Time to relax.

Time to relax.

Time to relax.

Time to relax.

Time to relax.

Time to relax.

Time to relax.

Time to relax.

Time to relax.

IFA Jargon Buster


Accrual Rate

The rate at which your pension benefits build up, as pensionable service is completed, in a Final Salary Scheme.


Someone qualified to consider financial issues, particularly ones involving probabilities such as life expectancy.

Additional Voluntary Contributions (AVCs)

Extra payments you can make into an individual pension plan, running alongside your company pension scheme, to boost your pension fund; the plan is independent of your employer’s main pension scheme. An alternative version is where the extra payments are used to purchase ‘additional years’ pensionable service within the company pension scheme itself.

AER (Annual Equivalent Rate)

The interest relating to current, deposit or savings accounts, expressed as an annual percentage, allowing easier comparison between financial products.


A contract you buy from an insurance company using a monetary lump sum, such as the proceeds of your pension fund, to guarantee you an annual income for life or for a period of time (e.g. five/ten years).

APR (Annual Percentage Rate)

In relation to mortgages, APR represents the total annual cost of borrowing, by taking into account all costs associated with the loan, for example, interest, legal and valuation fees. By law, all lenders must show the APR alongside their quoted interest rates to allow borrowers to compare the true cost of borrowing between lenders in the market place. For credit card or bank loans (or when you make any purchase on credit), APR is the interest rate at which you are charged over a full year on the balance you owe.

Arrangement Fees

A charge made by some providers to arrange your loan. This covers things such as administration and management fees.


BACS (Bankers Automated Clearing System)

A method of transferring funds from one bank account to another.

Base Rate

The interest rate set by the Bank of England which other banks use to set their rates. When the ‘base rate’ changes, lenders usually follow by adjusting their Standard Variable Rate.

Basic State Pension

The flat rate pension paid by the Government to an individual when they reach ‘state pension’ age: this is currently 65 for men and is rising to 65 for women by November 2018. To be eligible, you need to have paid sufficient National Insurance contributions during your working life.

Benefit Crystallisation Event (BCE)

These are points at which benefits are paid out to you from a pension plan in the UK. An individual can have several during their lives and they often take place pre-retirement; HMRC has identified twelve different events. These include: the need to take a lump sum in the event of ill health; purchasing a lifetime annuity; and, the paying of death benefits. BCEs ensure the lifetime allowance is applied to all an individual’s benefits.

Bid Price

This is the price at which you sell units in a unit trust back to the investment manager.

Bid-Offer Spread

This is the difference between the price at which you buy units from / sell back units to an investment manager operating a unit trust.


A form of investment offered by an institution, such as a building society, insurance/investment company or the Government. Its purpose is to raise capital; the sum borrowed is then repaid with interest at maturity. Bonds can be bought and sold on the stock market. N.B. Not to be confused with an ‘Insurance Bond’.


An extra payment that may be added to the funds accumulated in a ‘With Profits’ pension, endowment or investment policy. The ‘bonus’ amount added depends on the profits made by the respective insurance/investment company in any one year, or over a period of years. The most common are described as either ‘reversionary’ (annual bonus) or ‘terminal’ (final bonus).

Buildings and Contents Insurance

This is combined insurance covering both a building and its contents. This may be cheaper than having one policy for the buildings insurance and a separate policy for the contents.

Buildings Reinstatement Cover

This insurance covers the cost of rebuilding or repairing the structure of a property. Lenders insist on you having adequate buildings insurance before they will give you a mortgage. With leasehold properties, it is normally the freeholder’s responsibility to arrange buildings insurance.

Buy to Let Mortgage

A mortgage for individuals who buy property with the intention of then letting it out. The Financial Conduct Authority does not regulate some forms of ‘buy to let’ mortgage arrangements.



A lump sum of money.

Capital Gains Tax (CGT)

A tax payable on profits made on the sale of assets (such as investments) or property, other than your home.

Capital Growth

An increase in the value of shares or other assets in a fund.

Capital Repayment Mortgage

A mortgage in which monthly repayments consist of instalments of ‘capital’ (the amount of money you have borrowed), as well as interest.

Capped Rate Mortgage

A mortgage where the interest rate charged by the lender never rises above a specified rate – the ‘capped rate’. If the variable rate drops below the capped rate, you pay the variable rate instead.

