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• Accumulation and maintenance trust – a type of trust. It may
  be used when funds are to be left for minors (children) with a view to the monies being spent on their upkeep/education, with any surplus going to them when they become adults.
• Accumulation unit – a unit of an investment fund (normally
  through a pension or life insurance policy). These are the standard units of the fund, and where documentation talks about accumulation units there will normally be another class of unit, usually called initial (or capital) units. Initial units are normally the units that are bought early in the policy and they have much higher charges than the accumulation units. The term accumulation units can also apply to unit trust units that accumulate dividend income rather than pay it out.
• Actuary – mathematicians whose expertise lies in the areas of
  risk assessment, probability and statistics, all of which underpin the whole concept of insurance and the setting of rates. They are very well paid but the industry joke is that an actuary is someone who found accountancy too exciting.
• Added years – a method of enhancing pension benefits by making extra contributions.
• Additional state pension – until April 2002, the additional state pension for employees was called the State Earnings–Related Pension Scheme (SERPS). The amount of SERPS pension you received was based on a combination of the amount of your national insurance contributions, and how much you earned. In April 2002, SERPS was reformed and the additional state pension is now known as the State Second Pension. It gives a more generous additional state pension to low and moderate earners, and certain carers and people with a long–term illness or disability. By around 2030 or shortly afterwards the State Second Pension will become a simple, flat–rate weekly top–up to the basic state pension.
• Additional voluntary contributions (AVC) – the payment of
  extra contributions over and above those required by scheme membership. This only applies to people who are members of certain types of scheme run by their employer. AVCs can be free standing – an FSAVC, or in house. In house AVCs are normally either used to buy extra years or build up an investment fund.
• Advice – for legal purposes advice is given when an
  authorised person (e.g. your IFA) tells you what to do, as a result of analysis of your personal position. If you buy a financial services product as a result of advice you have much stronger rights than if you buy without advice (e.g. direct from a paper or over the Internet).
• AIM – see alternative investment market.
• Allowances (tax) – everyone is entitled to a certain amount of their annual income to be tax free.
• Alternative investment market – a market in which small (not long established or high risk) companies can float.
• Annual percentage rate – a standardised measurement of the cost of borrowing money.
• Annual allowance – the maximum contribution you can make to your pension scheme in any one year.
• Annuitant – person who gets income from an annuity.
• Annuity – a form of policy where, in exchange for giving the company a lump sum, the annuitant gets an income for a fixed term or until they die. E.g. 70 year old person has £20,000 and wants to maximise income. The bank pays £1,000 a year in interest, but an insurance company offers a £1,500 annuity. Buy the annuity and die the next year, the company wins. Live to 103 and the company loses.
• Appointed representative – a firm that is representing another financial company or firm (operating in areas covered by the Financial Services Act).
• Appropriate personal pension scheme (or plan) – a personal pension plan specifically for contracting out of SERPS and the State Second Pension.
• APPS – See appropriate personal pension scheme.
• APR – see annual percentage rate.
• Arm’s length – an arm’s length transaction is one where all parties act independently. The term normally arises as a warning in situations where people know each other and might rig a transaction to benefit themselves over others, (usually at the expense of the tax office or government). Where transactions must be seen to be arm’s length it usually means that independent assessment is required to confirm all values etc are fair market ones, or it may mean that the transaction simply cannot occur because of the close ties between the parties.
• Asset backed investment – an investment whose value is backed by some form of property, e.g. houses, or shares, and whose value will fluctuate as those properties change value in the market.
• Assignment – when the benefit of a policy is passed to someone else. For example a life insurance policy might be assigned to a lender so that if you die the lender gets its debt paid off.
• Associated operations – a term that effectively kills all “cunning plans” designed by lay people to avoid tax or legal issues related to investments when the intent of the law is clearly to tax or prevent the action.
• Authorisation – subject to context, either that the company has authorisation to conduct investment business, or that they require your authorisation to do something (commonly to get information from insurance and investment companies about your policies and investments).
• Authorised persons – people allowed by law to conduct investment business. Not all staff of financial companies are authorised, which means that if you call up and the person on the end of the line can’t help and needs you to talk to someone else, it doesn’t mean that they don’t know or can’t help, it means that the law won’t let them help. This is called Consumer Protection.
• AVC – see additional voluntary contributions.

