A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Accumulation units

A type of unit in which any income is added to the value of the units. Designed for people who prefer their income to be reinvested. Only available on a limited number of funds.

Adverse Credit

This is the term used for people who have a poor credit history. This could include previous mortgage or loan arrears, CCJ's or bankruptcy.

AER

This stands for Annual Equivalent Rate. This rate is generally quoted on interest paid on savings and investments. Interest paid monthly, quarterly or half-yearly represents a higher true rate than the same stated interest rate paid annually. Thus, the AER allows you to compare interest rates across accounts and reflects not just the amount of interest but also how often it is paid. It shows what your interest return would be if the interest was compounded and paid annually instead of monthly (or any other period).

Affinity / Donation Cards

These are issued by credit card companies and operate as standard credit cards but a percentage of purchases made via card usage is donated to a charitable beneficiary by the issuer. A donation may also made to the beneficiary on issue or first use of the card.

Allocation Rate

The difference between the buying price ("Offer Price") and selling price ("Bid Price") of an investment, calculated as: (Offer Price-Bid Price)/Offer Price. This is the percentage of a payment that is invested once charges have been deducted.

Alpha

A statistical term used to measure the contribution to portfolio performance from good stock selection.

Annual Management Charge

This charge is deducted from an investment each year and is usually worked as a percentage of your investment.

Annuity

An annuity provides a guaranteed income for life in return for a lump sum invested. There are two types of annuities; Compulsory purchase and Purchased life. Compulsory purchase annuities are bought with a payment from an employer's pension scheme or personal pension fund. Part of the fund may be paid out as tax-free cash, the remainder must be used to buy an annuity.

APR

This stands for Annual Percentage Rate. Any firm that lends money is required by law to quote the APR. Introductory rates do not include arrangement fees you may be charged and also don’t reflect any higher rate of interest that your borrowings will ultimately revert to. The APR takes into account the interest on a loan plus and additional charges making it easier for you to compare products. In general, the lower the APR the better the deal.

Arrangement Fee

This is a fee you a Lender for providing you with a mortgage or loan. They are usually paid on completion and tend to apply when you take out a fixed rate, discount or cash back mortgage.

Asset Allocation

Shows the proportion of your portfolio invested in different geographical areas or sectors or in different types of investment (e.g. equities, fixed interest).

ASU

This stands for Accident, Sickness and Unemployment insurance. This insurance covers mortgage repayments in case of accident, sickness or involuntary unemployment.

AVC

This stands for Additional Voluntary Contributions. As a member of an Occupational Pensions Scheme these are payments made above the normal level of contribution to gain additional pension benefits.

Bank of England

The Bank of England is the central bank of the United Kingdom .

Bankers Draft

A bankers draft is a secure way of receiving money where you fear a cheque may bounce. The draft is a cheque which is drawn directly on the bank or building society against funds in a bank account. There is usually a fee for obtaining a bankers draft.

Base Rate

Base rate (sometimes called the repo rate) is the interest rate set by the Bank of England which determines borrowing and savings rates.

Bar Bell Strategy

An investment strategy that combines two types of investment at each end of a spectrum (e.g. high yielding equities and nil yielding growth stocks).

BBA

This stands for British Bankers' Association who are the trade association for British banks.

Benchmark Index

A designated index considered the most appropriate for comparing the performance of a fund. See Relative Performance.

Beta

A statistical term used to measure the sensitivity of an investment to market movements. A Beta greater than 1 indicates that the investment will amplify market trends.

Bid/Offer Spread

The difference between the buying price ("Offer Price") and selling price ("Bid Price") of an investment, calculated as: (Offer Price-Bid Price)/Offer Price.

Blue Chip Share

Usually used to describe a large company in the leading index, such as the FTSE 100.

Bond

This term can have different meanings. See Corporate Bond, Insurance Bond.

Bottom up

This describes a fund manager who selects stocks purely on the fundamentals of the company alone, as opposed to taking a view on the economic environment. See also Top Down.

Bridging Loan

This is a short term loan that 'bridges' the time period between two property transactions. It is used to cover shortfalls between buying one property and selling another. Major banks and building societies can offer bridging finance.

BSA

This stands for Building Societies' Association which is the trade association for British building societies.

Buffer Zone

These are facilities on some bank accounts whereby you can go overdrawn to a certain limit without being charged and sometimes without paying interest.

Building Society

A building society is a mutual organisation owned by its members - its savers and borrowers - and not by shareholders.

Buildings & Contents Insurance

This is a combined insurance policy that covers the cost of rebuilding or repairing a property and replacing damaged or stolen contents.

