A professional who maintains accounts for businesses and individuals. Businesses use accountants for services such as maintaining financial records, tax affairs and payroll services. Individuals sometimes use accountants for tax returns.
Additional Voluntary Contributions (AVCs)
When you top-up an occupational pension, by making extra contributions into a scheme that’s run by your employer, you make an ‘additional voluntary contribution’.
Advice Fees are one of the ways you can pay your adviser for their advice and services. They’re usually fixed and agreed before the financial or legal advice and service is provided.
A professional, who is qualified to give you advice. Among others, this could be an independent financial adviser (IFA), a whole-of-market mortgage adviser, a solicitor or an accountant.
Legal representation in a hearing, usually carried out by a barrister or solicitor on your behalf.
This is the maximum amount of money you can put into your pension funds in a given tax year, and still claim tax relief.
A statement from your financial services product provider sent to you once a year, showing how much you’ve paid, what your plan is worth (and if it’s in relation to a loan, what you still owe).
It’s a payment that’s usually paid monthly, which you’ll receive as a guaranteed regular income during your retirement. This is one of several options when you retire.
Approval in principle
This is the certificate that some lenders issue to show how much they’d be prepared to lend you. It’s not a guarantee, but it can be helpful when you’re looking at property to purchase.
Asset allocation is the process of putting your investment into a range of different investments such as equities, gilts, property and bonds. By diversifying the assets into which you invest, you can protect against any reduction in value of any one or more asset class. Asset allocation depends on your investment plans and attitude to risk.
An authorised firm is one that has permission from the Financial Conduct Authority (FCA) to carry out regulated activities.
If you can’t pay your debts, you can declare yourself bankrupt – but you will lose control of your assets and income for a set period of time. The period of time is known as ‘bankruptcy’.
Basic rate taxpayers
You are a basic rate taxpayer if you are earning below the higher tax rate threshold and are paying 20% income tax for the tax year.
Basic state pension
This is the pension you receive from the government as a result of paying National Insurance (NI)contributions throughout your working life.
A beneficiary is a person named in a will or under a trust as entitled to receive a bequest or benefit.
A bond is a type of security held on a debt or a single premium life assurance investment bond. Bonds are sold to investors by companies.
These policies pay the cost of repairing or rebuilding your home if it’s damaged by unforeseen events. A mortgage lender will usually ask to see proof of adequate insurance to cover the re-building of the property and will inform you of how much cover you need.
If the value of assets that you own increase in value, then you may need to pay Capital Gains Tax (CGT). For example, selling shares for more than you paid for them could involve paying some CGT. You get an annual allowance for capital gains and only pay CGT on any gain over this amount.
The appreciation in the value of an asset over a period of time. It is calculated by comparing the current value, sometimes known as market value of an asset or investment, to the amount paid when you originally bought it.
Forerunner to Flexible Access Drawdown which provides the means to take retirement benefits on a flexible basis by drawing income from the retirement fund as alternative to buying an Annuity. Benefits are limited by Government Actuary Department’s (GAD) limits and these limits cannot be exceeded in any tax year.
This is a division of the High Court that deals in the administration of wills, probate and the
execution of trusts.
Child Trust Fund
The Child Trust Fund (CTF) is a long-term savings and investment account for children. In December 2010, the Government decided to stop opening CTFs, but those which had already been set up by then are designed to make sure that your children have savings up until the age of 18.
This is the use (or threat) of court proceedings by one business against another in relation to a dispute.
Commercial property law
This is the law that governs any premises occupied for business use.
This is the payment that’s made to a financial adviser for services that he or she provides, based on a percentage of the value of the investment or premiums paid. It’s paid to the adviser by the product provider. If your adviser takes a commission, you may not need to pay any fees.
An area of law built upon principles taken from previous cases rather than created by statutes enacted by Parliament.
A contract is a written or spoken agreement between two parties. For a contract to be in force there needs to be an offer, an acceptance, and a means of consideration (which means that something of value, either an object, a service or money, passes between the parties, and each party gives and receives consideration). Each party expects to carry out certain acts in return for the other party carrying out other acts.
When you opt to leave the State Second Pension (S2P) or State Earnings Related Pension Scheme (SERPS), this is known as contracting out. You’ll receive a rebate on your National Insurance contributions, which can be invested in a pension fund.
This is the process of transferring legal ownership of property from one person to another.
A conveyancing solicitor is the one will help you to buy or sell a property and give advice during the conveyancing process.
These are Bonds that are issued by companies when they need to borrow money. As an investment, they often offer higher rates of return than banks and building societies but with a varying amount of risk depending on the financial security of the company issuing the bond.