• Back to back – an investment that combines an income producing contract with a growth oriented one. The aim is to have your income and get your money back, (but this is not guaranteed). Normally 5–10 year packages. They might be supplied as a package, or created out of disparate investments to meet your specific requirements.
• Bare trust – a type of trust.
• Basic rate tax – the tax rate that applies to most of the income of most people.
• Bear – an investor who is pessimistic.
• Bear market – expression used to describe the stock market when prices are falling, especially if this occurs over a period of weeks or months or longer.
• Beneficiary – person who benefits, e.g. from a will.
• Benefits in kind – description given to those things that an employer gives an employee apart from actual money (e.g. cars, petrol, holidays). Used to have significant tax advantages, but these have been greatly reduced over time.
• Bid price – the price at which a financial instrument is bought from you, the investor (e.g. bid price 95p, offer price 100p). The company will sell to you at 100 and buy at 95. So if you buy at 100 you will need the bid price to reach 101 before you can make a profit.
• Blue chip – term for companies who are considered large and stable. A blue chip portfolio of shares would be full of household names.
• Bonds – a tradable form of debt, normally corporate or governmental. Private investors normally buy bonds for the income, which is known and predictable. UK government bonds are called gilts.
• Bonus – with regard to insurance policies. This normally applies to with profit policies. There are two sorts of bonus – revisionary and terminal.
• Bull – an investor who is optimistic.
• Bull market – expression used to describe the stock market when prices are rising, especially if this occurs over a period of weeks or months or longer.
• Buy and sell agreement– a contract that defines, in a particular fashion, what happens to a partnership if a partner dies.
• Buy to let– buying a property in order to let it out.
• Buy–to–let mortgage – mortgage secured on a property purchased to rent out.

• Call option – a contract that gives you the right, but not the obligation, to buy an asset (normally a share) for a fixed price.
• Capital gain – a profit made where you buy an asset at one price, and sell later at another, for a profit, so long as you are not doing so often enough to be treated as trading in that type of asset.
• Capital gains tax – the tax levied on capital gains.
• Capital gains tax annual exemption – you are not liable to tax on all of the gains that you make each year. The first few thousand is exempt.
• Capped rate mortgage – your interest cannot rise above a predetermined level, but can fall below it (e.g. rate capped at 7% for 5 years). Actual rate starts at say 5%, then rates rise to 10%, but yours only goes up to 7%.
• Cash – normally actually means deposit (bank and building society) accounts rather than actual folding money.
• Cash balance arrangements – A type of money purchase arrangement where, in the event that the funding fails to provide the required level of benefits, it will be made up to that level.
• Cash ISA – an individual savings account where investments are limited to deposit accounts.
• CAT standards – Charges, access, terms. The product meets certain criteria (mainly cheapness), laid down by the government. It is important to note that the fact that a product has a CAT standard does not mean that it is any good, and even if good, does not mean that it is suitable for you. Many CAT products achieve CAT standards by being limited and perhaps lacking features and benefits that you might need.
• CGT – see capital gains tax.
• Chargeable event – an event that has tax implications with regard to certain types of insurance contract.
• Chargeable gain – when benefits are taken from certain types of insurance policy under certain conditions then a tax liability may arise in respect of what is called the chargeable gain.
• Chartism – now more commonly called technical analysis.
• Chattels – personal items that are usually exempt from capital gains tax, (normally because they make losses not profits, and the government does not want people offsetting gains on shares with losses on the depreciation on their cars).
• Child trust fund – a tax free savings account for children born between 1 September 2002 and 2 January 2011.
• Codicil – an amendment to a will.
• Collared rate mortgage – the opposite of a capped rate mortgage. Your interest rate varies but will not go below a predetermined level. Collared mortgages are not common.
• Collectibles – term used to describe things that people collect, and that may or may not have investment potential – e.g. art, antiques, beanie babies.
• Commercial mortgage – a mortgage whose purpose and/or security is business related. Hint – if you are paying commercial mortgage rates for a business debt secured on your own home, this may be changed for a normal domestic mortgage, and your costs reduced.
• Commission – a method payment by which an IFA is paid by companies for selling their products. Allows IFAs to provide services free at the point of delivery because they know that “on average” they will get paid. Alternative to fees.
• Commodities – the trading of raw materials. Not for the normal private investor.
• Compliance – the term describing the processes that financial services companies have to go through to ensure correct action.
• Compulsory purchase annuity – an annuity that is bought because it is a legal requirement to do so (e.g. certain pension contracts).
• Contracting out – Opting not to be in the State Second Pension Scheme or State Earnings Related Pension Scheme.
• Convertible term assurance – a type of life policy that offers pure protection but has the ability to be converted to another type of policy.
• Convertibles – a class of share that provides a fixed income, but can also be converted, under predetermined conditions, into ordinary shares. Not normally used by private investors.
• Conveyance – the term used to describe the legal process associated with house buying/selling
• Cooling off period – a period of time that an investor has in which he or she can change his or her mind without loss or penalty.
• Corporate planning – the creation of a long–term business plan that allows for the development and implementation of strategies designed to optimise financial performance.
• Coupon – the income paid to holders of bonds and gilts. Not to be confused with yield.
• CPA – see compulsory purchase annuity.
• Critical illness insurance – insurance that pays out if you suffer from one of a specified set of conditions such as some forms of cancer, heart attack, stroke and others. (You may need to survive for a period to claim).
• Cross option agreement – a set of papers drawn up to define what happens in the event that a company shareholder director or partner dies. Aim is to protect the interests of the family, the firm and the surviving shareholders/partners.