Business Current Accounts

Business current accounts are available to non-personal customers, for example clubs, charities, and companies. Availability may be restricted by customer type, minimum balance requirements or business turnover.

Buy-to-Let Mortgage

Buy-to-let mortgages are provided for property purchases or remortgages for investment in the private rental sector. Assessment of borrower affordability can be based on projected rental income and/or earnings, dependent on the lender's individual policy.

Call option

This is a financial instrument, which gives the holder the right but not the obligation to buy a security, or index, at a predetermined price, on or before its expiry date.

Capital

If this refers to borrowing this is the amount owing not taking interest into account. When investing, this is the original investment amount.

Capital & Interest mortgage

This is also known as a repayment mortgage. With a repayment mortgage, the money you pay each month covers both the interest and capital of the loan. This means that at the end of the term you don't need any extra money to pay off the loan.

Capped Rate Mortgage

A capped rate mortgage has a maximum interest rate for a given term. The interest rate you pay cannot go higher than the agreed capped rate, thus you know the maximum amount your monthly repayments could rise to. However, if the basic interest rate falls below the capped rate, repayments will also reduce.

Cash Back Mortgage

This gives you a cash rebate on completion of the purchase. The sum is either a percentage of the advance or a fixed sum. This cash back could help you to cover some of the expenses of setting up home but this bonus is often subject to higher repayment rates and may include penalties for repaying the loan early.

Cash Card

These are plastic cards used for withdrawing cash from Automatic Teller Machines (ATMs) - also known as hole in the wall machines.

Cashflow

The cash generated by a company, generally calculated as earnings before interest, depreciation, amortisation, tax and fixed asset additions.

CCA

This stands for the Consumer Credit Act. This legislation sets the rules for the way in which UK banks and lenders may lend money.

CGT

This stands for Capital Gains Tax. This is a tax on the increase in the value of an asset since it was purchased. Everyone is allowed to make a certain level of profit each year before capital gains tax is charged. The amount of the allowance is £8,200 for the 2004/2005 tax year. This amount is reviewed annually in the Budget.

CHAPS

This stands for the Clearing House Automatic Payment System. It is the electronic transfer of payment between two accounts.

Chargeable Event

The circumstance in which a higher rate tax liability may arise in the case of an Insurance Bond, usually being a surrender or withdrawal of more than 5% p.a.

Cheque

A written order directing a bank to pay money.

Child Trust Fund

The Child Trust Fund became effective on 6 April 2005, for children born on or after 1 September 2002. Children in receipt of Child Benefit will receive a sum of £250 in the form of a voucher to be used to open either a cash or equity based account on behalf of the child. Families in receipt of full Child Tax Credit or certain benefits when Child Benefit was first paid will receive a further £250. If an account is not opened within a year, the Inland Revenue will open a Stakeholder account on behalf of the child. Parents, grandparents and friends will be allowed to make additional deposits up to a maximum of £1,200 each year. At age 7 the Government will make a further payment to the account, currently proposed at a minimum of £250, at age 16 the child can begin to make decisions about how the money is managed, and at age 18 the account matures and the child receives the proceeds. No withdrawals are permitted during the 18 year term.

Closed End Fund

An investment plan where the number of shares or units is fixed, e.g. an Investment Trust. New investors must buy shares or units from existing holders. The price of shares or units may be higher or lower than the underlying asset value.

Collective Investment

A structure that allows individuals to have a proportionate interest in a pool of investments, e.g. Unit Trust, OEIC, Investment Trust, or Insurance Bond.

Commercial Mortgage

Commercial Mortgages are used to purchase a business property or going concern, for the expansion of existing business premises or for property development. Commercial property includes shops, public houses and farms.

Commission

This is an amount paid to a provider or intermediary for placing business.

Company Pensions

A pension scheme set up by an employer to provide retirement benefits to employees.

Completion

Once the purchase of a property is complete and you are the new owner.

Compulsory Purchase Annuity

Compulsory purchase annuities are bought with a payment from an employer's pension scheme or personal pension fund. Part of the fund may be paid out as tax-free cash, the remainder must be used to buy an annuity. The income payments (usually monthly) from this type of annuity are taxed as earned income and are usually paid to the recipient net of basic rate tax. Higher rate taxpayers may be liable for additional tax which at present has to be collected separately.

Consolidated Loan

This is a loan taken out to consolidate debts.

Convertibles

Convertibles are fixed interest securities, which pay a fixed amount of income until maturity. They can, however, be converted into ordinary shares of the underlying company during certain times.

Conveyancing

The legal process involved in buying and selling a property.

