Jargon buster: A-H
£100 rule This is an HM Revenue & Customs regulation that says if a child earns more than £100 interest a year on money that has been invested by a parent or step-parent, that parent will be liable for tax on all interest earned at his or her marginal rate.
A-Day 6 April 2006: the date when reforms to the pensions systems came into force, changing the way you can save for pensions and take them out.
Additional Voluntary Contribution Schemes (AVCs) allow you to make additional contributions to your existing occupational pension scheme to boost the size of your fund.
Administrator The person or people appointed by a court to administer the estate of somebody who dies without leaving a Will.
Annual allowance The maximum you may invest into your pension funds in a given tax year and get tax relief. Currently £245,000 (October 2009), the annual allowance is set to rise to £255,000 by 2010.
Annuity When you retire, you may choose to buy an annuity with your pension fund to secure a guaranteed regular income throughout your retirement.
Annual Percentage Rate (APR) Essentially, the interest rate you will pay on a loan. However, it is called the APR because it also takes into account one-off fees to give you a measure of the total cost of your loan as a percentage.
Appointed representatives Advisers who are deemed fit and proper to deal with clients on behalf of an authorised financial services firm.
Assets Things of value. When it comes to investments, your assets are the things you buy when you invest, such as shares in a company or a house.
Attendance Allowance A tax-free, non-means tested benefit for people aged 65 or over who have an illness or disability and need help with personal care.
Authorised adviser A financial adviser regulated by the Financial Services Authority (FSA) for introducing investment and insurance business.
Baby boomers A term popularly used to describe people born between 1945 and 1965.
Basic rate taxpayers The interest you receive on your savings is taxed as your income. Normally, bank and building society savings accounts deduct tax before the (net) interest is added to your account. The tax on savings interest is deducted at 20%, so there is no extra to pay if you are a basic rate taxpayer.
Be aware that adding the interest you receive to your other income could make you a higher rate taxpayer.
Basic state pension This is the pension you will receive from the Government as a result of the National Insurance (NI) contributions you make during your working life. At 6 April 2009, the basic state pension was £95.25 per week for a single person.
Beneficiary Someone who receives money or other benefits from a benefactor (often in a Will)
Benefits Agency A Government department that deals with social and welfare benefits.
Bonds A form of investment. When you buy a bond, you are lending money to companies, governments or other organisations for a period of time at an agreed rate of interest. Typically, bonds are regarded as safer forms of investment than investments in shares, particularly when the market is volatile.
Budgeting An essential part of money management. It means working out your income and outgoings so that you can decide how much you have available to spend or save, and your financial priorities.
Bursary A financial award made by an institution to an individual or a group to assist their education or research. Bursaries are intended to cover course-related costs such as books, equipment, travel and study aids.
Cash A class of asset. Money kept in a savings account is a cash asset.
Capital Gains Tax (CGT) The tax you pay on any increase in the value of your assets that you benefit from. For example, selling shares for more than you paid for them may involve paying some Capital Gains Tax. You get a special tax-free CGT allowance that means you only pay CGT on any gain over £10,100 (October 2009). The rate of CGT is 18% (2009/10)
Capital Taxes Office The part of HM Revenue & Customs that deals specifically with Capital Gains Tax and Inheritance Tax (Capital Taxes).
Certified copy A certified copy is a true copy of an original document. Some professionals – such as doctors, financial advisers and solicitors – are able to certify documents.
Child Benefit Tax-free regular payments made to anyone bringing up a child or young person who qualifies.
Child Trust Funds A long-term savings and investment account for children. The Government introduced it to ensure a child has savings at the age of 18. You can find out more about CTFs at www.childtrustfund.gov.uk
Children's Bonus Bonds Available through National Savings and Investments (NS&I), Children’s Bonus Bonds allow you to invest tax-free for your child's future in their own name. All returns on Children's Bonus Bonds are completely tax-free for you and your child.
Child Tax Credits (CTC) A benefit paid to support eligible families with children.
Civil partnerships Legally recognised unions between two people of the same sex.
Code of Practice Rules established by regulatory bodies or trade associations as a guide to acceptable behaviour.
Compound interest Interest on an investment's interest, plus previous interest. The more frequently this happens, the sooner your accumulated interest will generate additional interest.
Corporate bonds Bonds that are soley issued by companies. Often, they offer higher rates of interest than bonds issued by governments, but they can sometimes be less secure.
Contracting out When you opt to leave the State Second Pension (S2P) or State Earnings Related Pension Scheme (SERPS), you are contracting out. You will receive a rebate on your NI contributions to invest in other pension funds.
Core and satellite strategy When investors put at least part of their money into a core of broad-based collective funds while picking satellites, which are riskier funds or individual shares.
Consumer Prices Index (CPI) Measures changes in the prices of a diverse basket of goods and services. Notably, the CPI does not include the cost of housing.
Credit rating A record of how well you have managed your financial affairs in the past by, for example, paying credit commitments on time. Your credit rating also takes account of your debt levels. This information is held by a credit reference agency, and various companies can consult it before they offer to lend you money or enter into credit agreements with you. You could be refused a loan because of a poor credit rating.