• Death duties – an old form of tax, now normally used colloquially rather than technically.
• Debt financing –the practice of raising money for working capital or capital expenditure by selling notes, bills or bonds to investors, who in return become creditors and receive a guarantee that the money will be repaid.
• Decreasing term assurance – a life insurance policy where the sum assured starts high, and then reduces. These policies usually provide the maximum initial cover for the lowest cost (e.g. family income benefit policies).
• Deeds of variation – a device by which a will can be changed after death. Requires the agreement of all the beneficiaries. Not to be relied upon for estate planning purposes.
• Deferred annuity – the practice of not buying an annuity immediately upon retirement. Normally found as an option in documents relating to certain older pension contracts as now all pensions can have deferred annuities.
• Defined benefit arrangements – benefits are determined by some kind of criteria, and are not dependent on the amount of any fund. The most common type is a final salary scheme where the benefits depend on your salary and length of service.
• Defined benefit pension schemes – a type of pension scheme in which your benefits are determined by contract rather than fund size. Normally only provided by large employers.
• Defined contribution pension scheme – a type of scheme where your pension is determined by the size of fund that you have built up.
• Derivative – type of asset whose value is derived from that of another asset. Not for the fainthearted or ill informed.
• Discretionary trust – a type of trust.
• Disposal – for capital gains tax purposes a disposal is an event that requires a gain/loss to be calculated. Normally equates to a sale, but gifting assets can also create a disposal (i.e. it is possible for a tax liability to be generated even when cash isn’t).
• Dividend – income derived from shares.
• Domicile – tax term that means “home” affects how you are taxed. In practice it is only relevant to those who have come to the UK from abroad, or those born in the UK who move overseas.
• Dynamisation – calculating the real value of an historic salary. Normally only applies to people who are seeking to maximise the benefits from a company pension scheme