Corporate Bonds

Fixed interest securities issued by companies. They usually pay a fixed rate of interest but capital values fluctuate broadly in line with Gilts.

Corporation Tax

This tax is payable by companies on their profits.

Cover Note

This is a temporary certificate that shows an insurance policy is in place.

Credit Card

Credit cards are a form of borrowing used to purchase goods and services, to obtain cash advances and for consolidating debt.

Credit Rating

This is a scoring system that lenders issue people with to determine how credit worthy they are.

Credit Search

This is a check a lender may take out to determine whether a person has any County Court Judgments or a record of not repaying debts.

Critical Illness Cover

This insurance pays out if the holder is diagnosed with an illness covered by the policy.

Current Account

These accounts offer the facility of a chequebook / cash card and do not require any notice to be given to withdraw funds. The accounts vary in the facilities offered such as cheque guarantee cards, debit cards and overdrafts etc

Current Account & Offset Mortgage

A current account mortgage allows you to operate your mortgage borrowing through a current account. This method enables you to save interest as your normal cash-flow will alter the outstanding debt. You will be required to pay your salary into the account. An offset mortgage allows you to keep your balances e.g. mortgage, savings, current account etc in separate accounts but all balances are offset against each other thus allowing the possibility of reducing the interest paid and could result in the mortgage being repaid early.

Currency hedge

This is a method to reduce the uncertainty about the future direction of a currency. This can be achieved by purchasing the currency in the forward market, or taking out an option which limits the option holder's exposure.

Cyclicals

Shares which are closely linked to the business cycle, generally found in old economy sectors such as chemicals, paper & packaging and construction.

Death Benefit

A sum paid when the insured life deceases.

Death in service benefit

A sum paid by an employer to beneficiaries if the insured person dies whilst still under their employment.

Debit Card

A debit card allows you to make purchases and withdraw cash by using funds from your bank account. These funds are automatically withdrawn from the connected account. They act as an alternative to cash and cheques.

Decreasing Term Assurance

Decreasing Term Assurance indicates that the sum assured decreases over the term of the policy. This is commonly used to protect a capital & interest repayment mortgage, where the outstanding balance reduces during the life of the borrowing.

Deed

This is a legal document that shows who legally owns a property.

Deed of Assignment

A form of gift, allowing an insurance bond to be transferred from one person to another without any transfer tax charge

Direct Debit

This allows an organisation to take money directly for a persons bank account.

Discounted Mortgage

A discounted mortgage offers you reduced repayments for a given term. The lender gives a discount off a variable rate. For example, the variable rate may be 5% with a discount of 1% making your initial interest repayment rate 4%.

Discrete year performance

Breaks down fund performance into individual years. Usually more informative than cumulative figures which emphasise recent performance.

Diversification

Holding more than one asset to broaden overall risk of failure

Dividend

Money paid to shareholders.

Dow Jones

An index of some of the largest companies listed on US stock markets. It is simply calculated taking the arithmetic mean of 30 shares and so its performance can differ markedly from more broadly based indices such as the S&P 500. Values are real time.

Duration

A term used to measure the average maturity of a fixed interest bond. This is usually shorter than the period to redemption, reflecting the cashflow benefit of interest payments.

Early Exit Penalty

A special charge made when an investment policy is surrendered.

Early repayment charge

If you repay (redeem) your mortgage at any time prior to the end of the mortgage term you may have to pay certain fees or an interest penalty (redemption penalty). If the mortgage is repayed in the early years there may be a heftier penalty, a product penalty. An extended redemption tie-in means that this penalty will continue to be payable beyond the initial term of the mortgage.

EASDAQ

This is a Pan European regulated stock market. Trading takes place through member firms in 15 countries.

Endowment

An endowment policy is a savings policy which provides life assurance cover for a policyholder. The policy exists for an agreed term, the minimum term usually being 10 years. A cash sum is paid out at the end of the policy term (on maturity), or in the event of the earlier death of a policyholder, either a predetermined sum (in the event of death) or an agreed capital sum on maturity.

Enterprise Investment Scheme (EIS)

A tax incentive to encourage investment in smaller, unquoted companies.

Enterprise Zones

Certain regions of the UK designated by the Government for preferential tax and rates treatment for ten years.

Enterprise Zone Property Trusts

A collective investment to allow private individuals to invest in properties situated in Enterprise Zones.

Equities

See 'Ordinary Shares'.

Equity Release

This is the process in which a new larger mortgage or an existing mortgage is increased to release some extra funds.

Estate

This is the money, property, belongings and debts belonging to a person when they die.

