Glossary of terms

Please click on a letter below to view our glossary. Note that the terms are updated on a regular basis although we cannot accept responsibility for any errors, omissions or out of date facts or figures.

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

A Shares
Ordinary shares that do not have voting rights.

Abatement
A proportionate reduction in payments payable or receivable.

Absolute Title
Ownership of registered land where the State guarantees that no one has better right to the land. Absolute leasehold title guarantees that the lessor has title to grant the lease.

Absolute Trust
A Trust where the Trustee has no obligation except to pass the trust assets to the beneficiaries at their request e.g. upon reaching majority. Also see: bare trust, naked trust, simple trust.

Abstract of Title
Details of the legal document proving an owners right to dispose of the land. Such detail is usually supplied prior to completion on a mortgage, and will be compared with the original documents upon completion.

Acceptance Letter
A document issued by life assurance companies in response to an application for cover. Deemed to be a counter offer valid for a limited period only. Details amount of cover and terms on which insurer is willing to proceed. Proposer accepts the terms by pa

Account
A record of monetary transactions forming part of an accounting system.

Accounting Period
The period of time from one balance sheet date to the next. See trading period.

Accounting Standards
Rules and guidelines on different subjects issued by the Accounting Standards Board under ‘Statement of Standard Accounting Practice.

Accretion
Increase in value of an asset through natural physical changes, rather than the usual market forces of supply and demand e.g. timber.

Accrual
A payment incurred in one period, but not paid until the next.

Accrual Accounting
The system of accounting for income and expenditure when earned or incurred, irrespective of the actual time the money changes hands.

Accrual rate
The rate (or formula) used to calculate the pension benefit, in a defined benefit occupational pension scheme. The most common pension accrual rate in the UK is 1/60th of final pensionable salary for each year of pensionable service.

Accumulation and Maintenance Trusts
A trust in which any investment return or deposit interest accumulates, and is used to support/educate the beneficiaries without disposal of the capital. Entitlement to the capital must arise, however, before the age of 25.

Accumulation Unit
A type of unit used by unit trusts whereby income is reinvested automatically thus increasing the price of the unit.

Act of God
Circumstances brought about by the forces of nature, unforeseen by reasonable foresight and not involving human influence.

Active Management
A style of fund management used by investment managers and stockbrokers to try to outperform stock market indices by the use of skilful stock selection.

Activities of Daily Living
Generally used as a basis for assessing claims under a Long Term Care contract. ADLs are considered to be basic activities essential to an active adult existence e.g. eating, dressing, bathing, using the toilet, getting in and out of bed, walking, climbi

Actuarial Certificate
A certificate issued by an actuary, normally in order to satisfy the requirements of the IR SPSS. Could relate to the solvency of a scheme or transfer of benefits.

Actuarial Valuation
A valuation carried out by an actuary on a regular basis, in particular to test future funding or current solvency of a pension fund.

Actuary
A person who assesses risks and costs, in particular those relating to life assurance and investment policies, using a combination of statistical and mathematical techniques.

Ad Hoc
Latin: ‘for this particular purpose’.

Ad Valorem
Latin: ‘according to value’. For example, an ad valorem tax or duty will be calculated according to the value of whatever is being taxed, as a percentage rather than a flat rate.

Added Value
An increase in real value resulting from changes in the makeup/content of goods or services.

Added Years.
Additional benefit purchased in a final salary related occupational pension scheme by way of transfer-in, additional voluntary contribution(s) or augmentation, and which is expressed in the form of additional years of service.

Additional Voluntary Contributions (AVCs)
AVCs are a way of increasing your eventual pension. If you are in an employer’s pension scheme but want to put more money into your pension, you can do so through an AVC. Details of your employer’s AVC scheme should be available from your pension’s admi

Advance
Once a mortgage lender has agreed in principal to give you a mortgage on a property, the next step is to actually get hold of the funds. The loan itself is the "advance".

AEI
Average Earnings Index

Agent
A person who represents someone else.

AGM
Annual General Meeting

AIM
Alternative Investment Market

All Employee Share Schemes
Type of approved share ownership plan for employees introduced in April 2000. Shares are given to employees (free share plan) or purchased by employees (partnership share plan). Subject to certain conditions the shares receive preferential tax treatment.

Allocation
The amount of premium actually used to purchase units. Under various charging structures less than the full premium will be allocated for investment in the early years of the contract. Asset allocation is the spread of fund investments between different

Allocation of Interest Election
Where husband and wife elect to have tax relief on mortgage loan repayments allocated in a split other than 50/50, the latter being the 'norm' without an election.

