IFA Jargon Buster

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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.

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).

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

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

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

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.

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