Euro

The basic monetary unit of most members of the European Union (introduced in 1999)

Financial Ombudsman Service

The body that handles complaints about financial firms.

Final salary scheme

This is a pension scheme where the amount of benefit is based on final salary.

Financial Strength

A way of measuring whether a Life Office is capable of meeting future liabilities.

Fixed rate account

These accounts offer a fixed rate of interest over a defined period. This means that the interest paid on the account will not be affected by changes in interest rates for a specified term.

Fixed rate bonds

Fixed rate bonds are savings products where you deposit a lump sum for a specific period. In return you get a fixed rate of interest.

Fixed rate mortgage

If you choose a fixed rate mortgage your monthly repayments will not change for the period of the fixed rate, regardless of the interest rate in the market place. This may be important to you if you have a limited budget as you are protected from rising interest rates. However, if the variable rate falls below the fixed rate level, your repayments will not fall.

Flexible Mortgage

The main feature of a flexible mortgage is the facility to make extra payments when you have extra money. You may also be able to reduce monthly repayments or even take repayment holidays, although you will normally have to build up a reserve through making overpayments before this arrangement is allowed. Such mortgages are usually offered on a daily interest basis. Flexible mortgages usually provide a loan drawdown facility that allows you to borrow extra funds at a set predetermined rate.

Franked Income

Dividends received from shares or unit trusts, net after corporation tax has been deducted.

Free Asset Ratio

The term given to the reserves a Life Office possess [assets minus liabilities]. The larger the free asset ratio the better.

Freehold

Freehold means that you own both the building and the land it is on.

FSA

This stands for Financial Services Authority who regulates the UK financial services industry.

FTSE 100

This index is designed to represent the performance of the 100 largest UK companies listed on the London Stock Exchange by market capitalisation. This index is calculated in real time.

FTSE 250

This index represents the next largest 250 UK companies after the top 100. Like the FTSE 100 it is calculated real time.

FTSE 350

This index combines the FTSE 100 and FTSE 250 indices.

FTSE AIM

The Alternative Investment Market, designed primarily for small companies, is regulated by the London Stock Exchange but has less demanding rules than the LSE Official list.

FTSE All-Share

This is the broadest of the UK series of indices and is made up of approximately 800 listed UK companies. This index is also real time.

FTSE techMARK All Share

This index covers all those technology companies included in the London Stock Exchange's techMARK sector.

FTSE techMARK100

This allows investors to follow medium and small technology companies, as it excludes the largest companies in the FTSE techMARK All Share.

Further Advance

This is the process of borrowing additional money against a property.

Gazumping

Gazumping means the seller of an asset , such as a house, accepts a higher purchase offer, when they have already accepted another lower offer from another potential buyer.

Gearing

Usually associated with investment trusts where the fund will borrow (usually bank loans) against its assets to increase its investment exposure. One method of calculation is total borrowings less cash and short-term investments expressed as a percentage of total assets.

GIB

This stands for Guaranteed Income Bond. It is a short-term life assurance contract guaranteeing a fixed income over a fixed term. The original investment is guaranteed to be repaid in full at the end of the term.

Gift with Reservation

Where a settlor of a trust maintains an interest in the capital or income.

Gilts

Securities issued and guaranteed by the UK Government. Can offer a fixed rate of interest until the Redemption Date or a return linked to increases in retail prices (Index Linked).

Gross Interest

This is interest earned by deposits at banks and financial institutions, or on gilts etc. before the deduction of tax.

Health Insurance

This insurance protects you in the case of sickness or injury.

Hedge Fund

This term covers a wide variety of different strategies, usually designed to reduce or eliminate the impact of general stockmarket movements on returns. Often structured as offshore funds with very high minimum investment levels

High Lending Charge

This is a fee that is used to buy insurance to protect the mortgage lender if you borrow more than a given amount. Many mortgage lenders will lend you up to, say, 90% of the value of a property without this fee. But, if you want to borrow more, the lender usually requires you to pay for insurance to ensure that it will recover all its money, even if the property had to be sold for less than the amount of the mortgage.

Hire Purchase

This means you hire a product you are buying and pay for it and interest over a fixed term

IFA

This stands for Independent Financial Adviser. These are people who are trained and authorised to give advice on financial products.

IHT

This stands for Inheritance Tax. A charge to IHT occurs when someone dies or when assets are transferred to a company or discretionary trust.

Income Multiple

This is a calculation used by mortgage lenders to determine how much they will lend you. This is typically three times your income, or two and a half times joint income. However, many lenders now base this on your ability to make repayments, taking into account your income and outgoings.