Allotted Capital
See Issued Capital.

Alternative Investment Market
Launched 19th June 1995 to offer new and growing companies a less expensive alternative to a full listing. Although regulation is less stringent than a full listing, companies registering through AIM must have a Stock Exchange approved adviser to monitor

Alternatively Secured Pension
Following the changes to pensions effective from 6 April 2006, an entirely new option has become available for anyone not wishing to buy an annuity even after the age of 75. An alternatively secured pensions (ASP) is similar to an unsecured pension (previ

Annual Allowance
The maximum contribution that can be paid to an individual's pension without incurring a tax liability in any tax year.

Annual Allowance
Out of ISAs (Individual Savings Accounts), PEPs (Personal Equity Plans) and TESSAs (Tax Exempt Special Savings Accounts), the only new schemes that can be commenced are ISAs. Within ISAs it is possible to invest up to £7,000 in each tax year per individu

Annual Management Charge
This is a fee paid on an ongoing annual basis by you to the managers of your investment. The amount of these charges varies from company to company and from product to product but is usually in the range of 1-2%. Annual fees are usually smaller than ini

Annual General Meeting
An annual statutory meeting of the shareholders, called by the board of directors of a company to report their activities to the shareholders.

Annual Percentage Rate
(APR) Standard measure of true interest on a loan measured over one year, reflecting the cost of paying on a monthly basis.

Administrator
In pension scheme terms the person or body responsible for the management of an occupational pension scheme. Required for all exempt approved pension schemes.

Advertising Standards Authority
Independent body set up by the advertising industry which overseas a self-regulatory code of advertising standards. All advertising must be legal, decent, honest and truthful.

Appropriate Personal Pension
A personal pension plan which is used to contract out of the State Second Pension.

Articles of Association
One of the establishing documents of a limited company, which sets out the internal operation of the company, including the powers of the directors.

A Day
The day of pension simplification – allegedly! The Finance Act 2004 sets out new legislation to simplify the taxation of all pension schemes. All pensions are now subject to a single set of taxation rules, which replace all those that existed before 6th A

ADL
Activities of Daily Living

AMI
Association of Mortgage Intermediaries

Annuity Deferral
Also called Income Drawdown or Income Withdrawal. The option to take income directly from a pension fund at retirement instead of purchasing an annuity immediately. Purchase of annuity can be deferred to age 75. Can be used for personal and occupational p

Annuity
With most modern pension schemes, when you retire, you use the money paid into your pension fund to buy an annuity. An annuity simply means an income for the rest of your life (i.e., your pension). How much you receive will depend on a number of factors

Annuity
A series of regular payments. Annuities are usually purchased by a lump sum of cash e.g. pension schemes generally discharge their promise of pension benefit by purchasing an annuity. Individuals can purchase using own capital. Wide range of options avail

Annuity Mortgage
More usually called a 'repayment mortgage', but sometimes referred to in these terms because of the make up of the payments i.e. as with some annuities, a mix of capital and interest.

Appeal
A process whereby a decision by one body may be reviewed by another, usually higher, authority.

Appellant
Someone who appeals against a decision.

Appointed Representative
Term used to describe tied agents of a product provider. Although tied to selling the products of one company, they retain their own business identity e.g. state agents and building societies.

Apportionment
When you buy a property you'll want to make sure you only pay electricity, gas, council tax etc for the period in which you own the property. So these expenses need to be apportioned or shared between the buyer and seller of a property. In that way each

Approval Categories
Pension schemes approved by the Inland Revenue fall within one of three categories: automatic, discretionary or exempt approval.

Approved Share Schemes
Revenue approved share incentive schemes offering certain tax advantages to the participants.

Arbitrage
Dealing in two or more markets (e.g. currencies, commodities) at the same time to benefit from rate differentials in situations where prices and returns are fixed.

Arbitration
Settlement of a dispute by independent third parties, rather than by a court.

ARP
Accrued Rights Premium

Arrears
This is when mortgage payments have not been paid on time and/or are not made at the correct level. Borrowers with a history of mortgage arrears will find it harder to commence a further mortgage with their current lender or a new lender in the future. Ho

Assessment of Risk
Risk in the context of financial planning relates to the possibility of losing money. For example, assessment of risk can be generalised for initial discussions with a client but must be personalised for final decisions to take account of the client's sub

Asset
Property which has value e.g. plant, machinery, shares, invoices.

Asset Allocation
The practice of spreading money across a portfolio of different investments, including equities, bonds and cash deposits, and/or different world markets.

Asset Backed Investments
Investments based on tangible, working capital/assets that have the potential for growth e.g. investment in the shares of an industrial or commercial concern, rather than investment in deposits.

