Glossary

'A' Shares. Ordinary shares that do not have voting rights.

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: bare trust, naked trust, simple trust.

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. Acid Test. See 'Liquidity Ratios'.

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, climbing stairs.

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.

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.

Advance Corporation Tax. When companies pay dividends to shareholders, they used to have to pay to the Revenue Advance Corporation Tax (ACT). This was effectively a payment on account of the shareholders tax due on the dividend, and the company's corporation tax. ACT was abolished on 5th April 1999.

Affidavit. A written statement, sworn or confirmed as true before an authorised person, which may be used in support of certain applications or as evidence in court.

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 their trading and advise on compliance matters. Replaces the USM. 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.

Annual General Meeting. The yearly meeting of the shareholders called by the board of directors of a company. It is the shareholders' chance to have a say in the way their company is run.

Annual Management Charge. General term for a charge levied on an investment fund for its management and administration.

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

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 available e.g. level, escalating, guaranteed, single or joint lives.

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.

Arrangement Fee. Fee charged by banks or building societies for arranging loans such as overdrafts or mortgages. 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.

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 subjective view of the options.

Asset allocation.  The spread of fund investments between different sectors.

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 device to ensure that any growth in an asset is outside the estate e.g. an interest free loan payable on demand invested by the borrower will produce growth in the borrowers 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.

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.

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.

Auditor. Accountants employed by companies to prepare their accounts and to give a short report which is included in the annual accounts. Companies are required by the Companies Act to appoint professionally qualified auditors to prepare Statutory Accounts.

Authorised Business. A business authorised by the FSA, an SRO or a RPB to conduct particular types of investment business.

Authorised Unit Trust. A unit trust which meets the rules governing the industry authorised by the Department of Trade and Industry, which also vets the company launching the trust.

Bad Debt. Money owed that will not be repaid. Normally written off as a charge to the profit and loss account.

Balance Sheet. A statement of assets and liabilities, plus owners equity and reserves at a specific date.

Bancassurance. General term describing the broader financial services activities of banks and building societies, in particular their 'insurance company' activities.

Bank of England. The UK's central bank. Its main responsibility is to implement and police monetary policy. Bank Rate. The official rate of interest charged by the Bank of England acting in its role as lender of last resort to the financial institutions.

Banker's Draft. A bill of exchange drawn on the bank, like a cheque, and presented by the bearer to the seller to purchase goods. The individual's account is then debited with the amount.

Bankrupt. Person or business incapable of paying outstanding debts and whose affairs have been ordered by a court into the control of a receiver. Before someone can be declared bankrupt, they must commit an act of bankruptcy, such as entering into a situation which shows that it is unlikely that ensuing debts will be paid.

Base Rate. The foundation of every bank's structure of interest rates. Depositors are paid interest rates a few percentage points below the base rate, and borrowers are charged rates above the base rate. Banks alter their base rates when MLR changes.

Basic Rate Tax. Under the unified system of taxation introduced in April 1973 there are currently three levels of taxation; a lower rate, currently at 10%, the basic rate of 23%, and a higher rate of 40%.

Basic State Pension. The flat rate state pension available to everyone upon reaching State Retirement Age, provided sufficient N.I. contributions are made.

Bear. Stockmarket jargon for a pessimist. Someone who thinks that the market is going to fall and sells shares or options in the belief that they can be bought back later at a cheaper price.

Bear Market. An investment market term meaning that the value of investments is expected to fall.

Bed and Breakfast. The sale of shares one day, and their repurchase the next day, done to achieve a disposal for Capital Gains Tax purposes. This did have the effect, until 17 March 1998 of rebasing the shares value and using the annual CGT exemption. Since that date at least 30 days must now elapse between the sale and repurchase for the practice to be effective so the level of risk is normally considered to be too great.

Bed and Isa/Sipp As above, this is a way of selling shares one day and buying them the next day within an Isa or self-invested personal pension. This fixes the gain for CGT and puts them into a tax-free wrapper.

Benchmarking. Comparing activities against agreed parameters to assess degrees of comparative performance Beneficiary. Someone who will receive the proceeds from a trust or settlement.

Benefits in Kind. Refers to non-cash forms of employee benefit, such as pension scheme membership, car packages, and private medical insurance

Best Advice. A generic expression referring to the regulatory requirement for a financial adviser to offer suitable and timely advice relevant to a client's needs. Client's needs must take precedent over the adviser's remuneration. The original "best advice" rules has been replaced by an FSA "suitability" rule. See 'Know Your Client'.