Income Tax

Income tax is payable on any income, whether it comes from working or an investment.

Index Linked

Linked to increases in the Retail Prices Index.

Individual Savings Account (ISA)

An investment scheme launched in 1999 by the Government to replace PEPs.

Inflation

Inflation is a general rise in prices across the economy.

Inland Revenue

The Government body who control taxation.

Insurance

An insurance policy provides compensation following a loss.

Intellectual Capital / Property

This is the sum of the knowledge-based assets that reside within some companies. This might include brand & customer relationships or patents, trade secrets and know how.

Interest free credit

When you pay for something in installments over a certain period free of any interest charges.

Interest in Possession

The named beneficiaries under a trust to whom assets will be passed if the trustees do not use their discretion.

Interest only mortgage

With an interest-only mortgage your monthly mortgage payments only pay the interest element of the loan and don't pay off any of the capital. To repay the capital most borrowers take out some kind of savings plan to ensure that at some time in the future they will have enough money to pay off their mortgage, such as an ISA pension or an endowment.

Insurance Bond

A collective investment structured by an insurance company. Similar to a Unit Trust or OEIC but with different tax treatment. Returns are usually quoted net of basic rate tax.

Investment Grade bond

These are generally regarded as high quality bonds. There are two main bond rating agencies, Standard & Poor's and Moody's. Their investment grade rating will range from, AAA/Aaa to BBB/Bbb.

Investment Club

Investment Clubs allow people to pool together and invest in the stock market.

Investment Trust

An investment trust is a company in which shares can be bought, and which must be quoted on a Stock Exchange, usually the London . It is a 'pooled' investment, with many investors owning shares in the same trust. The investment trust makes its profits by investing in the shares of other companies rather than by manufacturing a product that it then sells.

Land Registration

The register of who owns plots of land which also details any legal charges on it.

Leasehold

Leasehold means that someone else owns the land the building is on and so you are only buying the right to live in the property for a certain length of time.

Level Term Assurance

Term Assurance is a life insurance policy which covers the life of a person in monetary terms in return for a payment, usually monthly, and known as a premium. Term assurance is the cheapest and simplest form of life cover, providing life assurance for a fixed term only. The sum assured is payable only if the life assured dies within that term. There is no investment value to the policy at any time. In the case of Level Term Assurance the sum assured does not change during the term of the policy.

LIBOR

LIBOR stands for the London Interbank Offered Rate and is the rate of interest at which banks borrow funds from other banks, in marketable size, in the London interbank market.

LTV

This stands for Loan to Value which is ratio between size of loan and value of property. So, for example if you require a £90,000 mortgage on a property valued at £100,000 the loan-to-value you require is 90%.

Macro-economics

A global economic view covering topics such as inflation, interest rates, growth forecasts etc.

Market Value Adjuster

A clause permitting Life Offices to reduce bonuses if the underlying assets have fallen when an investor surrenders an Insurance Bond.

Maxi ISA

This is a tax-free savings vehicle in which you can invest up to £7,000 each year. You can invest either the full amount in stocks and shares or up to £3,000 in cash savings and up to £1,000 in life insurance investments.

Market Value Adjuster

A clause permitting Life Offices to reduce bonuses if the underlying assets have fallen when an investor surrenders an Insurance Bond.

Mini Cash ISA

The Individual Savings Account (ISA) was introduced on 6th April 1999. Individuals who are both resident and ordinarily resident in the UK for tax purposes and aged 16 and over are eligible to open an account. Returns from an ISA are free of income tax and capital gains tax. The maximum investment permitted per tax year is £3,000. ISAs can be instant access accounts (those which do not require any notice to be given to withdraw funds) or notice accounts (those where notice must be given to withdraw funds without penalty).

Monthly Income Accounts

These accounts pay monthly interest.

Mortgage

This is a loan used to buy a property. The property is used as security against paying back the loan.

Mortgage payment protection

If you cannot work or are made redundant this policy will pay your mortgage for you.

MSCI World Index

This is the most widely used benchmark for international equity funds and portfolios.

Mutual Life Office

A company with no shareholders; the policyholders are the members and owners of the company.

National Insurance

A form of tax on salary which funds state benefits.

National Savings & Investments

The government savings scheme.

Negative Equity

You are considered to be in negative equity if the money you owe on your mortgage is greater than the value of your property.

Net Asset Value

The balance sheet value of a company. This can be divided by the number of issued shares to indicate the NAV per share. This is often used to value an investment trust's assets against its current share price to see if it is trading at a discount or a premium.

Net Interest

Interest earned once basic level tax has been deducted.