• Earmarking – a policy or fund, part of a larger unit/group is considered to belong to one designated person. Normally in relation to certain pension contracts.
• Earned income – broadly speaking, income from work rather than savings or investment.
• Earnings cap – a (no longer applicable) limit on the amount of income that can be used in pension planning.
• Emoluments – things that comprise your employment package(s).
• Endorsement – alteration or note appended to an insurance policy.
• Endowment – an insurance policy that provides a level of life insurance and savings.
• Endowment mortgage – a mortgage protected and repaid by an endowment policy.
• Enduring power of attorney – a legal document that is drawn up by person A while fully compos mentis, that states that in the event of their being unable to act for themselves in the future, person B can do so. Normally used to help ensure that elderly parents’ wishes are followed.
• Entrepreneurs’ relief – reduces CGT on qualifying disposals.
• Equities – shares.
• Ethical investment – an investment philosophy that avoids nasty companies. Nasty is in the eye of the beholder, but normally includes arms companies, alcohol companies and companies considered to be environmentally harmful. When looking at these funds ensure that their definition of ethical matches yours.
• Exchange trade fund – an investment fund that is traded in markets.
• Exclusion clause – a paragraph of statement within an insurance contract that means that no claim will be paid (e.g. most insurance policies will not pay out for injury while piloting your own plane unless you tell them in advance and pay the extra premium).
• Execution only – the client makes their own decisions and is not given advice..
• Executive pension scheme – a type of pension scheme normally used by people who run their own business, or are high up within smaller companies.
• Executor – person who makes sure that a will is followed.

• Family income benefit– a policy designed for families to provide income while children are growing. For example: child age 0, policy taken out to provide £10,000 a year until the child is 25. If the parent dies straight away then £250,000 is paid out (over time). If the parent dies when the child is 10, only £150,000 would be paid out.
• Fees – the IFA charges the client directly for their analysis and advice. Client has to pay whether or not they choose to follow the advice.
• FIB – see family income benefit.
• Final salary pension scheme – a type of defined benefit scheme.
• Finance Act – the Act of Parliament that is created by the Budget. Most financial laws are referenced in one or other Finance Act.
• Financial adviser – a person who is (check their credentials) authorised to provide financial advice.
• Fixed interest – an investment where the investor receives a regular and unchanging amount of money for a given term.
• Fixed rate mortgage – a mortgage where the interest rate is fixed, normally for a period of a few years. Your payments will not change during this time, whatever happens to interest rates. Very good for those who need to budget.
• Flexible whole life policy – a type of life insurance where the balance between life insurance and savings can be varied when needed.
• Forex – a foreign exchange trading organisation
• Free assets – the reserves of an insurance company. Investment companies do not require free assets (unless they have With Profits investments).
• Free cover – when arranging life insurance for groups (e.g. a firm’s employees) companies normally state that up to £X life cover will be provided without seeking medical information. £X is known as the free cover limit.
• Free standing additional voluntary contribution (FSAVC) – a contract that allows you to build up funds outside of your employers’ pension scheme (where that scheme is of a particular type). The maximum FSAVC contributions are based on P60 remuneration.
• Friendly society – a type of organisation that offers insurance and investment policies, some with particular tax advantages.
• FTSE – Financial Times Stock Exchange, normally suffixed by Index, 100, 250, etc.
  A measurement of the value of the market. Index trackers normally track the FT–SE 100.
• FSAVC – see free standing additional voluntary contributions.
• Fund manager – person, team or company that manages a fund. An ABC Life fund may be managed by XYC Fund Managers.
• Fundamental analysis – an investment philosophy that takes the view that reading charts tells you nothing about the future value of shares. Instead do detailed analysis of cash flow, sales, product development and markets to try and see which companies are currently underpriced or overpriced.
• Funded unapproved retirement benefit schemes – a type of pension (but not actually a pension) scheme usually set up to meet very specific needs.
• FURB – see funded unapproved retirement benefit schemes.
• Futures – a contract that is used to trade commodity and currency markets. Not for most private investors.

• Gearing – the ability to invest more than you own, normally by borrowing funds or using futures and options. Gearing is aggressive and carries high risks, as well as the potential for high rewards.
• Gilts – UK government bonds.
• Grant of probate – legal process that is part of the sorting out of a Will.
• Gross (interest) – the amount of interest paid before tax.
• Group life – a life insurance policy that covers a lot of people. Mainly occurs where employers set up life cover for their employees.
• Group pension – a type of pension scheme that covers a lot of people. Mainly occurs where employers set up pensions for their employees.
• Guaranteed bonds – an investment that offers a fixed rate of return for a period of time.