Bid Price. Price at which market makers, life assurance companies and unit managers buy back units from investors. Also used when unit linked policy matures or is encashed. Always less than offer price.

Bid/Offer Spread. Difference between the bid price and offer price of units. Usually between 5% and 6% of the offer price of units. Used to recoup management expenses and initial costs.

Black Economy. Goods and services paid for by 'cash in-hand', and not recorded for tax and NI purpose.

Blue Chip. A phrase taken to mean 'first class', referring to shares of a company with a good trading and dividend record, or to the company itself.

Bonds. A generic term for life assurance policies that contain a nominal amount of life cover and a large investment content. Marketed as investments and subject to special tax treatment. Phrase also used to describe Government securities.

Bonus. Added to with profit policies. The amount is determined by life company's actuary and represents a distribution to with profit policyholders of investment return achieved by fund. Payment of bonus is not guaranteed. Reversionary bonuses, normally declared annually, cannot be removed once added. Terminal bonuses added on death or maturity.

Bridging Loan. A short-term loan taken out to help fund the purchase of one asset before the sale of another asset has been finalised. Commonly seen in the property market.

Broker. A broker is an agent who brings two parties together to do business, and is remunerated by a fee or commission, the latter calculated as a percentage of the contract sum.

Broker Fund. Generic term for an investment fund managed by a specialist financial adviser. Usually invested in the units of other investment funds/unit trusts.

Brokerage. Dealing fee or commission charged by a broker. May also be used as a term for a broking firm.

Building Societies Association. Trade association for UK building societies which represents societies in discussions with government and other organisations.

Building Society. A financial institution which, traditionally, accepts cash deposits and pays out interest on deposits at a variable rate. Money is also lent, traditionally to finance house purchase. Many are now expanding into banking and financial services.

Bull. The opposite of a bear. the optimist who believes that the market is going to rise, and so buys shares now to benefit from future price rises. So a bull market is a rising investment market; the 'opposite' of bear market.

Business Property Relief. An inheritance tax relief, applying to lifetime transfers of business property or business interests. Amount of relief ranges from 50% to 100% depending on type of asset. Relief not available if business deals in stocks and shares, land and buildings or investments.

Buy at Best. Instruction to buy until the required quantity is reached.

Call Option. An option to buy, e.g. shares, at a fixed price on or before a set date in the future.

Cancellation Period. A cooling off period after the purchase of certain investment products. During the period the purchaser can change his or her mind about going ahead, and opt to have any initial payments repaid. Applies to certain contract variations e.g. increases to existing premium of more then 10%. Does not apply to "off the page" purchases. See "Cooling off Period".

Cap. Used in a number of ways to indicate an upper level or ceiling e.g. Mortgage Cap - an upper limit to mortgage rate fluctuations; Earnings Cap - an upper limit to the amount of salary which can be used to calculate pension.

Capital. Can be used in a number of ways: To differentiate certain assets from income and cash flow. To refer to the value of a business owner's investment i.e. the equity in the business In a limited company, this equity is represented by share capital plus reserves. Capital expenditure is the purchase of new fixed assets. A capital asset is one likely to be held for a long period. A fixed asset recorded in the accounts is said to be 'capitalised'.

Capital Allowances. Tax allowances which enable the owner of an asset to take into account depreciation on the asset against taxable income. Capital Gain. The increase in value of an asset or investment.

Capital Gains Tax. A tax levied on the investment gains of an individual in a tax year, provided those gains exceed the current exemption. Husband and wife pay the tax separately and have separate allowances.

Cartel. A group of individuals or businesses which try to profit from a trading situation by fixing prices and/or regulating/restricting the supply of a product.

Chargeable Event. Chargeable events occur when certain payments are made from packaged life and investment products. They may or may not give rise to a tax charge. Any tax liability which might arise falls within income tax rules.

Chargeable Gain. A chargeable gain is the taxable element of a gain arising from a chargeable event. Any gain can be said to be the 'excess' of returns over investments into certain packaged products. There is no income tax liability for basic rate, nor any CGT liability. The maximum rate chargeable will be 17%, being the difference between basic rate tax and higher rate income tax, any gains being assumed to have already attracted tax at basic rate.

Chargeable Transfer. This is a transfer or gift of value which does not attract any IHT relief, is not covered by any IHT allowance, nor is it a transfer that qualifies as an exempt transfer, and so will be taxable.