Carry Back

A facility for members of personal pension schemes to have their annual contribution, or part of it, treated as being paid in the previous tax year.

CHAPS (Clearing House Automated Payment System)

A ‘same day’ payment transfer of funds from one bank account to another.


One method by which independent financial advisers or insurance brokers are paid by an insurance company for placing business with them.


The point at which the legal formalities of a property purchase or mortgage are finalised and the funds released by the lender.

Consequential Loss

Insurance of loss following direct damage, e.g. loss of profits, loss of use insurance or business interruption.

Contents Insurance

Insurance taken out to cover your possessions. This may include cover against loss or damage away from the home.

Contracting In/Out

The process by which an individual can elect to stay in or opt-out of the State Second Pension (S2P), formerly known as the State Earnings Related Pension Scheme (SERPS).

Corporate Bond

A form of investment offered by a company in order to raise capital, where the lump sum is repaid with interest at maturity. These bonds can be bought and sold on the stock market.

Corporation Tax

A tax applying to limited liability companies, charged on the company’s profits.

Credit Check

An enquiry made on the credit history of an applicant, normally by reference to one of the major credit agencies.

Critical Illness Insurance

Pays a lump sum of money to an individual if they are found to suffer from one of a range of designated illnesses (normally including cancer, heart attack or strokes). When an illness requires you to stop working for some time, having this insurance means financial worries are eased: normal practice is to have sufficient insurance to cover your mortgage and provide an income for a year or two.


Death After Retirement Benefits

The pension and lump sum paid to a deceased member’s spouse and/or other nominated dependants when death occurs after retirement.

Death in Service Benefits

The pension and/or lump sum paid to a deceased member’s spouse and/or other nominated dependants where death occurs while still working for an employer and before a specified retirement age.


This occurs when income is taken from an individual’s pension fund.

Defined Benefit Scheme

Also known as a Final Salary Scheme. This is the traditional form of company (or occupational) pension, where your pension is calculated as a proportion of your salary during your last few years of work. The amount you receive also depends on how many years you have been a member of your company scheme.

Defined Contribution Scheme

Also known as a Money Purchase Scheme. A pension scheme where a member’s retirement benefit level depends on the amount of contributions paid into the scheme by or for the member. The rate of contributions is decided by the policyholder or their employer.

Discounted Rate Mortgage

A mortgage where the interest rate is set below the lenders standard rate for a fixed introductory period. These are usually offered by mortgage lenders to attract new customers.


Payments made to investors of the income generated by an investment fund.


A distribution to shareholders of a portion of a limited company’s profits. The amount of dividend per share is decided by the company’s board of directors and distributed in proportion to the number of shares held by each shareholder.


Early Repayment Charge

If you borrow money and pay it back before it’s due, the lender will make less money on the deal than expected. To compensate, the lender may ask for an additional payment to cover administration costs to repay (or ‘redeem’) the loan early. The redemption period varies according to the terms of your mortgage or other loan.

Earnings Per Share

The total amount of a company’s earnings divided by the number of ordinary shares it has issued. This is used as an indicator of the return on equity investments.

Employers Liability Insurance

An insurance policy for employers designed to protect against their potential liability to employees for injury or disease arising out of and in the course of their employment. With some exemptions, this insurance is compulsory in Great Britain and the Isle of Man and can only be provided by an authorised insurer.

Endowment Policy

A life insurance and savings policy which pays a specified amount of money at the end of an agreed term or on the death of the life assured. These are often linked to a mortgage.

Enhanced Annuity

An annuity aimed at people suffering from medical conditions that may reduce their life expectancy. They often pay a higher income to individuals than a ‘standard’ annuity as a result of this perceived decreased life expectancy.


The ordinary shares of a company.


In relation to mortgages, this is the difference between the value of your property and the amount you borrowed. For example, if the value of your house is £80,000 and you have a £60,000 mortgage, your ‘equity’ is £20,000.

Equity Release

This occurs where you ‘release’ some of the value of your house as a cash lump sum while continuing to live there.


The total value of all your assets less any debts you may have.

Ethical Funds

These investment funds hold shares in certain companies that, for instance, promote the improvement of the environment, good working practices or green energy solutions. They tend to avoid markets such as alcohol, firearms, pornography and the tobacco industry.