• Hedge – to make an investment or contract designed to protect a position rather than make money. Originally used by major companies to allow them to control their major costs or manage forex risks on large contracts.
• Hedge fund – a catchall term for funds that have great freedom of action as to their investments. Actually Hedging may or may not be involved.
• Higher–paid employees – term used to determine whether or not an employee is liable to tax on benefits in kind. These days higher–paid is almost everyone.
• Higher rate tax – tax rates above basic rate tax.
• Home income plan – a contract that allows people to use the equity in their house to generate income.
• Home reversion plan – a contract that allows people to use the equity in their house to generate income and/or capital, in particular by a method that passes some or all of the ownership of the property to an investor (person or fund).
• Hybrid arrangements – These occur when a scheme promises some kind of minimal value, irrespective of actual fund performance. For example the terms might be “1/60th for every year of service, or whatever the fund buys, if greater”. If performance was good then the full fund will be used and it will be a Money Purchase Arrangement. If there was poor performance, then the scheme would pay out the 1/60th and be seen to be Defined Benefit.

• IFA – see independent financial adviser.
• IHT – see inheritance tax.
• Income bond – a bond more like a fixed term fixed rate deposit account in that they are not normally tradable, and are also normally very safe. May also refer to a life insurance bond whose emphasis is income.
• Income drawdown – in retirement you draw monies from your fund and delay buying an annuity.
• Income protection plan – an insurance policy that provides you with an income (to retirement age and index linked if required) in the event that ill health stops you working.
• Income tax – tax on income. Broadly speaking, assume that you are liable to income tax on all income that arises anywhere in the world. Be wary of all cunning plans not approved by your professional UK adviser.
• Income tax allowances – see allowances (tax).
• Independent financial adviser – a UK professional who can research the whole market in order to make the optimum arrangements for their clients. As opposed to financial advisers who are only able to sell the products of one company or a limited range of companies. They can be paid by fees as opposed to commission to demonstrate product recommendations are not affected by commission.
• Independent mortgage adviser – an adviser able to source mortgage funds from more than one lender. Many IMAs, who are not also IFAs, can only arrange the insurance and investment element with one company, which may not be the best for you.
• Index contracts – an investment that is linked to an index, in the UK normally the FTSE 100.
• Index linked gilt – a gilt whose return is linked to inflation.
• Individual savings account – (ISA) a tax efficient investment account.
• Inheritance tax – a tax levied on estates.
• In house additional voluntary contribution – a way of improving your pension.
• Initial unit – a unit of investment fund (normally through a pension or life insurance policy). This type of unit is used as part of the charging mechanism for the policy.
• Intestacy – This occurs if you die without making a will. A fixed set of rules are used to distribute your estate.
• Investment trust – a form of investment company.
• ISA – see individual savings account.

• Joint and several liability – a legal term that means that if the people you are in a business relationship with create debts and liabilities, you can be held liable to settle them.
• Joint tenancy – a way of owning property when ownership is shared. Normally applies to homes and it means that if one person dies the other automatically gets the whole property. Also the sharing is 50:50. See also tenants in common.
• Junior ISA – a new type of ISA for children, to be available from 1 November 2011.

• Keyperson (insurance) – an insurance policy taken out by a firm to provide the firm with a lump sum in the event of the death, or critical illness etc of a person considered key to the survival of the firm. Normally taken out on the lives of key managers, technical experts, directors (especially those who the bank thinks key to repaying any debts), and top sales staff.

• Lapse – of a policy. Normally as the result of non payment of premiums, a policy is terminated by the insurance company.
• Level term (insurance/assurance) – a policy without any savings element, where, if the person dies or gets a critical illness etc (according to policy type), during the term of the policy, a payment is made.
• Life insurance bond – a type of investment offered by life offices.
• Life office – an insurance company that provides life insurance policies.
• Lifetime allowance – the maximum fund size that qualifies for the tax advantages of pension schemes.
• Lloyds – not to be confused with the bank Lloyds TSB, Lloyds is an insurance market in London. It is possible to be an investor in this market, but only if you understand the risks.
• Long (stocks/shares) – to be invested in a stock or share. The normal position, you hold what you think will go up.
• Long-term care plan – a financial plan that will help to cover the costs of care in old age.
• Low start mortgage – a mortgage where the initial interest rate is low, and then increases. May also mean that the rate is not low, but payments are, (and you make this shortfall up later). Only for people with very good reason to believe that their income will rise by enough to meet the higher payments.
• Lower earnings limit (national insurance) – when your earnings exceed this limit you become subject to national insurance.