Charging Structure. Most investments and investment products incur expenses in their development, management and selling. To ensure that each stage of the product is properly costed, expenses are deducted at different stages to reflect the expenses of that particular element e.g. bid/offer spread, policy fee, annual management charge.

Charting. A way of analysing trends, using different types of chart, to forecast future movement, particularly in respect of share movements. A 'chartist' is a person who makes use of such a method.

Chattel. A moveable object, usually taken to be a personal possession. You can receive up to £6,000 p.a. on the sale of personal chattels each year without affecting the CGT allowance.

Child Benefit. State benefit paid for children under 16, and for 16/17/18 year olds in full time education, or, in some circumstances, on an approved training scheme.

Churning. The practice of moving investments merely to attract additional commissions.

Children's Tax Credit. Tax credit issued via tax codes to individuals who have a child or children aged under 16 living with them. Introduced from April 2001.

Clawback. Money claimed back which has previously been paid out e.g. life assurance commission may be claimed back if the policy is cancelled within a certain period.

Clearing. Taken as a banking term, the process of presenting cheques to the drawers bank for payment.

Clearing House. An organisation set up to arrange settlements of money between a number of parties, e.g. banks or stockmarkets, so that only one balance has to be settled between any two parties at the end of each day or trading period.

Client Account. An account held on behalf of clients which is kept separate from the business finances of a company or partnership.

Codicil. A document intended as a supplement to a will, executed in the same manner as a will.

ColdCalling. A personal visit or oral communication made without invitation.

Collar. An option on some mortgages which prevents interest rate payments dropping below an agreed minimum rate.

Collateral. Security used to guarantee a loan.

Collective Investment Schemes. Also known as pooled investments. Refers to unitised schemes where investor's contributions are pooled and they receive units in the fund in exchange for their contribution e.g. unit trusts.

Commission. Money payable to an agent or third party for services, usually introducing business.

Commodities. Generally taken to refer to investments involving future pricing of raw materials in foodstuffs and metals.

Commutation. The option of exchanging pension for cash at retirement at a fixed rate.

Compliance. A word taken to indicate the process of following agreed procedures; e.g. compliance with FSA 1986 and related regulations means that things are being done 'by the book'.

Compound Interest. Interest which is added to the principal sum, and which earns interest in addition to the principal sum.

Consideration. Something of value exchanged as part of a contract; an essential of a valid contract. Sometimes used in the sense of 'payment', e.g. premium, or promise to pay a premium.

Contract Note. The confirmation received when shares are bought or sold - proof of the transaction for tax purposes.

Contracted Out Money Purchase Scheme (COMPS). Type of occupational pension scheme used to contract-out of SERPS on a money purchase basis.

Contracting Out. In relation to State pensions, opting out of the earnings related part of the State pension arrangements. This used to be known as Serps but is now called the State second pension, S2P.

Convertible Preference Share. A specific kind of preference share which allows conversion of an investment into a certain number of ordinary shares at a fixed price and within a specified period of time.

Conveyance. A document, usually a deed, which transfers an interest in property.

Cooling Off Period. A period of 14 days from receipt of the statutory cancellation notice during which a policyholder may cancel a life assurance policy. For policies not covered by the Financial Services Act cancellation rules e.g. term assurances of less than 10 years, the relevant cooling off period is 10 days. For other regulated agreements e.g. hire purchase, the consumer may serve notice of cancellation before the end of the fifth day after receiving the required second copy of the agreement.

Corporate Bonds. Similar to Government Stock (gilts) but with higher risk profile. They are loans to corporate bodies, usually on fixed rate for a fixed period.

Council of Mortgage Lenders. (CML) Trade body representing mortgage lenders. They set up the Code of Mortgage Practice. See Code of Mortgage Practice.

Coupon. A slip of paper representing a monetary value. Often used with reference to the interest payable on gilts, because the coupon attached to the certificate represents annual interest, and can be encashed.

Credit. A sum of money or equivalent purchasing power available for a person's or business use. A positive balance in a bank account. The practice of making goods or services available before payment. Entries on the right hand side of an account.

Current Yield. The dividend or interest payment on an investment expressed as a percentage of its current price.

Data Protection Act 1984.Established rules for storage and disclosure of personal details by computer.

Dealing. Name given to transactions in stocks, shares unit trusts, commodities and other financial instruments.

Death in Service Benefits. Generally refers to one or more of life assurance, spouses' and dependants' pensions, return of personal contributions, as provided by a pension scheme, on a member's death in service before retirement.