The first portion of a loss or claim which must be paid by the insured. An excess can be voluntary to obtain a reduced premium or imposed for underwriting reasons. This is sometimes referred to as ‘deductible’.


This generally refers to an insurance policy and is something that is not covered. For example, specific types of cancer may not be covered by a critical illness policy, or gates and fences may not be covered by storm damage under a household insurance policy.

Exit Fee

This is the charge for selling an investment or exiting a financial arrangement before the agreed end date.

Expression of Wish

This is a signed document by which the member can indicate a preference as to who should receive any lump sum death benefit. The choice is not binding on trustees or administrators and, as a result, Inheritance Tax is not normally payable. This is also referred to as a nomination form.


Final Salary Pension Scheme

Also known as ‘Defined Benefit’ Pension Scheme. This is the traditional form of company or ‘occupational’ pension where your income on retirement is calculated as a proportion of your salary during your last few years of work and dependant on how many years you have been a member of the scheme.

Fixed Rate Mortgage

A mortgage arrangement where the interest rate is fixed for an agreed period, usually for between two and ten years, and is unaffected by changes in the lender’s variable rate. This means that, during the specified period, you will know exactly how much your monthly repayments will be. At the end of this period, interest on the mortgage will be charged at the lender’s variable rate. Early repayment charges may apply on this type of arrangement.

Flexible Mortgage

A mortgage arrangement where you can vary the amount you pay each month and take breaks from your monthly payments.

Flexible Pension Plan

A pension product which allows you to vary the amount you pay each month and take breaks from your monthly payments.

FTSE 100 or ‘Footsie’

The popular name for the Financial Times Stock Exchange 100, the main UK share index. This represents the share prices of the top 100 public listed companies by value.


A general term for an investment vehicle which pools the money of investors and invests according to a defined set of investment objectives.

Fund Manager

An investment professional who takes decisions on what to buy and sell on behalf of a fund’s investors on a day-to-day basis.


A contract to buy or sell a fixed amount of currency, shares or commodities on a fixed date in the future at a fixed price.


Gilt or Gilt Edged Security

A fixed interest bond or security issued by the UK Government.

Group Personal Pension Scheme

An arrangement set up by an employer for employees to participate in a personal pension scheme on a group basis.

Green Funds

See Ethical Funds.

Guaranteed Equity Bond

An investment where you are normally (but not always) guaranteed to receive back your original capital investment, plus a return. These arrangements usually run for a fixed term of between 3-5 years.

Guaranteed Income Bond

Similar to a Guaranteed Equity Bond (see above). This type of plan pays a regular income to an investor and they will normally receive their original capital investment back on maturity



A strategy designed to offset the risk of an investment.


Income Drawdown

A facility by which you can draw an income from your pension fund while keeping the fund itself fully invested. There is no longer a requirement to purchase a pension annuity.

Income Protection Cover

An insurance policy which pays a tax-free income to the policyholder should they suffer an accident, illness or disability that prevents them from continuing their everyday work. The amount received is related to salary. Also referred to as Permanent Health Insurance.

Income Tax

A tax payable by individuals on the income they have received (such as from wages or interest on savings) above a minimum level set by the Government.


An increase in contributions, or an additional one-off contribution, to an existing policy.

Indemnity Period

The period of time during which benefits are payable under an insurance policy. Commonly used with reference to business interruption policies, this is the period during which cover is provided for disruption to the business following the occurrence of an insured peril.


A means of measuring movement in a set of statistics over a period of time, used as a benchmark of performance by investment managers.


Payments protected against the effects of inflation by increasing in line with changes in the index of retail prices (RPI).


The amount, expressed as a percentage, by which the price of goods and services rises year on year.

Inheritance Tax (IHT)

The tax payable by your estate on the value of your assets after you die in excess of a certain threshold. Certain gifts between husband and wife are exempt. It is important to note that IHT can be levied in certain circumstances while you are still alive.

Initial Charge

A charge levied by an investment manager to cover administration and sales commission when you invest in a fund.

Insurance Bond

This term usually refers to a single premium life insurance policy. It is an investment plan incorporating a small element of life insurance to be paid out after your death. An insurance company will take the premium and invest it for income and/or capital growth until the policyholder withdraws money from the policy. As the policyholder does not receive income directly from the policy, personal income tax can be deferred until certain events occur at which time the insurance company will then calculate any gain on the bond. Isle of Man residents should seek advice if they hold investment bonds.