• Managed fund – technically any fund, but in retail investment (i.e. that for ordinary individuals) the term describes broadly based funds which will have investments in blue chip equities, gilts/bonds and property. They are designed to produce middle of the road performance rather than provide great excitement.
• Married couples allowance – an income tax allowance that reduces the tax bill for some older married couples.
• Maxi ISA – an old type of individual savings account.
• Mini ISA – an old type of individual savings account.
• Money laundering – the process by which criminals turn criminal money into apparently clean money. Prevention of money laundering has lead to laws being passed that require advisers to collect a lot of personal details about clients.
• Money market account – a cash–based investment that earns market–based interest.
• Money purchase arrangements – benefits are entirely dependent upon the funds built up for the member. Most arrangements made by individuals are of this type, as are many company schemes.
• Money purchase pension scheme – your pension is determined by the size of the fund that you have built up through your own contributions and those of your employer. Other legal limits may be applied to those who have very large funds.
• Mortgagee – the borrower.
• Mortgage – a loan explicitly secured on property, and appropriately legally documented.
• Mortgagor – the lender.
• Mutual – a corporate structure in which the firm is owned by the policy holders (life/investment mutual) or savers/borrowers (mutual building societies). Advantages are normally considered to be low costs and no profit motive, disadvantages can be inefficiency and, in the event of problems there are no shareholders funds to raid/provide compensation.

• Name(s) re Lloyds – the term given to an individual investor in Lloyds.
• National insurance – the government scheme that provides pension and other benefits. It is not actually run as an insurance scheme and is really just a tax.
• National Savings – body that raises money for the government, mainly by means of issuing interest bearing investments.
• NEST – National Employment Savings Trust: a new type pension scheme proposed for employees from October 2016, although currently in its very early stages.
• Net relevant earnings – your earnings for purposes of pension calculations. Normally comprises all salary, commission, bonus, benefits in kind etc. Note: if you are part of an employers’ scheme their definition may be more restrictive. This however does not affect your legal rights where you can use your full NRE.
• Nominee account – system where a person (more commonly company) holds investments on your behalf, normally for administrative ease.
• Non–resident – person (or company etc) that is not considered tax resident in the UK. This may or may not confer tax advantages.
• Non–status (mortgage) – the lender lets you have the money simply because you ask for it, and your deposit is high, so that if you turn out to be unable to afford it, they can sell quickly without losing money. They will normally however run a credit check.
• Non–taxable – normally refers to a form of income that can be ignored when computing your tax bill, even if you have a very high income.
• Non–taxpayers – people whose income is such (low) that they don’t need to pay tax.
• NRE – see net relevant earnings.

• Occupational pension scheme – a scheme run by an employer which employees can join.
• OEIC – see open ended investment company.
• Offer price – the price at which a financial instrument is sold to you, the investor (e.g. bid price 95p, offer price 100p. The company will sell to you at 100, and buy at 95. So if you buy at 100 you will need the bid price to reach 101 before you can make a profit).
• Offshore (investment) – putting your money outside the UK. Don’t assume that this offers any better returns or tax benefits than onshore funds without checking with your UK professional adviser.
• Open ended investment company – a form of structure used by fund managers for making investments available to investors.
• Option – a contract that gives you the right to buy (call option) or sell (put option) at a predetermined price. Not for the average investor.
• Ordinary residence – a tax term, only of importance to British citizens who have spent time outside the UK, or immigrants to the UK.