The Consumer Price Index (CPI) is a measure of inflation used by the British Government for its UK inflation target. It measures changes in a ‘basket’ of goods and services purchased by households.
The process of evaluating an applicant’s loan request or a corporation’s debt issue in order to determine the likelihood that the borrower will live up to his/her obligations. also called credit analysis.
This is the system used by banks and other loan companies to judge whether you’re creditworthy when you apply to borrow money.
If you’ve borrowed money, then you are ‘in debt’, typically owing interest as well as the money initially borrowed.
This is the area of law that governs the process of recovering debts from individuals.
In this type of pension scheme, members receive a set pension income on retirement – based on their final salary, how many years they’ve been working for the company. It’s also known as a final salary scheme.
In this type of pension scheme, the amount of money you will have in your retirement fund depends on the amount of money you put in, where the money was invested and how much it grows. It’s also known as a money purchase scheme.
Defined investment stratergies
These portfolios will always remain at a fixed risk/reward level, as selected by you and based upon your requirements. You can change portfolios at any time and at no cost.
hese are payments that are made on a regular basis from your bank account on an agreed date. You arrange this with the company you’re paying, by giving them your bank details. For example, phone bills and utility bills are often paid by Direct Debit.
These are expenses that are incurred by the solicitor or other professional adviser on your behalf. They can include things like search fees in home purchases, medical reports in personal injury cases, any court or professional fees, or even their travelling expenses.
This is the process of spreading – or ‘diversifying’ – your investments over a range of assets, so that you reduce your exposure to risk. By diversifying your investment, if one type of investment falls in value, then the remaining ones may not fall at the same rate, or at all.
These are payments that are made to shareholders by a company from any profits that the business has made.
Enables people with a certain type of pension to draw an income and/or cash lump sums from their pension fund rather than buying an annuity and to take income direct from their pension fund.
This is the area of law that governs the relationships between employers and employees. It includes things like harassment and unfair dismissal.
Employment law solicitors
An employment law solicitor can give an opinion on an employee’s position, prepare an application for an employment tribunal and represent the employee in the tribunal. Companies may also use employment law solicitors to advise them on employment and staff issues and to represent the employer side in tribunals.
This is a term that’s used to describe a company’s issued stocks and shares. If you own shares in a company you own some of the company’s equity. It can also be used to describe the amount, or value, of your home that you own. If you ‘have equity’ in a property, it means that you own a portion of it above the value of any debts secured on that property, such as a mortgage.
For inheritance tax (IHT) purposes, an individual’s estate is calculated as being his or her total assets less any liabilities at the time of their death. Proper estate planning could save your family hundreds of thousands of pounds, because IHT (sometimes called ‘death duty’) will be charged on what you leave behind, over the IHT threshold at time of death. Currently, IHT is due at 40% of the value of all the assets you leave behind on death above the IHT threshold.
Ethical investments are opportunities offered by businesses or funds that aim to avoid companies involved in some kinds of activities, but instead favour those involved in other activities. For example, companies trading in armaments, cigarettes, animal research or alcohol are unlikely to be considered ‘ethical’ – but a company that is highly committed to recycling or human rights issues, may be considered to have an ethical bias. Ethical investments can also be known as ‘green investments’ or ‘socially responsible investments’.
European Union law
This is the body of law that’s enacted by the European Union.
An executor is a person, named in a will, who is charged with administering the deceased person’s estate and distributing the assets to beneficiaries.
This is the area of law governing family relations, including matters concerning children, marriage, divorce and domestic violence.
Family law (divorce) solicitors
A family law solicitor tries to help you protect your rights on divorce and make sure you get the correct entitlement from a final divorce settlement. They’re sometimes known simply as ‘divorce solicitors’.
The Financial Conduct Authority (the FCA) is the UK’s financial services regulator.
Fees are one of the ways you can pay your adviser for their advice and services. They’re usually fixed and agreed before the financial or legal advice and service is provided.
Final salary schemes
A final salary pension scheme is another description of a defined benefit scheme.
Financial and investment services
These are the services, often offered by solicitors and independent financial advisers, relating to investment of a client’s assets, such as following a divorce settlement or a grant of probate.
Financial Ombudsman Service
The Financial Ombudsman Service has been set up by law to help settle individual disputes between consumers and financial firms. It gives consumers a free, independent service to help resolve disputes, but you usually must have first taken your complaint to the financial firm yourself before the Ombudsman can step in.
Fixed interest security
This is another name for a ‘bond’. The amount of interest you receive, when you invest in a fixed interest security, is stated at the time of purchase. These are usually regarded as a lower risk investment than stocks or shares.