Debenture. Long term loan to a company, usually at a fixed rate of interest and for a specific term. Debenture holders are creditors of the company. In the event of liquidation debenture holders have a preferential claim on the assets. Debentures are marketable securities.

Deed of (Family) Arrangement. A formal document used to override the directions of a will after death.

Deep Discount Bonds. An investment bond issued at a large discount. The bond does not pay interest, but is repaid at par.

Defined Contribution. Another term for 'money purchase' pensions. A pension scheme where the final pension will be the result of an agreed contribution input, rather than an agreed formula output, as with a final salary scheme.

Deposit Account. An account which pays interest, the interest being determined by reserves and long term investment projections, rather than current investment conditions. Interest may be variable, but once paid is not subject to fluctuations in value e.g. as with a building society account.

Depreciation. The amount by which the value of an asset reduces from the beginning of one accounting period to the beginning of the one which follows.

Derivatives. A form of investment, such as options or futures, which are based, or derive from, ordinary shares or bonds.

Discretionary Investment Management Agreement. Detailed investment agreement specifying the limits of discretion within which manager will manage investments. Sets out exact nature of relationship between manager and client, degree of discretion granted and fee structure.

Discretionary Scheme. Usually used in relation to occupational pension schemes, where membership is by employer invitation only, and where benefits and contributions may differ from member to member. Although discretionary, equal access and discrimination rules must be adhered to.

Discretionary Service. Investment service whereby the adviser makes investment decisions without consulting the client.

Discretionary Trusts. A trust in which the trustees may exercise their discretion, within a class of beneficiary, as to whom should receive benefit.

Dividend. A share in company profits, usually paid annually or twice a year, paid out depending on the number of ordinary shares held. Usually expressed as a value of the shares held e.g. 5p per share.

Dividend Waiver. Similar to 'bonus sacrifice', in that this may be a way to increase payments into a company pension scheme i.e. the dividend is waived, and the money thus 'released' is paid into a pension arranged by the company, as an additional employer contribution for the benefit of the individual. The dividend must be waived before the dividend is calculated and known.

Dividend Yield.The dividend payment of a share divided by the current market price of the share and expressed as a percentage.

Domicile. The country that a person considers to be, and treats as, a permanent home and which forms the closest ties. An essential element when dealing with legal and taxation matters.

Dow Jones Industrial Average. Index of share prices traded on the New York Stock Exchange.

Earnings Cap. See 'Cap'. Earnings Per Share. A ratio calculated as share earnings for the year divided by number of shares in issue Earnings Yield. A company's earnings available for shareholders dividend by the current market value of the company's equity capital, or earnings per share dividend by the share price.

Eligibility. Most occupational pension schemes have age and service qualifications that must be met before an individual is able to join the scheme. Such qualifications may be termed eligibility conditions.

Embezzlement. A form of theft; the misappropriation of an employers funds by an employee.

Employee Profit Sharing Scheme. A type of share incentive scheme whereby a special trust is established to purchase company shares which, provided certain conditions are met, will escape income tax on profits on resale.

Employee Share Incentive Schemes. Arrangements which enable employees to purchase the shares of their employing company, some with tax advantages, some without.

Employee Share Ownership Plans. Share incentive schemes which allow the employing company to make tax deductible contributions into an Employee Share Ownership Trust. Trustees then use the money to buy company shares for all participating employees, who qualify by reference to working hours and length of time employed by the company.

Endowment Assurance. A medium to long term life assurance/savings contract, incorporating an investment element and a protection element. Policy proceeds normally paid on maturity or earlier death. After early years policy acquires surrender value. See 'Maximum Investment Plan'.

Endowment Mortgage. An interest only property purchase loan where the outstanding capital will be repaid at the end of the term out of the fund accumulated under an endowment policy.

Enterprise Zone Trusts. Property trusts investing in enterprise zones, or areas in which businesses receive special government incentives for a fixed period. Investors in these trusts can write off most of their investment against income tax liabilities.

Enterprise Zones. Designated areas throughout the country offering special tax incentives to encourage investment in commercial property.

Equity. The value of a business (assets less liabilities, but excluding ordinary share capital) or of a property less the amount of the mortgage.

Escrow. A deed which has been delivered, but which will not become operative until a later date or until certain conditions have been met.

Estate Planning. General phrase relating to personal financial planning, the emphasis being on passing on intact as much of one's estate on death with as little tax as possible being paid.

Ethical Investment. Making investments only in companies which are considered acceptable according to a set of criteria concerning the type of product, environmental issues and political issues.