Interest Only Mortgage

A mortgage in which repayments consist only of interest on the amount you have borrowed, not of the capital sum. At the end of the mortgage period, you must pay off the capital sum using a suitable repayment vehicle – such as an endowment – set up at the outset of the mortgage.

Investment Trust

A public limited company, listed on the Stock Exchange, which invests in the shares of other companies.

Individual Savings Account (ISA)

A tax efficient savings plan for UK residents which can hold a combination of cash, shares or life assurance. They were first introduced in 1999 and are now known as NISAs – or new ISAs.

ITIP (Income Tax Instalment Payments)

The system in the Isle of Man by which income tax contributions are collected from your salary by your employer before it is paid to you, and passed to the Income Tax Division. The corresponding system in the UK is known as PAYE (Pay As You Earn).


Joint Life Policies

These plans cover two (or more) individuals on a joint basis, commonly a husband and wife. Benefits can be paid out following a successful claim on the first or the second life assured, or both, dependent on the terms of the policy.


Key Facts

Also known as an illustration, this is a document clearly setting out the terms and conditions of a financial product such as a mortgage, pension, insurance policy or investment.

Key Person Insurance

This provides cover, in the short term, against the loss of profits likely to be suffered by a company following the death or critical illness of a key employee.



Life Insurance

An insurance policy which pays out a lump sum of money should the policy holder die during the term of the agreement.


A type of pension arrangement where the investment strategy changes from higher risk to a medium / low risk approach as you near retirement.

Lifetime Annuity

A pension annuity which pays a guaranteed level of income for the rest of your life.

Lifetime Mortgage

Similar to Equity Release. Under this arrangement, an individual can take out a mortgage on their home to raise a lump sum of money or income which they do not have to repay until the house is sold when they die or are taken into care.

Listed Company

A company whose shares are quoted on a recognised stock market.

Loan-to-Value Ratio (LTV)

The size of a mortgage expressed as a percentage of the value of the property. For example, a £45,000 mortgage on a house valued at £50,000 gives a LTV of 90%.


Market Capitalisation

The value of a company measured by the total stock market price of its shares, calculated by multiplying the number of shares by the current share price.

Market Value Reduction (MVR)

This term mainly concerns a ‘with profits’ policy or investment offer by mutual friendly societies where you have to pay a penalty fee if you choose to cash in a policy early. This is also known as a Market Value Adjustment (MVA).

Money Purchase Scheme

Also known as a Defined Contribution Scheme. A pension scheme where a member’s retirement benefit level depends on the amount of contributions paid into the scheme by or for the member. The rate of contributions is decided by the policyholder and/or their employer.


A loan secured against a property for the purpose of allowing you to purchase the property.

Mortgage Indemnity Guarantee (MIG) Fee

If a bank or building society agrees to lend more than its usual ‘loan-to-value’ limit on a property, they may take out insurance to cover the risk of default. Should it be necessary to repossess a property and the lender cannot recover the full amount of the original mortgage, the difference is covered by the insurance. The cost of the insurance is payable by the borrower and is covered by the MIG fee.

Mortgage Payment Protection Insurance

This insurance policy covers all or part of your monthly mortgage payment, plus an extra amount to cover mortgage related expenses, for up to 12 months should you lose your regular income as a result of an accident, sickness or unemployment.

Mutual Company

A company that does not have shareholders but is owned instead by its policyholders and/or clients.

Mutual Fund

An open-ended vehicle operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. Shares are issued and redeemed by the investment company on demand.



The index of more than 3,000 leading technology stocks in the USA.

National Insurance (NI)

Payments made based on earnings by employees, employers and self-employed individuals to the Government. Making NI contributions entitles you to a range of benefits, including the state pension.

Negative Equity

A term used if the market value of your house is less than the amount you owe on your mortgage.

National Employment Savings Trust (NEST)

A workplace pension scheme available to all employers in the UK when choosing which company pension plan they would like to use for staff.

Net Yield

The income (or profit) on an investment after deducting all relevant expenses, such as commission, taxes and the cost of purchase.

No Claims Bonus

This relates to general insurance policies (such as motor or buildings and contents cover) where you will be given a discount on your premium if you haven’t made a claim for a number of years.

Nominal Value

This usually refers to a corporate bond or gilt and is the price at which it was first issued. This is sometimes also referred to as the ‘face’ or ‘par’ value.