An interest rate that’s fixed is one that doesn’t move up or down for a set period of time.
Flexible Access Drawdown (FAD)
Replaced Capped Drawdown as the main alternative to taking an Annuity at retirement. Allows the policyholder to take a proportion of benefits tax free and arrange flexible income payments which are taken from the fund. Once set up, access is not restricted but care needs to be taken with personal tax planning and there is therefore a risk that the policyholder could run out of money before they die.
The diffence between this and standard ISA is that You can take money out of a cash ISA at any point, and return it in the same tax year (by 5 April), without it reducing your current year’s allowance.
This is a term that’s used to describe various dishonest acts included in the Theft Acts of 1968 and 1978.
This is a legal framework that sets guidelines for the collection and processing of personal information of individuals within the European Union (EU). The GDPR sets out the principles for data management and the rights of the individual, while also imposing fines that can be revenue-based.
General Investment Account
A General Investment Account (or GIA) is a financial product that allows you to hold investments outside of tax wrappers such as pensions or ISAs. They do not offer tax relief, but have few limitations.
A GIA isn’t as tax efficient as an ISA or Pension but it has no annual or lifetime allowances on contributions and can be a great way to grow your money. You can withdraw your money from a GIA at any time. These are subject to Income Tax on any ‘income’ generated by the portfolio, even if reinvested, and Capital Gains Tax (CGT) on any realised profits.
These may also be called gilt-edged or Treasury bonds. They’re bonds that are issued by the UK government. They’re regarded as being very low-risk, secure investments because it’s the government that promises to pay you back.
This is another name for ‘ethical investments’, or ‘socially responsible investments’.
Group Personal Pension
If you work for a company, you may have a Group Personal Pension. It’s the name given to a group of personal pension plans offered by employers to employees.
Carried out by financial instituitions to verify the identity of members/clients. This is deemed as important by the government to fight financial crime of all kinds.
Income protectionThis is an insurance policy that pays you a monthly income if you’re unable to work due to illness or injury, until you are able to return to work, or you retire, whichever is the sooner.
Income taxThis is the tax paid on your income. Generally, all income is taxable. The exceptions are for income falling within personal allowances and income that’s generated from certain tax-efficient investments such as ISAs.
Independent financial adviser
Independent financial advisers (IFAs) are professionals who give financial advice about products and services across the whole market. They act on your behalf, and may charge a fee or be paid by commission.
Index Linked Gilts
These may also be called gilt-edged or Treasury bonds. These are bonds that are issued by the UK government and are linked to inflation.
These seek to replicate the holdings and performance of a designated market index. These follow a passive investment strategy and are designed to offer investors exposure to an entire index at a low cost.
Individual Savings Account (ISA)
There are two types of Individual Savings Account (ISA): Cash ISAs, and Stocks and Shares ISAs. Each tax year, you can put money into both types up to the annual limits. ISAs aren’t an investment in their own right, they’re a tax-free ‘wrapper’ in which you can shelter investments.
Inheritance tax (IHT)
Inheritance tax (IHT) is charged on an estate after a person’s death. It’s currently charged at 40% on amounts above the IHT threshold, which can change every year. A person’s estate includes the total of everything owned, less any liabilities at the time of their death. If this amount is less than the threshold, no IHT is payable.
An injunction is an order of the court that requires an individual or organisation to do or not do a specified act. For example, when a newspaper is ‘given an injunction’, they may be told not to publish a specific article or picture.
Insolvency is usually defined as a financial state in which a company can no longer pay its bills or other obligations on time. It happens when liabilities – or debts – are greater than assets and cash flow.
Intellectual propertyAnything that’s created by the intellect – with a commercial value, such as music, literary or artistic works or even computer code – is intellectual property.
When you give your money to a bank, to look after, you may receive an amount of money on top in return. That percentage is known as interest. You also have to pay interest on loans or mortgages when you borrow money.
Junior individual savings accounts (JISA) offer a choice of thousands of funds that can be held tax efficiently. Parents of children under 16 that do not have a Child Trust Fund can open a JISA in the child’s name.
All financial advisers must provide customers with at least two ‘Key facts’ documents: one explaining their status (whether they are tied, multi-tied or independent) and one explaining the services they offer and a menu of their charges. This helps you understand the value and cost of the adviser’s advice and service. Comparing these documents is a good way to shop around.
Key features document / Key Facts Documents
A ‘Key features’ or ‘Key Facts’ document is one that all firms authorised and regulated by the FCA must give you to explain their services, or products, and details about anything that you’re interested in buying.