Eurobond. A medium/long-term bearer bond denominated in a European currency and issued by Government or international companies.

European Currency Unit. Based on a basket of weighted currencies of EU members.

European Monetary Union. Expressed aim of EU.

Ex gratia. A payment made without obligation Ex Officio. Latin, 'by virtue of holding an office' i.e. being in one job will involve taking on other jobs.

Excess Clause. A clause in an insurance policy requiring the policyholder, in the event of a claim, to bear part of the claim.

Exchange Rate. The value of a country's money compared with other currencies.

Execution only. Where an adviser is instructed by a client to arrange a particular investment, without having received advice from the adviser.

Exempt Income. Investment income which escapes tax, such as National Savings Certificate.

Fact Find. An important stage in the advice cycle, one which enables the adviser to draw out all pertinent information about a potential client, and to update information already held concerning an existing client.

Factoring. The buying of debts at a discount.

Family Income Benefit. A type of reducing term assurance under which proceeds in event of a claim are paid as income instalments for remainder of term. Total payments equal the reduced sum assured at time of claim. Fee. The charge imposed for provision of professional services.

Final Salary Scheme. A pension scheme providing pension benefit by reference to the scheme member's salary at or near retirement.

Financial Adviser. A person offering financial advice. There are two types of adviser: those who offer advice based on the sale of the products of a single company or a limited number of companies (tied agents or multi-tied agents), and those who select the most suitable product from all those available in the market described as independent financial advisers (IFAs).

Financial Services Authority. (FSA) Regulator established in 1997 to bring together the differing regulators overseeing various financial services. It is aA single independent non-governmental body which exercises wide ranging statutory powers governing the financial services and banking sectors.

Fiscal. Relating to tax e.g. fiscal year, fiscal policy. The fiscal year is a period of 12 months for the purpose of tax calculation; in the UK the fiscal year runs 6 April in one year to 5 April the following calendar year.

Five Day Trading. The settling up system for buying and selling shares on the London Stock Exchange i.e. payment within 5 days of the trade; production of share certificates in the same time. Voluntary system, due to become three days in 1998. Fixed Asset. An asset (e.g. machinery, plant) used by a company on a long term basis.

Fixed Rate. Unchanging, not subject to movement or fluctuation, usually for a specified term. e.g. fixed rate mortgage, where the rate reverts to the normal variable rate at the end of the fixed period.

Floor. In business terms, the lowest acceptable level of trading and exchange. See 'Cap'.

Flotation. The open sale of shares in a company 'going public', rather than the issuing of shares in a private company start-up.

Footsie. The Financial Times Stock Exchange 100 Share Index, generally abbreviated to FT-SE 100. The index reflects the change in the value of shares of the top 100 companies traded on the London Stock Exchange.

Forward Pricing. Price quoted for units where the manager arranges the underlying assets after the investor applies for the units. The price reflects the future or rearranged asset valuation.

Free Standing Additional Voluntary Contribution (FSAVC). A stand alone AVC operated outside the main pension scheme, and available to all active occupational pension scheme members, except controlling directors.

Friendly Society. A mutual benefit organisation having the main aim of providing maintenance and relief to members during sickness and retirement. Their tax advantages enable them to offer tax effective policies, but for limited premium levels only.

Fund. Investment funds are pooled investments run by a manager helped by a team of analysts who choose individual company shares to put in the fund based on the remit or sector the fund is targeting. Investors leave the fund selection up to the manager and his team.

Futures. An agreement to buy or sell commodities, shares or currency at a future date for a price fixed today. Futures traders do not intend to take delivery of the subject of the contract, but try to buy or sell contracts in anticipation of their value increasing or decreasing.

Futures and Options Fund. An authorised unit trust which can invest a limited amount of its fund in derivatives. A Geared FOF may invest a larger proportion into derivatives.

Future Value. The value at which a sum of money invested now will grow when invested at a given rate or rates of interest during the period. See Current Value and Present Value.

Gift with Reservation. A transfer of value in which the donor retains an interest. e.g. the donor gives a house to a friend, on condition the donor continues to live in the house.

Gilts. 'Gilt edged securities' are fixed rate bonds issued and guaranteed by the UK government. The bonds pay fixed interest. Traded on the Stock Exchange, and can also be purchased at Post Offices through the National Stock Register. Originally, the bond certificates had a gold border, hence the name Gilt Strip. Where each interest payment and the redemption value become investments in their own right which can be bought and sold.

