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Jargon buster: I - Q

Identity fraud Unlawfully taking another person’s details without their permission, usually to obtain credit and goods.

Immediate need care fee payment plan A financial product aimed at providing continuous income to cover care fees for the rest of your life. It is paid directly to the care provider once you start needing care.

Income Tax A tax on your income. In general, all your income is taxable, except for your individual tax allowance and certain benefits.

Independent Financial Adviser (IFA) Trained professionals who give financial advice on a range of products and services across the whole market. IFAs act for you and are regulated by the Financial Services Authority (FSA). They may charge a fee or receive a commission for their services.

Individual Savings Account (ISA) A savings plan in cash, stocks and shares or a mixture of both. While ISAs offer tax advantages, there are limits to what and how much you can invest.

There are two types of ISA: cash and stocks and shares.

In one tax year you can put your money into both types, paying up to £3,600 into a cash ISA and up to £7,200 into a stocks and shares ISA – provided you don't exceed £7,200 in total.

But from 6 October 2009, these limits will change. If you’re 50 or over, or if you’re turning 50 before 5 April 2010, your annual ISA investment limit will increase to £10,200. Of this, you can save £5,100 in cash. The higher limits will apply to everyone from 6 April 2010.

Inheritance Tax (IHT) A tax paid in the UK on money, property, etc. passed from one person to another during their lifetime or as part of their estate after death.

Interest You receive interest on money you lend to banks or other organisations through savings accounts, investment funds or bonds. You have to pay interest for example on loans or mortgage commitments.

Interest rates The rate of interest that you earn on savings or pay on loans will vary depending on the product. The interest rate on a particular product may, for example be fixed or variable.

Interest rate risk As interest rates fall, the capital value of corporate bonds rises so that the income/yield rises in line with market rates. So if interest rates rise, the value of the bonds falls.

Intestate The term used when a person dies without a valid Will.

Investing Buying stocks, shares, property, bonds or even cash-based funds with the aim of making a profit by selling them for more than you paid.

Joint tenancy A type of property ownership where each person owns the entire property subject to the other person's beneficial interest. On death the property passes to the surviving person.

Lasting Power of Attorney (LPA) A legal document that allows you to appoint someone you trust as an attorney to make financial/property and/or welfare decisions on your behalf.

Learner Support Funds Students aged 16 and over can put these funds towards costs associated with their further education courses. These costs could cover books and equipment; extras, such as visits or field trips; and emergencies affecting the student’s living, learning or personal expenses. Learner Support Funds are targeted at those in greatest need and students can access them by contacting the Student Support Officer at the college or school sixth form they attend or hope to attend.

Legacy A gift given to someone after death through a Will.

Letters of administration Used when someone dies without leaving a will and covers the authority given by the Probate Court to those nominated by law to manage the dead person’s estate.

Life interest A beneficiary’s lifelong right to the interest or benefit from an estate’s assets, but not the assets themselves.

This is often used in a Will to allow somebody such as the widow to remain in the home during her lifetime and on her death the home to pass to the children.

Lifetime allowance The maximum you can accumulate across all your pension funds throughout your lifetime while still benefiting from tax relief. It currently stands at £1.75 million, but is set to rise to £1.8 million by 2010.

Liquidity Cash has greater liquidity as an asset than, for example, bonds or property because you can access the value of your cash by spending it as you wish. However, you can't get your money back on a bond for maybe several years and even longer on a property.

Longevity The length of your life.

Lowrate taxpayers  Up until the end of the 2007/2008 tax year, there was a lower rate of income tax (10%) that was payable on any income eligible for tax up to £2,230 over your individual allowance.

As of 6 April 2008, the lower rate tax band was abolished for income - except for income on your savings. If you earn up to and including £2,440 over your personal allowance, then you will be a lower rate tax payer on your savings income only. However if you earn more than £2,440 over your personal allowance, the 10% tax rate will not apply.

Means-test An investigative process that determines whether an individual or family is eligible to qualify for help from the state.

Medical certificate A certificate outlining a person's state of health, provided by a doctor who has carried out a medical examination on them.