This is the area of law that governs the relationship between both landlords and tenants of residential and business properties.
Landlord and tenant law (property) solicitors
These solicitors are experts in landlord and tenant law. They can help individuals to draft tenancy agreements, explain obligations to tenants and help with eviction proceedings if this becomes necessary.
This is the maximum amount of money that you can accumulate as pension savings throughout your lifetime and still benefit from tax relief. If the amount you save exceeds the lifetime allowance, then you will have to pay tax on these savings.
A lifetime annuity will give you a regular income for the rest of your life. You buy an annuity with the cash sum that’s built up in your pension fund, so that you can have a regular income during retirement. There are different types of annuities to suit your needs and circumstances.
Litigation is the use or threat of court proceedings.
A bank loan is a set amount of money that a company agrees to lend you for a set period of time. Payments and interest rates are agreed at the time of the loan.
Mediation is the process that parties enter into in an attempt to resolve a dispute without court proceedings. It’s usually undertaken in the presence of a ‘mediator’ – someone with a neutral opinion who can voice the issues of both parties.
Mental health law
This is the area of law that governs the treatment and classification of mental patients under the Mental Health Act 1983.
The government has introduced tough money laundering laws in a bid to combat international crime and terrorism. This means that solicitors and other professionals need to check that you are who you say you are when you first instruct them. They may also ask for proof of identity if you have not instructed them for some time. Usually, identity is provided with a form of photographic document –such as your passport.
Money purchase pension
Occupational pensions, personal, group personal, stakeholder, Free Standing Additional Voluntary Contributions (FSAVCs) and Additional Voluntary Contributions (AVCs) can be called money purchase pensions. You can choose where your contributions are invested. The size of your fund depends on your contributions, over what period you invest them, and how well your investments grow.
Multi-tied financial advisers
A multi-tied financial adviser can offer you a choice of products from a limited range of financial companies.
National Insurance (NI) contributions are an amount of money that’s paid to the Government a percentage of your income if you are aged over 16 but under the pension age (currently 60 for women, 65 for men) and you earn more than the minimum threshold. They go towards providing for state pensions, as well as other state-provided benefits. If you are an employee, NI is deducted from your pay before it is paid to you.
A non-advised sale is where a firm provides information only to a potential customer leaving them to make a choice about how they wish to proceed and with no recommendation made.
If you don’t pay tax because your income is below the personal allowance threshold, then you can choose to receive gross interest (interest without tax deducted). Remember, the interest from investments could take you over the threshold. You can also reclaim any overpaid tax provided you make your claim within set time limits, usually around six years. If you want to receive your interest
gross, you should complete Tax Form R85, which you can pick up from your bank, building society or savings provider, or find at www.hmrc.gov.uk/taxback/forms.htm
UK Occupational Pensions. Occupational pension schemes (also called Company Pension schemes) are when the employer organises a pension scheme for its employees. It can either be set up as a trust and run by trustees or entrusted to a life insurance company.
These are investments that are held for a long time with the aim to maximize your return over the long term while minimizing your buying and selling activities tracking a market-weighted index or portfolio.
The Government announced pension freedom in the 2014 Budget to start in the 2015/16 tax year. It means anyone aged 55 and over can take the whole amount as a lump sum, paying no tax on the first 25% and the rest taxed as if it were a salary at their income tax rate.
Moving funds from one personal pension scheme to another where neither are occupational schemes and there are no protected benefits.
A pension transfer from a defined benefit (salary-related) pension scheme means giving up your scheme benefits in return for a cash value which is invested in another pension scheme.
An area of law governing the payment and the protection of pensions.
A personal allowance is the amount of income that you can earn each year before you start paying tax.
Personal pensionThis is a pension policy that’s taken out through a pension company, into which you pay contributions and will at retirement provide some or all of your pension income. These are invested in funds, which you can choose according to your attitude to risk and plans for the future. A personal pension is set up on a money purchase (defined contribution) basis.
An investment portfolio is a collection of assets owned by an individual or by an institution. Most investment portfolios, particularly portfolios that are assembled to pay for a retirement, are made up mainly of securities, such as stocks, bonds, mutual funds, money market funds and exchange traded funds.
This is the name given to the regular amount you must pay for an insurance policy. It is also the name sometimes given to pension contributions.
Probate is the process of obtaining legal authority to deal with the affairs of someone who has died and getting the will certified so that the executors can carry out the wishes and instructions contained within it in order to wind up the estate.