• P11D – refers to benefits in kind (the term is the name of the tax form that employers have to complete).
• Paid up policy – this is a policy (normally pension or insurance) that you have stopped paying contributions to, but has value and provides benefits. Charges will still be taken and a paid up policy of little value will fall in value over time and may eventually lapse.
• Pension – a fund/contract/right to an income in retirement (or from a certain age).
• Pension arrangements – formal classification of type of pension scheme.
• Pension mortgage – a mortgage where you expect to use the cash that you will get on retirement to pay off the loan. In the meantime you only pay the interest. Can be very attractive to those expecting large pension funds (especially if you only have a few years to go and there is little doubt that the money will be there).
• PEP – a type of tax–efficient investment. All PEPs are now ISAs.
• Pension earmarking – the payment of a specified amount of a pension and/or lump sum when dividing a pension in the case of divorce.
• Pension offsetting – offsetting pension benefits against other assets, usually in the case of divorce.
• Pension sharing – dividing a pension and pension rights between a couple, usually in the case of divorce.
• Permanent health insurance – see income protection plan.
• Personal allowance – an allowance of tax free income that everyone gets.
• Personal equity plan – a type of tax efficient investment. Current ones may continue but no new one can be started. Individual savings plans took their place.
• Personal pension plan – a type of pension policy that belongs to the individual.
• Personalised bond – a type of life insurance bond.
• Phased retirement – colloquially a movement from full time to part time to retired, but also describes a method by which pension funds are cashed in over a period of years in the aim of maximising returns.
• Portfolio – the total of all your investments and assets, or some part of them (e.g. your share portfolio).
• Portfolio theory – the practice of constructing portfolios so that the performance of the portfolio meets the needs of the client, (which can mean expecting parts to fall while other areas rise).
• Potentially exempt transfer – a gift (normally to the value of tens of thousands of pounds and upwards) that is made while a donor lives. If they live for 7 years after making the gift it becomes exempt from inheritance tax. If you die, it is not exempt. Purpose – makes deathbed gifting irrelevant for inheritance tax purposes (though such gifting, appropriately witnessed, is still valid for the purpose of making sure that the right people get the right assets, especially if not covered in the will).
• Pound cost averaging – a statistical demonstration of the importance of regular investment.
• Preference share – a type of share that normally carries greater rights to assets/revenue, but perhaps without the power to vote.
• Premium bond – a gamble offered by National Savings.
• Put option – a contract that gives you the right, but not the obligation, to sell a financial instrument (normally a share) for a fixed price.

• Qualifying (life policy) – a type of insurance policy that can have tax benefits.
• QROPS – Qualifying Recognised Overseas Pension Schemes. You can transfer UK pension rights overseas, provided you meet certain conditions, and use an HMRC recognised QROPS. Usually of interest to UK–based foreigners returning home and UK expatriates. Expert advice is essential.

• Regulator – body that makes and enforces rules regarding financial services business.
• Reinsurance – a way of spreading risks across the industry (it is this that enables even vast disasters like hurricanes and earthquakes to be covered).
• Registered pension scheme – an investment scheme registered as being for the provision of pensions.
• REITs – Real Estate Investment Trusts. A way to gain exposure to property.
• Remortgage – replacing an old mortgage with a new one. Normally because the new one is cheaper.
• Remuneration – your earnings package.
• Rent a room – tax break to encourage people to let spare rooms in their house.
• Repayment mortgage – a mortgage where you pay off some of the debt each month.
• Reserve – a fund that prudent insurance companies set aside to ensure that they can meet all their liabilities.
• Residence (for tax purposes) – the country in which you live.
• Retail price index – a measure of inflation published monthly by the Office for National Statistics.
• Retirement annuity – a form of pension contract widely sold to people from the early 1970′s to June 1988.
• Reversionary bonus – A bonus that is declared by the insurance company for its with profit policy holders. Once a reversionary bonus is declared it cannot be taken away and effectively puts a minimum value on the policy at maturity.

• Section 32 – a type of pension contract.
• SERPS – see State Earnings Related Pension Scheme.
• Self certification (mortgages) – a form of mortgage where you are not asked to prove your income, but simply state it. Very rare these days after the sub–prime mortgage debacle.
• Self directed investment – term used to describe pension schemes where the investments can include property, loans to the company etc. Normally only for people running their own firm, family companies etc.
• Settlement (trusts) – a trust.
• Settlor (trusts) – person who sets up a trust.
• Short (stocks/shares) – to sell a stock that you do not own in the hope of buying it cheaper, or do so via a derivative (e.g. option), ie to bet that a stock will fall. For experienced stock market investors only.
• Single price units – the financial instrument is bought and sold at one price, e.g. 100p.
• Small self administered pension scheme – a type of pension scheme normally only used by people who own and control companies.
• SSAS – see small self administered pension scheme.
• Stakeholder (pension) – a type of pension scheme.
• State second pension – Successor to SERPS. The rules are different, but designed to, on the whole, offer a better deal for the low paid, carers, mothers of young children and people with illness/disability.
• Stamp duty – a tax on share and property transactions.
• State Earnings Related Pension Scheme – A top up to the old age pension, based on your earnings. See also additional state pension.

