or firm which provides counseling and evaluative services to donors before and after grantmaking decisions. PIA The Personal Investment Authority, which regulates the way in which financial products are marketed, promoted and sold. PLC Public Limited Company. Denotes any company which has share capital of at least a fixed amount. PMAR Private Medical Attendant's Report. Polarisation The requirement for a financial adviser to be either 'tied' to one financial product provider, or completely independent. A provision of the Financial Services Act. Policy The legal document issued by the insurance company to the policyholder, which states the terms and conditions of the insurance, it may also be called the policy contract or the contract. Policy Reserves The measure of the funds that a life insurance company holds specifically for fulfilment of its policy obligations. Policy Term The period of time for which an insurance policy provides coverage. Policyholder The person or organisation who owns an insurance policy. Pooled Investment Fund A vehicle for bringing together the investments of many people or organisations and using the combined funds to obtain economies of scale and investment management skills not available to individuals. Examples include unit trusts, investment trusts, etc. Portability All the interest rates in this range are portable. This means that if you move home during the discounted or fixed rate period, you can enjoy the same rate, on the amount outstanding on your original loan, for the remainder of the discounted or fixed rate period. Conditions apply - please ask for details. Pound Cost Averaging Pound cost averaging is a benefit of making regular savings in the stock market, especially when the market is volatile. In practice it means that you can get more for your money by investing in smaller, regular amounts. Pre-existing Condition Any physical or mental conditions that exist prior to the effective date of insurance coverage. Premium The single or regular periodic payment made to an insurance company in respect of an insurance policy. Pre-tax Net Income A corporation's annual net income before it has paid taxes. In the USA , The Internal Revenue Service currently allows corporations to deduct charitable contributions as much as 10 percent of their pre-tax net income. Private Foundation A foundation that receives most of its income from, and is subject to control of, an individual or other single or limited source. See Foundation. Also in the US , the technical IRS term for an organisation which is tax-exempt under Section 501(c)(3) and classified as a private foundation under the Internal Revenue Code. In the US , a private foundation is referred to as 'having a 501(c)(3) status'. Private Operating Foundation A legal classification for an endowed organisation which uses its income to operate a charitable activity, such as a school or camp, rather than to make grants. Private Medical Attendant's Report A report from an individual's own doctor ('Private Medical Attendant') which does not require a medical examination to be carried out. Used for underwriting purposes. Private Medical Insurance Pays towards private medical treatment if your condition is covered by the policy. Processed Date The date the contribution was credited to the account by the Charitable Gift Fund (USA). Probate The process by which the Will of someone who dies while living in England or Wales is validated. A local Probate Office will issue a Grant of Probate to validate a will and authorising the executors to administer the estate. This Grant has the status of a decree of the High Court. Hence anyone dealing in good faith with the executors named in the Grant has legal protection against any other party claiming to represent the deceased. Professional Indemnity Insurance Protects professionals against liability claims resulting from negligent work. Pro Rata Premium A rate charged for a period of insurance cover shorter than the normal period. For example, if an insured had cover for one quarter of a year, the Pro Rata premium might be only one quarter of the annual premium. PSO Pension Schemes Office. Public Charity In the USA , charitable organisations (those designated under Section 501(c)(3) by the Internal Revenue Code) that qualify as public charities, private operating foundations, or private foundations. A public charity as defined in Section 509 (identified by the Service as "not a private foundation") normally receives a substantial part of its income, directly or indirectly, from the general public or from government sources. The public support must be fairly broad, not limited to a few individuals or families. Public Company A company listed on the stock exchange and hence one whose shares are available for public investment. Public Foundation A non-profit organisation that receives at least one-third of its annual income from the general public (including government agencies and foundations). Public foundations may make grants or engage in charitable activities. Purchased Life Annuity An income for life purchased from an insurance company. That part of the annuity that is deemed to be return of capital is tax-free but any balance is treated as interest and is subject to income tax.
Qualifying Policy A life insurance policy which has been certified by the Inland Revenue as complying with the 'Qualifying Policy Regulations'. Proceeds on maturity or death will not give rise to a tax charge. Qualifying Service The period for which an employee must be employed by a company before becoming eligible to join a group scheme. Also refers to the service to be taken into account to entitle a member of a pension scheme to 'short service benefit'. Quartile Most UK funds are grouped into specific sectors as defined by AUTIF, with each sector being divided into four quarters or quartiles. The midway point is known as the median; all funds want to see their performance stay above the median but the real target is to be consistently in the top quartile (i.e. the top 25% of all funds in that particular sector). To use a soccer analogy, The top quartile is like being in the premiership and is the place to be. Quotation The illustration provided to show the costs of insurance cover. The quotation document forms the basis of a new contract or the renewal of an existing one. It contains details of the conditions, benefits, caveats and premiums for the policy.
Rate The pricing factor upon which an insurance premium is based, it is the cost of a given unit of insurance. Rate Review Used in group insurance to describe the review of premium rate at the end of a rate guarantee period. Rated Describes coverage issued at a higher rate than standard, usually due to impairment of the insured life. Received Date The date the contribution was credited to the account by the Charitable Gift Fund for tax purposes. Redemption For all our mortgages, if you pay off the whole or any part of the loan before the end of the mortgage term, you will have to pay a redemption charge. This will be the amount specific to the mortgage product specified on the relevant web page and in our brochures. There will also be an Administration fee at redemption. If you decide to redeem your Standard Variable Rate mortgage, you would only pay an administration fee. Fees applied in addition to any interest charges at the time the mortgage is redeemed are charged to cover our reasonable administration costs. These include retrieving and checking the Deeds and Documents, formal sealing, recording of documents sealed and secure postage. (Please note that with some products, for example the Base Rate Tracker products, certain specific criteria apply allowing part repayment w | ||||||||||||||||||||||||||||||||||