Asset Conversion
An Estate Planning device to change assets which do not attract tax relief into assets which do attract relief.

Asset Freezing
An Estate Planning activity to ensure that any growth in an asset is outside the estate e.g. an interest free loan payable on demand, deposited by the borrower will produce growth in the borrower's hands, rather than the estate of the lender.

Asset Reduction
An Estate Planning device to reduce the value of a taxable estate by making use of suitable gifting arrangements.

Asset Stripper
Someone who purchases a business with a view to selling its assets, individually, at a profit.

Assignee
Someone to whom control over property is assigned.

Assignment
The transfer of a right (e.g. to claim on a policy) from one person (assignor) to another (assignee).

Assignor
Someone who assigns property.

Associated Company
A company where another company owns between 20% and 50% of the ordinary (voting) shares.

Associated Operations
Actions that are deliberately linked, one to another, to produce, by a series of steps, a beneficial long-term result. When used in relation to tax planning, such operations no longer escape the tax evasion net.

Association of Unit Trusts and Investment Funds
The trade association of unit trust managements. Most managements are members. The Association has the aim of promoting unit trust sales, so is not impartial.

Assurance
Often interchangeable with insurance and usually used in conjunction with life assurance.

Assured Tenancy
A tenancy which provides the tenant with some security of tenure for an agreed period.

At Best
A buy or sell order which means that it should be executed immediately at the best obtainable price.

At or Better
An instruction to trade at a given level or better.

Attestation
The signature of a witness to the signing of a will.

Audit
Close examination of something e.g. the trading books, papers and accounts of a company, or the relationship between plans and desired outcomes.

Audited Accounts
Company accounts which have been checked and examined to determine how the figures have been achieved.

Auditor
Someone who performs an audit. Generally used in connection with accountants employed by companies to prepare their accounts and to give a statutory report which is included in the annual accounts.

Augmentation
An increase. For example, provision of additional employee benefits for particular individuals where the cost, usually, is born by the employer.

Authorisation
In the context of financial advice, the process of qualifying to be able to sell and advise on investment products.

Authorised Business
A business authorised by the FSA to conduct financial services business.

Authorised Capital
The total of the shares a limited company is permitted to issue to raise capital. The permitted limit will be stated in the Memorandum of Association, along with the number of shares and their nominal value.

Authorised Investment
Investments in which a trustee may invest trust assets.

Authorised Unit Trust
A unit trust which complies with rules governing this type of investment. Authorised by the

Automatic Accrual
A type of business agreement where the shares or business share of an individual passes automatically to the remaining shareholders or partners.

Automatic Approval
The Inland Revenue must approve occupational pension schemes which meet the requirements of s.590 of the Income and Corporation Taxes Act 1988 (ICTA 88). This section imposes strict benefit requirements relating to pension entitlement and retirement cash.

AVC
Additional Voluntary Contribution

Average Clause
Where a person underinsures property, this clause in the policy allows the insurance company to pay only a proportion of the insured amount, the policyholder bearing the balance of the claim.

Average Earnings Index
A government produced index of the measure of increase in average earnings in all industries. It includes basic pay and all related fluctuating payments e.g. bonuses, commissions.

ABI
Association of British Insurers

ACA
Association of Consulting Actuaries

ACAS
Advisory Conciliation and Arbitration Service

ACORN
A Classification Of Residential Neighbourhoods. A market research method for targeting and selecting buying indicators of particular neighbourhoods.

Administration Fee
Sometimes also know as an arrangement fee or booking fee. Some mortgage lenders charge this fee to cover their initial costs and is not refundable if the mortgage application does not proceed. Often the administration fee will form part of the valuation

AFS
Association of Friendly Societies

Age Allowance
Personal tax allowance for those aged 65 or over. It increases up to age 75, but reduces if income exceeds a certain level.

Agricultural Property Relief
Applies to lifetime transfers of agricultural land. When certain conditions are met, the value of the transferred property is reduced by certain factors, depending on the type of property, for IHT calculation. Agricultural property does not qualify for re

Acid test ratio
Reveals the capability of a business to repay current obligations immediately, and is calculated as: Cash and marketable securities and debtors divided by current liabilities

AITC
Association of Investment Trust Companies

Alimony
See Maintenance.

Amortize
To write off a debt over a period of time by putting aside regular fixed amounts. Or, to depreciate or write down the value of an asset over two or more accounting periods.

Arrangement Fee
Usually refers to the fee charged by lenders or their agents for arranging loans.

Average
The mid-point of a set of data.