IFA Jargon Buster

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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).

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.

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

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.

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.

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

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.

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

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

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

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.

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

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 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.

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.