Green Book. London Stock Exchange publication detailing USM trading regulations.

Green Paper. Preliminary report on proposals for a new law to be discussed in Parliament. Precursor to a White Paper. Greenback. Slang for US dollar bill.

Greenmail. Almost blackmail, in that the exercise involves buying enough shares in a company to threaten a takeover bid and all the expenses that exercise involves, but then selling the shares back to the company at a higher price than was made.

Gross. The sum total, without deduction.

Gross Domestic Product. The total value of finished goods and services produced within an economy over a specific period, normally one year.

Gross National Product. GDP plus net property income and profits from abroad.

Gross Profit. The difference between cost of sales and revenue before deducting general running/overhead expenses.

Group Pension. Generally operated by an employer for a group of employees and may be a 'conventional' scheme where the employer helps fund the arrangement; or may be a group personal pension scheme where the grouping is merely for administrative convenience. Alternative name for occupational pension scheme.

Guaranteed Death Benefit. A minimum amount of life assurance paid out under a unit-linked policy if the fund value is not higher.

Guaranteed Income Bond. Single premium insurance bond that guarantees the repayment of a capital sum at a future ate.

Guaranteed Minimum Pension. When a group occupational pension scheme contracts out of SERPS, the scheme must provide a minimum pension in respect of the amount of state pension foregone. This is the GMP, and is approximately equal to SERPS, for the same period. A member of such a scheme is guaranteed to receive a pension at State Pension Age not less than the SERPS equivalent. The GMP principle ceased for benefits accrued after 6th April 1997, when the Reference Share principle was established.

Hang Seng Index. Arithmetically weighted index based on the capital value of leading shares quoted on the Hong Kong stock exchange.

Headroom Test/Check. 'Maximum benefit' test for FSAVCs to ensure that FSAVC plus main occupational scheme benefits together do not produce more than the maximum benefits permitted by the PSO. Operates when contributions to FSAVC exceed £2400 p.a Health Insurance. See Private Medical Insurance.

Hedge. Action taken against the possibility of loss caused by a change in prices e.g. by buying raw materials in advance of having to supply the finished goods.

Higher Rate Tax. Any rate of income tax in excess of basic rate tax. Hire. Short term use of an asset in return for a fee.

Holistic. When used in conjunction with financial planning, refers to the consideration of all aspects of a persons financial involvements.

Home Reversion Scheme. Similar to a home income plan, except here the money is raised by selling one's home, but retaining the right to live in it until death.

Hybrid Schemes. Occupational pension schemes which combine money purchase and final salary benefits. Also used to describe self administered schemes marketed by insurance companies where some assets are invested in insurance company's funds.

Imputation System. The system of dividend taxation, where the company pays Advance Corporation Tax (ACT) on dividends, and the dividends are assumed to be paid net of basic rate tax. The shareholder receives a tax credit with the dividend cheque as proof of tax paid. Ceased on 6th April 1999 as a result of the abolition of Advanced Corporation Tax.

Incorporation. The act of turning a business into a limited liability company.

Independent Financial Adviser. Someone authorised by the PIA and qualified by experience and examination to provide financial advice, who is not working for any single product provider company.

Indexation. Price adjustment which allows capital or income to take account of, or benefit from, inflation. Indexed. Also Index-linked. Growth in income or capital which follows one of the many growth or performance indices e.g. Retail Prices Index, Average Earnings Index.

Individual Pension Accounts. (IPA) A form of investment medium introduced in April 2001. They enjoy the same tax advantages as other eligible investment available to exempt approved pension schemes. Can be transferred between pension arrangements.

Individual Savings Accounts (ISA). A tax free investment contract, allowing investment into cash, life assurance and stocks and shares. It replaced PEPs and TESSAs for new contributions from April 1999. Different investment limits apply to maxi and mini ISAs, can be funded by lump sum or regular saving.

Inflation. In simple terms, when production costs increase for the same level of output, the result is often an increase in the product price. This in turn results in a reduction in purchasing power, because more is needed to buy the same goods. This leads to higher wage demands, which leads to higher production costs, and so on. The results of this cycle is price inflation, which is what is generally meant by the term inflation.

Insolvency. The inability of a business to meet its liabilities. Inspector. In insurance terms, an 'inspector of agents' i.e. someone representing an insurance company who calls upon intermediaries who hold an agency with the company. The role is generally seen as a new business generating one.

Institutional Investor. It is estimated that over 90% of UK shares are owned by such investors, which are generally pension funds, unit trusts and insurance companies.