Notice Accounts

These accounts require notice to be given to withdraw funds to avoid any penalty, such as loss of interest.

OEIC

Stands for Open Ended Investment Company. A type of Collective Investment now tending to replace unit trusts.

OFEX Market

This is a market for share dealing in unquoted companies which is operated by J P Jenkins Ltd. Shares traded on this market should be considered high risk.

Offset Mortgage

An offset mortgage allows you to keep your balances e.g. mortgage, savings, current account etc in separate accounts but all balances are offset against each other thus allowing the possibility of reducing the interest paid and could result in the mortgage being repaid early.

Offshore Accounts

Many banks provide offshore accounts based in the Channel Islands and the Isle of Man. Interest is paid into the account gross but has to be declared as income.

Open Ended

An investment scheme which issues new shares or units to new investors and repurchases share or units from those who sell, e.g. Unit Trust or OEIC. The value of the shares or units generally reflects their net asset value.

Ordinary Shares

The type of shares most commonly traded on the London Stock Exchange, also known as Equities.

OTC stocks

Over the Counter stocks are not traded on a recognisable investment exchange, and are technically unquoted and high risk.

Overdraft

Banks will often allow you to overdraw your current account. If you have arranged for an overdraft facility on your account you will be charged an authorised overdraft rate - the rate of interest that you will pay on your overdrawn balance if you remain within your authorised limit. If you have not arranged an overdraft facility or exceed your authorised limit you will be charged interest at the unauthorised overdraft rate.

Overpayment

This is when monthly repayments to a mortgage are increased, meaning that the mortgage is repaid before the end of the mortgage term.

Packaged Account

An account that charges a monthly fee but often offers benefits such as free travel insurance and reduced overdraft rates.

Payment Holiday

A period during which you make no payments on borrowings. This is usually only available on a flexible lending.

PEG

This takes the P/E ratio a step further and compares this multiple to its forecast growth rate. A higher ratio indicates that a share is highly priced.

P/E Ratio

A popular valuation measure for Equities. It is calculated by dividing a company's current share price by its earnings per share (EPS).

Pension

Money you get at retirement either from a personal plan or the government.

Percentile ranking

A fund with x% ranking is within the top x % within its peer group. The lower the figure the better the performance.

Personal Equity Plan (PEP)

A tax incentivised investment scheme. Now closed for new investment but existing plans can remain in existence. ISAs replaced PEPs on 6th April 1999 and new PEPs ceased on that date.

Personal Loan

A loan taken out by an individual over a fixed term.

Personal Pension

A personal pension is a tax-efficient savings plan that enables you to save for retirement. The contributions attract tax relief and they can be made in various ways, either regularly, by lump sum or by a combination of both. On retirement, up to 25% of the fund value can be taken as a tax-free cash lump sum. The remainder of the fund must be used to buy an annuity.

Portability

A mortgage which can be transferred between properties when you move house.

Preference Share

A type of share with preferential rights over ordinary shares (usually in terms of repayment and dividends).

Premium

The amount paid for insurance cover.

Protected Equity Funds

A fund where the downside risk is lower than with a conventional equity fund. Generally use options to establish a 'floor price'.

Purchased Life Annuity

Purchased life annuities are purchased by private investors and payments comprise part taxed interest and part untaxed return of capital.

Put option

The holder will have the right, but not the obligation, to sell a security or index at a predetermined price on or before the expiry date.

Quartile ranking

A measure of fund performance ranking it against peers; top 25% are 1st Quartile whereas bottom 25% are 4th Quartile.

Redemption

If you repay (redeem) your mortgage at any time prior to the end of the mortgage term you may have to pay certain fees or an interest penalty (redemption penalty). If the mortgage is repayed in the early years there may be a heftier penalty, a product penalty. An extended redemption tie-in means that this penalty will continue to be payable beyond the initial term of the mortgage.

Redemption Price

The price at which the shares or units will be redeemed.

Redemption Yield

The overall return for an investor in a fixed interest bond who holds the bond to maturity. Takes account of capital returns as well as income.

Relative Performance

The performance of an investment relative to its Benchmark Index

Reduction in Yield (RIY)

A measurement of all of the charges in a product. It shows the loss of return compared with a product with no charges. Usually calculated over a five or ten year period.

Regular Savings Accounts

A number of banks and buildings societies offer regular savings accounts. These require a deposit to be paid into the account each month. These accounts often give a higher rate of interest than a normal savings account. However, they usually come with a restriction on the number of withdrawals (and missed deposits), which if exceeded can mean a dramatic drop in the rate of interest paid.