This area of law covers claims against any professional whose work has not met the standards that can reasonably be expected. Medical professionals, surveyors, architects, accountants, solicitors, financial advisers, builders, plumbers – these kinds of profession run the risk of professional negligence.
Property is a type of asset. Property assets can be residential – such as your house – or commercial, such as offices and shops.
Protected rights pension
This is the part of your pension fund that has been built up due to redirection of national insurance contributions.
Qualifying years are those tax years in which you’ve paid a certain amount of National Insurance contributions. A minimum number of qualifying years must be built up during your working life to qualify for the full basic state pension.
A measure of performance. It is the total of the increase in value and any income received over a given period, expressed as a percentage.
In investment terms, the balance of potential loss and potential gain as perceived by the investor. In insurance terms, the likelihood of a claim being made on a policy during the term.
Investment risk can be defined as the probability or likelihood of occurrence of losses relative to the expected return on any particular investment. Description: Stating simply, it is a measure of the level of uncertainty of achieving the returns as per the expectations of the investor
The Retail Prices Index (RPI) measures the change in the cost of a basket of retail goods and services.
A Self Invested Personal Pension is a type of plan that allows you, or your appointed fund manager, to make choices from a wider range of investments than other personal pension schemes offer. With a SIPP you can invest in the shares of any company listed on a stock exchange.
A professional who provides legal advice and services to individuals and businesses on a wide range of issues, for example divorce, conveyancing, contract law and employment law.
This is a personal pension in its most simple form. A stakeholder pension will allow you to make a minimum investment of £20 per month and offer a range of funds in which to invest – and there must be no penalties for transferring away from the fund. Your employer may offer access to a stakeholder pension scheme.
This is a tax that’s levied on the transfer of certain kinds of assets: it’s imposed by HMRC, who need to ‘stamp’ documents to complete the purchase of such assets. Home buyers must pay stamp duty on properties with a value that’s above a set figure. Anyone buying shares also needs to pay stamp duty.
Similar to Direct Debit, a standing order is a means of authorising your bank to make a single or regular payment to an individual either on a limited time basis or an ongoing basis. A Standing Order can only be set up and varied by the customer with their bank and so it is not suitable for arranging payments with firms that may vary, such as mortgage payments or life insurance premiums that increase with inflation.
Your basic State Pension is based on your National Insurance contributions. You may also qualify for the additional State Second Pension if you are employed, based on your earnings and National Insurance contributions.
State Second Pension
The State Second Pension is an additional pension that’s paid on top of your basic State Pension. It was called SERPS until 2002. Self-employed people are not entitled to a State Second Pension.
A stockbroker is a professional who buys and sells stock (shares) on behalf of clients. Only registered stock brokers can buy or sell shares on the stock exchanges.
Stocks and Shares
Both terms mean the same thing: companies’ stocks and shares that can be bought and sold. Owning a share in a company means owning a part of that company, or owning some of that company’s stock.
These portfolios make small adjustments over the years to to ensure you always retain the optimum exposure to risk/reward in line with your current age, time to invest and end requirement (capital withdrawal or income generation) at any particular target date you set (and can amend). This can be ideal for clients who are not certain which level of risk/reward they should be taking at any point, or whom simply want us to manage this for them.
This area of law governs the payment and evasion of tax due to Her Majesty’s Revenue & Customs.
Tied financial advisers
A tied financial adviser can only offer advice on the products of one provider.
This type of law governs the creation and maintenance of trusts, such as those used to protect family assets through the generations.
Another way of taking pension benefits without going into drawdown or buying an annuity. It can be used to deplete the fund in one go, taking 25% tax free and the remaining 75% taxable (as indeed can flexi-access drawdown).
These are ‘open-ended’ investments in which the underlying value of the assets is directly calculated by the total number of units issued multiplied by the unit price less the transaction or management fee charged and any other associated costs. There are many different unit trusts available, all investing in different assets.
An unsecured pension is a way of taking an income from your pension fund up to age 75, while leaving the rest of your fund invested. It does involve incurring some risk to the value of your pension fund. There are two types of unsecured pension – a short-term annuity and income withdrawal.
These are interest rates, offered by banks and financial institutions on loans or deposits, that may change according to circumstances. For example, a movement in the interest base rate set by the Bank of England would usually be an influence.
Venture Capital Trust (VCT)
A venture capital trust is designed as a way for individual investors to gain access to venture capital investments via the capital markets. They aim to seek out potential venture capital investments in small unlisted firms to generate higher than average returns for their investors. VCTs are tax-advantaged investments in the UK currently, often relieving investors of many of the tax implications surrounding dividends and capital gains, or offering lower taxation rates.