Intangible Asset. Non-physical asset, such as goodwill, trademark or patent. Inter Spouse Transfers. A tax-free transfer under Inheritance Tax rules. Inter Vivos. Used in the phrase 'gift inter vivos', or gifts between living individuals and used in conjunction with the seven year gifting period for potential Exempt Transfers (PETs) under Inheritance Tax rules.

Interest in Possession. An entitlement to the income from trust property. Interim. Occurring during a company's financial year rather than at its end. Interim results are often accompanied by interim dividends, whereas the year end accounts may give rise to final dividends. Interim Deed. A temporary measure whilst waiting for the full and final version to be engrossed. Often used when establishing group pension arrangements.

Intermediaries. Generic term referring to anyone who assists two other parties to do business e.g. IFA effectively bringing together client and insurance company. Intestacy. The result of having died intestate i.e. without a valid will. Intestate. Without a valid will.

Investment Bond. A single premium unit linked life policy containing a nominal amount of life cover. A non-income producing investment. Any partial or full encashment proceeds are subject to special tax rules. Investment Business. Under the Financial Services Act 1986 this phrase has a specific meaning, covering all life assurance, pensions, investments, but not covering most PHI, term assurance and medical insurance contracts. The common link is the investment element.

Investment Trust. A public limited company which invests in shares of other companies. Its shares are traded on stock market. They are not true trusts and can borrow money to buy additional investments.

Irredeemable. Certain government bonds are irredeemable (e.g. war loans) which means that whilst they pay interest they have no maturity date, and so will be repaid only at the discretion of the government. Irrevocable. Cannot be rescinded or changed. An irrevocable trust is a necessity for exempt approval of a group pension scheme.

Joint Life. A life policy option where life assurance is taken out by two (or more) individuals, the payout coming with either the first or final death.

Joint Tenancy. Where a property is in the names of two owners, on the death of the first owner, the property passes in its entirety to the survivor. See 'Tenants in Common'

Joint Life. A life policy option where life assurance is taken out by two (or more) individuals, the payout coming with either the first or final death.

Joint Tenancy. Where a property is in the names of two owners, on the death of the first owner, the property passes in its entirety to the survivor. See 'Tenants in Common'.

Key Employee Insurance. Life assurance or PHI contracts, taken out by the company to help compensate the business for the loss through death or disability of the element of profit contributed by a key employee.

Key Features Document. A document that will contain key information, such as: details of what the policy might be worth in future years. details and explanation of the charges made on the policy. an explanation of the purpose, type, and risk level of the policy

Know Your Client. Legal obligation on financial salespeople (such as PIA members and stockbrokers) to record all aspects of a client's personal financial situation and to ensure that all advice takes this into account. See Best Advice.

Land Registry. Established by the Land Registration Act 1925 to maintain details of land ownership e.g. describes the land and any rights, the owner and any charges noted against the land.

Launder. To 'clean up' 'dirty money' earned through illegal means by easing it into the normal monetary systems so that all traces of its origins are removed, or 'washed out'. The Criminal Justice Act 1993 contains legislation dealing with money laundering and insider dealing.

Lessee. Someone who uses an asset owned by someone else, its use being governed by an agreement called a lease. The Lessor is the owner of the asset. Let. To make available living or office accommodation in return for rent.

Letter of Credit. Document from a bank authorising payment on behalf of a client to a third party. Letters of Administration. Authority granted by the court to an individual permitting that person to administer the estate of someone who died intestate.

Lien. A charge or claim over an asset, often for security as a loan.

Life Business. General term which can be applied specifically to life assurance, but often is applied to all life, pensions, savings and investment business.

Life Interest Trust. A trust which controls property which may be held only as life tenant.

Life Tenant. Person with an interest in property for their life only e.g. income from investments. At death the interest ceases and cannot be passed on by the life tenant's will.

Managed Fund. Usually a fund choice with a unit-linked policy Managed funds are generally made up of units from other funds e.g. equity fund, international fund, so that it represents a wide base for the investor happy to accept a medium risk investment. In most cases the fund receives the same investment management attention as any other fund, so perhaps a better name in those circumstances might be 'mixed fund'.

Management Buyout. When the senior management of a company, usually with institutional funding, take control of the company by buying its shares.

Management Charge. An annual charge on investment funds to pay for their management, usually expressed as a percentage of fund value.