Relative Volatility

The Volatility of an investment divided by that of its Benchmark Index.

Remortgage

Switching a mortgage to a new lender.

Repayment Mortgage

With a repayment mortgage, the money you pay each month covers both the interest and capital of the loan. This means that at the end of the term you don't need any extra money to pay off the loan.

Repossession

This is the legal process by which a borrower who has defaulted on mortgage repayments has the property taken away from them. This usually involves a forced sale of the property at public auction.

RPI

This stands for Retail Prices Index.RPI is an average measure of change in the prices of goods and services bought by the majority of households in the UK . It is compiled and published monthly.

Return On Capital Employed

A company's profits before tax and interest divided by its capital employed. A measure of how efficiently the company is using its resources.

Reversionary Bonus

Annually declared addition to With-Profits insurance policies.

Sealing fee

The charge made by lenders when a mortgage is repaid.

Secured Loan

A secured personal loan is one in which some of your property (home, stocks and shares, etc) is held, by the lender, as security for the amount you have borrowed. Secured loans usually offer lower interest rates than unsecured ones.

Self certified

Normally when applying for a mortgage you will be asked to provide pay slips or company accounts to prove your income. If it is difficult or inconvenient to provide this documentation, you can choose to self-certify your income. This involves signing a declaration which states your income sources and amounts. Lenders will usually charge you higher rates than average and offer you a more limited range of mortgages if you choose to self-certify your income.

Settlor

The creator of a trust who gifts money or assets to it for the benefit of others.

Share

This is a legal document that states the holder is part owner of the company in which the share is held.

SIPP

This stands for Self Invested Personal Pension. These are personal pensions plans in which the person whose plan it is makes their own investment decisions.

Split Capital Trust

A type of Investment Trust with different share classes, designed to appeal to different types of investor, e.g. income or capital.

S&P 500

This index broadly covers the 500 leading companies listed on US stockmarkets. The index is calculated in real time.

Stakeholder Pension

These are low cost pensions that have to adhere to government rules on charges, access and terms.

Stamp Duty

This is a tax that's is payable by the purchaser on the purchase of a property. The amount paid depends on how much the property is purchased for. For properties with a purchase price of up to £125,000, no stamp duty is charged. For properties between £125,001 and £250,000, 1% stamp duty is payable on the purchase price. For properties between £250,001 and £500,000 it is 3% and for properties over £500,000 it is 4%.

Standing Order

An authorised payment that instructs the regular payment of funds.

Stockmarket Bonds

Insurance Company fixed term policies that guarantee either income or capital and link the returns to a stockmarket(s).

Store Card

Store cards are a form of credit card but are issued by or for a particular retailer and can only be used in that retailer's store's) / chain (unless it is endorsed by a credit card company).

Sum insured

The amount covered by an insurance policy.

Surveyor

A surveyor is a person who is qualified to carry out valuations and surveys of properties.

SVR

This stands for Standard Variable Rate. This is the standard interest rate charged by lenders. The rate goes up and down (is variable) and your repayments will be adjusted accordingly.

Technical Analysis

The use of price charts to seek to predict future changes in markets.

Term Assurance

Term Assurance is a life insurance policy which covers the life of a person in monetary terms in return for a payment, usually monthly, and known as a premium. Term assurance is the cheapest and simplest form of life cover, providing life assurance for a fixed term only. The sum assured is payable only if the life assured dies within that term. There is no investment value to the policy at any time.

Terminal Bonus

A special bonus declared on With-Profits insurance policies when they are terminated by surrender or, death.

Tessa Only ISAs

Tax-Exempt Special Savings Accounts, or TESSAs, were five-year savings accounts which enabled you to receive interest gross - without the deduction of any tax. The TESSA was replaced by the ISA on 6 April 1999. However TESSAs in existence at that date were allowed to continue to run to maturity under normal TESSA rules. The last TESSAs, therefore, matured on 5 April 2004. Maturing TESSA (Tax Exempt Special Savings Account) capital could be deposited into a TESSA Only ISA until 5 October 2004 without affecting the amount that can be invested into the cash component of an ISA. The only opening of these now is by transferring between TESSA only ISAs.

Tie-in

As a condition of a certain mortgage deals you may have to agree to stay with the lender for a certain period of time. If you move your mortgage elsewhere during this period, you may have to pay an early redemption charge.

Title Deed

States the owner of a property and details about the property and the land upon which it is built.

TMT

Phrase coined during the technology 'euphoria', encompassing technology, telecom and media stocks.