Occupational Pension Scheme

A legal contract set up by an employer to provide pensions and/or other benefits for one or more employees on retirement, death or leaving pensionable service.

OEIC (Open-Ended Investment Company)

A managed fund which holds a portfolio of investments into which you can buy in. Unlike a unit trust, OEICs are companies issuing shares instead of units and normally quote a single price for buying and selling shares.

Offer Price

The price at which you buy units from a unit trust investment manager.

Offshore Bond

These offer a tax efficient way to save and can be used as an alternative to, or alongside, a traditional pension plan. While tax relief is not available on contributions paid in to or proceeds taken from a bond, no further penalties are applied to the amount taken from the bond.

On Risk

The term used for when cover under an insurance policy begins. This may be before you have paid a premium.

Open Market Option (OMO)

Your right at retirement to buy an annuity from a provider other than the one which administered your pension fund.


In relation to a pension, the choice of how to take, or ‘draw’, your fund (e.g. as a lump sum and pension, or as a pension only) and from which company to buy an annuity. This can be from a different provider than the one who administered your pension fund while you were working (see Open Market Option, above). Alternatively, in relation to an investment, a contract giving the right to buy or sell commodities, currencies or shares at a fixed date in the future at a fixed price.


Paid Up Pension

A term used to describe a pension when no further contributions are expected.

PAYE (Pay As You Earn)

The system in the UK by which income tax and National Insurance contributions are collected from your salary by your employer, before it is paid to you, and passed to HMRC. The corresponding system in the Isle of Man is ITIP (Income Tax Instalment Payments).

Payment Protection Insurance

This policy pays out a certain level of monthly tax-free income should you be unable to work due to illness, an accident or being made redundant.

Pension Commencement Lump Sum (PCLS)

The amount of money you can take from your pension plan as a tax-free lump sum when you retire. Most pension plans will allow you to take up to 25% as a tax-free lump sum (30% for most Isle of Man contracts). Also referred to as Tax-Free Cash.

Pension Forecast

A service provided by the Social Security Division of the Isle of Man Government Treasury Department which tells you, free of charge, what your State Pension is worth. A similar facility for UK residents is provided by the Department of Work and Pensions.


A specific source of loss (such as fire, theft or liability) which may be covered by an insurance policy.

Personal Pension Scheme

A pension scheme for individuals or employees, or those who are self-employed, that are not members of an occupational scheme.

Permanent Health Insurance

See Income Protection Cover.

Phased Retirement

The facility to use small segments of your pension to buy annuities, or for drawdown purposes, as and when you need more income, rather than using your entire pension fund.

Policy Excess

The amount you will have to pay of any insurance claim. For example, this may be the first £50 of a £500 claim for damage caused by a storm. An excess can be voluntary to obtain a reduced premium or imposed for underwriting reasons.

Policy Schedule

This details how much cover you have (the sum insured), the discount you qualify for (if any), and the premiums you will have to pay under an insurance policy. With some policies, you may receive a new schedule at each renewal or whenever you want to change the policy.

Pooled Investments

An investment arrangement where lots of investors’ contributions are ‘pooled’ together to create a larger investment. Examples include investment trusts, unit trusts and OEICs.


The collective term for all your investments, properties, insurance, etc.

Pre-Existing Medical Condition

The term given to any health issues you have prior to starting a life insurance policy, private medical insurance or travel insurance policy. The insurer will calculate how likely it is that your condition will affect your life expectancy or general health and price your premiums accordingly. It is very important that you disclose any existing medical conditions during the policy application process otherwise it could invalidate any future claim.


The payments you make to a provider for your insurance policy, pension or investment plan. This could be a one-off payment, or on an annual or (most commonly) a monthly basis.

Price/Earnings Ratio

Calculated by dividing the market price of a company’s ordinary shares by its earnings-per-share figure. It provides an indicator of a company’s performance potential.

Private Medical Insurance (PMI)

Insurance to cover the cost of private medical treatment should you suffer one of the medical conditions specified under the policy. This can provide quicker access to treatment than health service waiting lists.

Professional Indemnity (PI) Insurance

This policy protects professionals against their legal liability towards third parties for injury, loss or damage arising from their own professional negligence or that of the employees of the insured’s company.