Critical illness insurance Pays out a lump sum if you are diagnosed with a heath problem that meets the definition of a critical illness in the insurer’s policy conditions provided you survive for a minimum period after diagnosis.
Death certificate A legal document – signed by a doctor, coroner or other health professional – certifying a person’s death.
Debt If you have borrowed money from a bank or a person, you are in debt to them. Typically, this means you owe interest as well as the money you borrowed in the first place. While debt is now a common feature of our personal finances, it can become a problem if you borrow too much and find it difficult to meet your repayments.
Deferred payment agreement A form of loan from a local authority that enables care home residents to pay for their care without having to sell their home to do so.
It is an interest free loan. The cost is subsequently recovered when the property is eventually sold – usually after they die.
Defined contribution Pension schemes whose final value is defined by the amount of money you have put into them. See also money purchase schemes.
Defined benefit Pension schemes where the member receives a set amount on retirement. See also final salary schemes.
Deflation A sustained decrease in the general price level of goods and services.
Deliberate deprivation When someone needing care transfers an asset out of their possession to make it easier for them to obtain financial assistance from the state.
Designated accounts If you want to keep control over the money you give to a child through a building society account or a savings plan, for example, you can hold it in your own name but also designate it in the child’s name or initials.
Discretionary Will Trust A trust in which the trustee(s) has full discretion over which members in a group of beneficiaries receive either the trust’s income or its capital – and when.
Diversification To balance risk, investors generally spread their portfolio of investments rather than putting all their eggs into one basket. A range of different or unrelated investments is a less risky way to invest.
Dividends Payments made to shareholders by a company, usually after a profit announcement. Receiving share dividends is one way to make money from share investments.
Education Maintenance Allowance Up to £30 a week to help out with the cost of staying in education after the age of 16.
Enduring Power of Attorney (EPA) A legal document that gives one or more people the right to manage someone’s financial affairs and property. EPAs have not been available since October 2007. But providing they are still valid, EPAs from before October 2007 are still legally recognised.
Equity Another term to describe shares in a company or stock. If you own shares in a company, you own some of its equity.
Equity release Usually a term for financial plans that allow you to release cash from your home to boost your finances in retirement.
Estate A term used in common law to signify the total of a person's property, entitlements and commitments.
Estate planning Arranging your financial affairs to make sure that as much of your property as possible is passed on after your death.
Exchange Traded Funds (ETFs) Open-ended investment companies that can be traded at any time throughout the course of the day.
Executors Person(s) you appoint in a Will to make sure your wishes are carried out after your death.
Final salary schemes Provide you with a retirement income based on how much you are earning when you retire. These schemes pay up to two-thirds of your final salary – depending on how long you have been part of it.
Financial assessment A calculation that assesses how much someone can afford to pay for the care services they receive.
Financial Services Authority (FSA) An independent body that regulates the financial services industry in the UK.
Fixed interest security Another name for bonds. In this case, you are told how much interest you will receive when you buy the security. Investing in fixed interest securities is considered more secure than investing in shares, for example.
Fixed term plans Some savings plans – for example, some Guaranteed Equity Bonds – pay interest at the end of a fixed term, say after five years. This money may be paid gross. In other words: without any tax deducted. If you are thinking about making this kind of investment, you need to be clear on the following points:
- Your tax position in the year you receive your interest or return determines how much tax you pay. So, if you are a basic rate taxpayer, you may become a higher rate taxpayer towards the end of the term – and you will need to pay tax at the higher rate on the whole of your return.
- You need to think about your future tax position. If you are married or in a legal partnership, putting your savings plans in your partner’s name could be more tax-efficient. This can become complicated, so you may wish to seek advice on this option.
Friendly Societies Voluntary mutual organisations offering tax-advantaged savings and investments, as well as help for its members covering sickness, unemployment, retirement, and life assurance.
Fund managers Hedge funds and mutual funds typically have fund managers who are responsible for directing how investments are made. In hedge funds particularly, investors rely in part on the fund manager's judgement to make a profit.
Gilts Also called gilt-edged or Treasury bonds, these are bonds issued by the UK Government. They are regarded as very secure investments because the Government is virtually guaranteed to pay you back.
Guarantor By standing as guarantor, you agree to take responsibility for a loan if the person who originally applied for it fails to keep up their agreed repayments.
Health insurance Covers the cost of private health care.
Hedge fund A type of investment fund that is usually open to accredited investors only, rather than the general public. Hedge funds look to make large investment returns from complex investment strategies on the stock markets.
Heirship The right to an inheritance.
Higher rate taxpayers If you are a higher rate taxpayer (40% in 2009/10), you will need to pay this rate on the interest from your savings. Since your provider has already deducted basic savings rate tax at source, you will have to pay the difference (another 20%), usually as part of your annual tax return. It is your responsibility to declare this. Remember that your personal allowance increases when you turn 65 and 75, which means you can keep more of your income before you start to pay tax.
HM Revenue & Customs R85 Completing the R85 form means you are telling your bank or building society that you do not have to pay tax on any interest you receive.
Humanist Someone who will conduct a non-religious service at a funeral.