Top Down

This phrase describes an investment approach whereby the starting point for selecting shares is to look at the macro-economic picture and to select stocks which will fare better under the expected conditions. See also Bottom Up.

Top-Slicing

The tax calculation on single Premium Insurance Bonds to determine if a higher rate tax liability is due.

Total Expense Ratio

The total annual expenses of a fund, e.g. the management fee plus all other annual outgoings, expressed as a percentage of the fund value.

Tracking Error

A statistical measure of how closely a fund's performance moves in line with its Benchmark. A Tracking Error of 2% is relatively low, 5% is above average and indicates an active style of management.

Tracker Mortgage

These mortgages track the changes in base rate and so the interest rate you pay changes in line with this.

True Cost

True cost shows the total cost of the mortgage over a period of time. This allows you to compare the overall cost of mortgages including repayments and any up-front fees. Any cash back at the beginning of the mortgage term is deducted from the true cost. Redemption penalties and start-up costs are included in this figure.

Trust

A legal provision for gifting assets from one person [the settlor] to another/others.

Underwriting

Where a company looks at known facts such as age and health in order to assess the likelihood of you making a claim on an insurance policy.

Unit Linked Pension

Such pension contributions are used to buy units in a pooled fund or funds. Unit-linked pensions are invested in a variety of funds. The funds are grouped together in sectors, representing the style, area and risk level in which the relevant pension fund has chosen to invest. As the value of the units may fall and rise during the period of investment, care is taken to 'spread' the investment in a variety of ways to obtain the best return commensurate with prudent investing.

Unitised with profits pension

With these pension schemes payments are used to buy units in an insurance company's with profits fund. The value of these increases annually depending on the investment performance and profits of the insurance company.

Unit Trust

A unit trust is a portfolio of investments that spread market risks. It allows an investor to reduce their risk exposure by pooling their investment. When investing in a unit trust, cash buys units. Each unit trust has thousands of people holding units in the fund. A unit trust is an open-ended investment, as the number of units in each trust will vary depending on supply. As more investors join, more units are created. Unit trusts cover a variety of funds.

Unsecured Personal Loan

A personal loan available from a bank, building society or other financial institution without security. They are usually covered by the terms of the Consumer Credit Act. A lump sum will be loaned in return for you agreeing to make regular repayments usually by direct debit. Personal loans are available from £500 up to £25K (security will usually be needed for loans of large amounts) and are repayable over a period of time, usually between 6 months and 10 years.

Valuation

A check of a property in order to find out how much it is worth and whether it is suitable to lend a mortgage on.

Valuation Fee

A fee payable to the lender to check what a property is worth and if it is suitable to lend a mortgage on.

Value investing

Value investors will only buy companies that appear cheap compared to their net assets, or cheap on a P/E basis.

Variable Rate Mortgage

A variable rate mortgage is one in which the amount you repay increases or decreases in line with any interest rate changes. This means that you cannot predict the monthly cost of the borrowing, which could cause financial concerns within the mortgage period.

VAT

This stands for Value Added Tax which is charged on most things that a person buys.

Venture Capital Trust (VCT)

A tax incentivised scheme to encourage investment by individuals in smaller unquoted companies.

Volatility

A statistical measure of the variation in returns from an investment. The higher the volatility, the more of a roller coaster ride you are likely to experience but, be warned that volatility can change in the future.

Warrants

A high risk type of security, similar to a call option, which confers a right to purchase ordinary shares at a fixed price for a set period of time.

Will

A legal document that states where a person wants their assets to go when they die.

With-Profits

With Profits Bonds are single premium Whole of Life policies offered by many insurance companies and usually require lump sum investments. The amount of life cover is normally only minimal, and most With Profits Bonds are taken for investment growth and not life cover alone. The investment buys units in the insurer's With Profits fund. This fund invests in a wide range of underlying assets such as shares, fixed interest securities and property. Each year bonuses are added to the sum assured either by an increase in the price of units or by allocation of extra units. A type of investment in which the returns are smoothed from year to year. Returns consist of bonuses and once declared these cannot (usually) be removed.

Withdrawal [from Bonds]

An annual allowance of 5% return of capital from an Insurance Bond taxfree. Anything over 5%pa is taxable.

Yield

This is the annual return you get from holding a stock, share or unit trust. It is expressed as a percentage of its price.

Zero Dividend Share

A type of share which pays no dividend but has a predefined Redemption Price. Usually issued by Split Capital Investment Trusts.

Z-Scores

Z Score is a statistical measure that quantifies the distance (measured in standard deviations) a data point is from the average (mean) of a data set. It is useful when comparing data with different averages and standard deviations.