• Taper relief – mechanism whereby capital gains tax is reduced (only applies to disposals up to 5 April 2008).
• Tax mitigation – a private or corporate financial plan that eases the burden of tax.
• Tax planning – the creation of a financial plan whose goal is to minimise tax payments.
• Technical analysis – an investment philosophy that believes that the past patterns of share movements can be used to predict future movements (especially over the short term).
• Tenants in common – a way of sharing the ownership of a property. Shares can be unequal. Each person can do with what they like with their share, including sell it or pass it to someone in a will. See also joint tenancy.
• TEP – see traded endowment policies.
• Term assurance – a policy that runs for a term and then lapses without value (if no claim arises during the term).
• Terminal bonus – a bonus that is added to a with profits policy when the policy matures. May also be added (possibly at a lower rate) in the event of early surrender.
• Traded endowment policies – some endowment polices are worth more to an investor than their surrender value, hence a trade between those who want cash now (the owner) and those who want investment (the buyer).
• Transfer value (pensions) – the amount of money that can be taken from one pension scheme or fund for investment in another.
• Triviality commutation – the ability to take an entire pension fund as a lump sum if your total pension funds are worth less than 1% of the lifetime allowance.
• Trust – a legal structure whereby people (trustees) look after money/assets on behalf of someone else (the beneficiary or beneficiaries). They can be very simple or very complex. If asked to be a trustee, make sure that you understand what your legal duties are and what may happen if you are found to have acted improperly.
• Trustee – person who is responsible for running a trust (normally there is more than one trustee).

• Upper earnings limit (national insurance) – an upper boundary for certain NI payments.
• Underwriter – insurance expert who determines whether or not to take on a risk, and if so, at what rate.
• Unit linked – the fund reflects the asset base.
• Unit trust – a type of investment structure.
• Utmost good faith – in insurance you are obliged to tell the company anything that you think might be relevant, or risk not being covered. If you plan to do dangerous sports, but haven’t quite started yet, you do need to tell them.

• Value shifting – term used to describe occasions where value is moved from a pension fund to a member other than by taking benefits.
• Venture capital – money available for high risk projects (typically companies who are not yet floated on any stock market). Not for the novice investor.
• Vesting (options) – converting options into shares (and, often, then selling them). Also applies to other pensions and investment contracts such as when the benefits are taken from a personal pension.

• Waiver of premium – an insurance that means that if you cannot keep up the payments on your policy for reasons of ill health then the insurance company will eventually pay out as if you had kept up the payments.
• Wasting asset – an asset whose value is expected to reduce over time.
• Will – legal document that determines what happens to your estate when you die. You can do pretty much what you like (though people financially dependent upon you do have a right to expect reasonable treatment).
• Will trust – a trust set up by a will (e.g. the house in Spain shall be sold and the proceeds invested for little Johnny. The income can be used for his schooling and holidays, and he gets the capital at age 21).
• With profit policy – a policy whose value depends upon the returns and profits made by the insurance company.

• No entries for X yet!

• Yield – the relationship between the income that an asset produces and the market price. Example: a bond with an initial price of 100p and a coupon of 10% (i.e. pays 10p a year). The initial yield is 10%. Interest rates fall and so the bond price rises to 200. The coupon has not changed, it still pays 10p a year, but the yield is now only 5%.

• Zeros (zero dividend preference share) – a type of share which offers a fixed rate of return as a capital sum at the end of the term, but in the meantime no dividends. Normally used to meet known future needs, and/or as a (normally) low risk way of using your CGT exemption. The risk inherent in zeros is determined by the management strategy of the fund that provides their asset backing.