Proposal Form

Another name for the application form you complete to take out an insurance policy.


A term used by those working in the life insurance sector. It means the same as ‘insurance’.

Public Liability Insurance

A policy for businesses that provides cover against claims made by individuals for injuries suffered by them or for damage done to their property.

Public Limited Company (PLC)

A limited liability company in which anyone can buy shares and whose shares are available to buy and sell, usually on a stock exchange. A ‘PLC’ is owned by its shareholders.


Qualified Recognised Overseas Pension Scheme (QROPS)



Most UK funds and investment trusts are grouped into sectors for comparison purposes. Each sector is divided into four quarters or ‘quartiles’; the best performing funds or trusts are in the top quartile, the worst performing funds or trusts are in the bottom quartile.

Quoted Company

A company that is listed on the stock exchange.


Rebuilding Cost

This is the recommended amount of cover (from your property valuation) that you should take out under a buildings insurance policy. This may be higher or lower than the market value of your property.

Recognised Overseas Pension Scheme (ROPS)

A non-UK pension scheme that can receive transfers of UK Pension Benefits without incurring an unauthorised payment and scheme sanction charge. This system was launched in 2006 as a direct result of EU human rights legislation with regards to freedom of capital movement. These were referred to as Qualifying Recognised Overseas Pension Scheme (QROPS) until April 2015.

Redemption Date

The maturity date of a corporate bond or government security: it is when the loan amount becomes repayable to the investor along with any other agreed payments.

Redemption Value

The amount you receive back when a corporate bond or gilt matures and the loan is repaid.

Reducing Term Insurance

This is a life cover policy where the amount of cover decreases / reduces over the term. It is usually linked to a Repayment Mortgage (see below). Also known as Decreasing Term Life Insurance or Mortgage Protection.


The process of switching your mortgage from one lender to another without moving house.

Renewable Term Insurance

A life cover policy where you have the option to renew its terms without having to take a medical as it is renewed based on your health when you first took out the policy.

Repayment Mortgage

Your monthly repayments consist of instalments of capital (the amount of money you have borrowed) as well as the interest due on the amount you borrowed. Also known as a capital and interest mortgage.

Replacement Value

This is the cost of buying the same or similar items as new, if you have to replace them in the event of an insurance claim.

Retail Prices Index (RPI)

A measurement of inflation calculated based upon the average monthly price of consumer goods, services and house prices.

Reversionary Bonus

This is the annual bonus paid to you if invested in a ‘with profits’ fund.

Rights Issue

New shares sold by a company to raise capital.


Refers to the fact that the value of your savings and investments can fall as well as rise. Some savings and investments (for example, direct investment in equities) carry greater risk than others (such as a bank or building society deposit account). It is also used by insurers with reference to their covering individuals or businesses.

Risk Management

The identification, measurement and economic control of risks that threaten the assets and earnings of an individual, business or other enterprise.


Scrip Issue

The issue of new share certificates to existing shareholders to reflect an accumulation of profits on a company’s balance sheet.


The general name for stocks and shares.


If you own ‘shares’ in a company, you are a part owner of it, entitled to vote at annual general meetings and benefit from the company’s profits. The latter are distributed in the form of a dividend payment.

Single Life Annuity

These provide income to one person only from an initial capital investment, e.g. a pension pot. Income is not paid out to anyone else after that person’s death.

Self-Invested Personal Pension (SIPP)

This is an alternative type of pension arrangement that gives you much greater control over how your money is invested and also allows you, unlike with an annuity, to pass on the remaining fund to nominated beneficiaries or your estate should you die in retirement.

Small Caps

Another name for smaller companies.

Small Self-Administered Scheme (SSAS)

An occupational pension scheme in which all the members are trustees and are directly responsible for administering the fund and paying out the benefits. Some funds are invested in assets other than unitised insurance funds.

Standard Variable Rate (SVR)

A mortgage rate issued by the lender without any deals or discounts applied. Because the rate is variable, the mortgage lender can increase or decrease the rate at its discretion.

Stakeholder Pension

A low-cost, defined contribution pension scheme introduced by the UK Government in 2001 to encourage people to make provision for their financial future. Stakeholder pensions are aimed at those who may have been unable to afford a personal pension and were not eligible for an occupational or group pension scheme.