Money purchase schemes These include personal pensions, stakeholder pensions and occupational pensions. Money purchase involves making regular contributions to a pension fund, which is invested for you. The income you receive in retirement will depend on how much and how long you have contributed, and how well the underlying investments have performed.

Mortgage A mortgage is a special type of loan usually used to purchase property. The loan is secured against the property.

Mortgage repayments are typically one of a household’s biggest expenditures.

National Insurance Contributions (NICs) are paid as a percentage of your income if you are aged 16 or over but under the pension age (60 for women, 65 for men). Currently, you need to earn at least £110 per week to make NICs. They go towards funding state pensions and other state-organised benefits.

National Will Week This is a week each year when people are encouraged to review and make a Will, with some solicitors and charities offering free Will writing services.

NHS continuing care NHS-funded nursing care that is provided over an extended period of time to meet physical or mental health needs arising from a disability, an accident or illness. It is funded entirely by the NHS.

Nil-rate band The first £325,000 on your estate that is tax free. The rate is reviewed annually and the allowance is combined to £650,000 if you are legally married or widowed.

Non-taxpayers If you do not pay tax, you can choose to receive gross interest. In other words: interest without tax deducted. Bear in mind that the interest you receive could turn you into a taxpayer. You can also reclaim any overpaid tax.
To qualify, you will need to complete tax form R85, which you can pick up from your bank or building society or other savings provider. Alternatively, download an R85 here www.hmrc.gov.uk/taxback/forms.htm.

Occupational pension Also known as a company pension scheme, this is organised by an employer for their employees, who can choose to pay into it. It may take the form of a final salary pension scheme or a money purchase scheme.

Open-ended investment companies (OEICs) A type of open-ended collective investment formed as a corporation under the Open-Ended Investment Companies Regulations of the United Kingdom. As an open-ended company, the manager must create shares when money is invested and redeem shares when asked to by shareholders.

Overdraft A bank may allow you to withdraw more money from your account than you actually have in it. This is an overdraft. The bank will usually charge you an agreed rate of interest for this facility. Having an overdraft means you are in debt to the bank. If the bank has not agreed an overdraft with you or if you exceed your agreed overdraft, it will charge you additional interest or even a penalty.

Personal accounts The personal accounts scheme will be a new, simple, low-cost pension saving scheme aimed at middle- to low-income workers who do not have access to an occupational pension scheme already.

Personal allowance - Everyone has a personal allowance (including children), which is the amount of income you can have before you start paying tax. Once you reach 65, it goes up. This means you can have more money each year before you start paying tax.

*These allowances reduce where the income is above the income limit – by £1 for every £2 of income above the limit. However they will never be less than the basic Personal Allowance or minimum amount of Married Couple’s Allowance.

Personal Equity Plans (PEPs) A PEP is like a stocks and shares ISA. PEPs were replaced by ISAs in April 1999. After that, no new subscriptions to PEPs were accepted. PEPs already in place at that date were allowed to stay in existence. In April 2008, they became stocks and shares ISAs.

Personal Expenditure Allowance (PEA) The amount of income care home residents are allowed to keep for personal expenditure each week, currently £21.90 per week (2009/10).

Personal pension A pension scheme owned by an individual but typically administered by a life and pensions company, which invests your contributions on your behalf.

Pre-paid funeral plan An insurance policy paid in advance to cover your funeral costs.

Price to earnings ratio (P/E) A company’s performance is measured by its P/E ratio. Price is the current share price. Earnings are the profits the company earns in one financial year for each single share.

Principal private residence relief If you sell your principal residence, usually the one where you live permanently, you should not have to pay capital gains tax on any increase in its value.

Principal Probate Registry Holds copies of all the Wills proved in England and Wales and all letters of administration since 1858.

Probate The court’s authority for a person or people to administer a deceased person’s estate.

Property An asset class. Property assets can be residential (your own house or a house you rent) or commercial (office blocks, business centres etc.).

Qualifying years The tax years during which you make National Insurance Contributions (NIC). To qualify for a full basic state pension, you must accumulate a minimum number of qualifying years during your working life.