State Second Pension (S2P)

A state pension additional to the basic state pension, based on earnings. It replaced SERPS (State Earnings-Related Pension Scheme) in the UK and Isle of Man from 6th April 2002.


An alternative term for shares.


A professional who buys and sells investments and shares on the stock market on behalf of their clients.

Stock Market

The marketplace for the sale and purchase of shares, government bonds and other securities.

Structured Product

These investments usually offer some capital protection with your money being tied up for an agreed duration with the potential for an agreed level of return.

Surrender Charge

Should you cash in certain types of investment prior to an agreed date, you might be charged a fee by the provider to cover their administration costs.


Moving an investment out of one fund and into another.


Tax-Free Lump Sum

A term used with reference to pensions. The amount of money you can take from your pension plan free of tax when you retire. Most pension plans will allow you to take up to 25% as a ‘tax-free lump sum’ (30% for most Isle of Man contracts). Also referred to as a Pension Commencement Lump Sum.


The duration of an insurance policy, investment or loan.

Term Assurance

A life insurance policy with a fixed term. The sum assured is only paid out if the life assured dies within the specified length of the policy.

Total Expense Ratio (TER)

When investing in a fund, this helps to illustrate the total costs involved. In addition to the annual management charge (AMC), the TER also takes into account additional costs incurred by the fund manager such as legal fees, auditor costs and trustee fees.

Third Party Buildings Insurance Charge

A charge levied by a lender if you decide to take buildings insurance from someone other than the lender.

Total Return

The combination of capital growth and reinvested income produced by an investment at the end of any given period.

Tracker Mortgage

A mortgage where the variable interest rate is linked to a certain index, such as the Bank of England Base Rate. If the index to which the mortgage is linked changes, so does the interest rate of the mortgage.

Transfer Value

The amount of money available to be transferred from one pension arrangement to another.


Unit-Linked Policy

An insurance policy where the benefits depend on the performance of units in a fund invested in shares, bonds and property.

Unit Trust

An investment contract which invests in a variety of different stocks and shares. It is divided into units which are issued to its members instead of shares as with an Open Ended Investment Company or OEIC.




Relating to mortgages, an independent check of a property by an approved surveyor to help a lender establish how much the property is worth and how much they are prepared to lend.

Variable Rate

The interest rate that a lender charges on a loan or mortgage. This can go down as well as up, which means that your repayments can do the same.

VAT (Value Added Tax)

A form of indirect taxation levied on goods and services at the point of sale.


The degree by which share prices in a particular market or sector go up or down over a specified period.

Voluntary Excess

When making a claim on an insurance policy, the amount you agree to pay before your insurer will pay out anything.


Waiver of Premium

This is usually an option offered with a life insurance policy where, should you be unable to pay your monthly premiums due to an accident or illness, your insurance provider will pay them for you.


A warrant is an agreement that permits you to purchase a set number of shares in a company at an agreed fixed price and future date. On that date, you can choose whether to invest or not. If the share price of the company were trading above the price on the warrant, then you would effectively be buying the shares for less than they were currently worth.


A very strict condition under a policy imposed by an insurer. A breach entitles the insurer to deny liability.

Whole of Life Policy

A life insurance policy which pays out a specified amount on the death of the life assured.

Winding Up

The legal termination of a pension scheme.

With Profits

These are funds mainly run by insurance companies and mutual friendly societies. They usually invest in a wide range of assets and every year pay an annual bonus calculated on how well the fund has performed. Some of this bonus will be held back to help boost bonuses in later years where the fund has performed poorly. This is known as ‘smoothing’ and can help reduce volatility.

With Profits Annuity

In certain circumstances, these annuities can be a viable alternative to income drawdown. They do not pay out a given level of income like a standard annuity. The fund is invested in a with-profits fund and so enables an individual to benefit from any investment gains. However, if bonuses are lower than expected, income from the annuity will fall: as a result, they are only suitable for those able to take on this extra risk.

Wrap Account

An investment platform enabling a financial adviser to see all of a client’s assets in one place. This helps advisers to provide a better service to clients by streamlining administration and enabling them to complete transactions more quickly.


XD (Ex-Dividend)

The interval between the announcement and payment of the next dividend. In the case of a unit trust, this is the interval between the announcement and payment of the next income distribution.



The dividend or income from an investment expressed as a percentage of its value.



Zero Rated

Goods or services that are taxable for VAT purposes but with a tax rate of zero.