Mandate. Instruction, order, permission to allow or permit something to happen. Usually written e.g. bank mandate, as in a standing order to pay sums to another account. Mandatory. Compulsory, something which must be done.

Margin. The difference between one thing and another. In financial terms, usually relates to percentage differences between costs and prices.

Marginal Tax Rate. The highest tax rate an individual pays, usually taken to mean less basic rate tax (23% in 1998/99).

Market Level Indicator. An index comparing the values of fixed interest securities and shares, used in determining state scheme premiums.

Market Capitalisation. The value of a company on the market, computed by multiplying the number of shares by the current market price.

Market Counterparty. A category of investor identified under financial services legislation. Person who, in course of own profession, transacts the same type of business as he transacts on his own behalf via an adviser. Deemed to have full understanding of nature and risks of the investment transaction e.g. stockbroker purchasing shares.

Market Maker. A dealer in securities on the stock exchange who deals as principal rather than agent. This used to be the role of the stock jobber.

Market Value. The value of an asset to a third party on the open market.

Matched Bargain. Where the purchase and sale of the same stock are matched, quantity for quantity, at a price agreed by buyer and seller, rather than on the open market.

Maturity. In financial planning terms, the date at which a financial document or insurance policy becomes payable.

Maximum Benefit Regimes. Term used to describe three categories of pension scheme membership used by the Inland Revenue when calculating maximum benefits. Regimes introduced in 1987 and 1989 give rise to three categories: pre '87, '87 - '89 and post '89 membership.

Maximum Investment Plan. Effectively, a unit linked version of the endowment policy i.e. a regular savings plan with life assurance cover, paying out on maturity or earlier death or surrender. The major difference is that MIPs do not attract bonuses, their value depending on the unit price.

Medium. A gilt which is due to be redeemed after five to 15 years.

Merger. The union of two or more companies. Distinct from a takeover where one company purchases another.

Mezzanine Finance. Business finance following the start-up phase of a business. Less risky, in general, than start up finance.

Middle Band Earnings. Earnings between the lower earnings limit and upper earnings limit. Used to calculate an employee's SERPS benefits and National Insurance contributions. Only employer NI contributions payable on earnings exceeding middle band earnings.

Maximum contribution limits apply. A maxi ISA and mini ISA cannot be established in the same tax year.

Minimum Contributions. Contribution payable to an appropriate personal pension by the DSS in respect of a member who has contracted-out. Consists of an age related rebate of NI contributions plus basic rate tax relief on employee's element of the rebate.

Minimum Funding Requirement. (MFR) A minimum funding standard that applies to final salary pension schemes. Regulations detail the assumptions to be used in the calculations. If a scheme fails to meet the MFR, action must be taken to restore the funding level within a specified timescale.

Modelling. Using numerical methods and relationships to represent real life situations as a basis for business projections.

Monetarism. Economic theory that the volume of money on issue affects prices; therefore, inflation can be controlled by controlling the money supply.

Money Market Accounts. The money market operates through the buying and selling of short-term loans and securities e.g. Treasury bills and bills of exchange. Private investors, individuals or companies, can invest in this market, usually with a minimum input of £50,000, and receive a higher rate of interest over a shorter term.

Money Purchase. See 'Defined Contribution'.

Monopoly. The control of a market by one source of supply.

Moral Hazard. The potential for the attitudes, lifestyle and conduct of individuals to affect the level of risk attaching to a proposal for life assurance.

Moratorium. A temporary halt.

Morbidity. The incidence of sickness and disability. Used as a guide in calculating PHI premiums, in a similar way to the use of mortality statistics with life insurance.

Mutual Life Office. A company without shareholders, and effectively owned by the with-profits policyholders, who are entitled to a share of any surplus funds at valuation. These 'surplus' distributions are termed bonuses.

National Insurance Contributions. An additional form of tax paid by most employers, employees, self employed (and some unemployed) people. For the employed it is deducted from income by the employer on a scale related to income levels.

National Savings. A 'branch' of the treasury, selling investment, savings and deposit products with the aim of raising money for the government, and providing medium to long term financial planning products for customers.

Negative Equity. The situation where the value of the property falls below the outstanding loan(s) used to purchase it.

Net. After all deductions have been made. Hence Net Book Value. The written down value (after allowing for depreciation) of an asset.

Net Pay System. Refers to the situation where employee contributions to an occupational pension scheme are deducted from gross income before tax is applied. This avoids the need to adjust the tax code.

Net Profit. Profit after all deductions except tax and dividends.

Net Relevant Earnings. A definition of 'pensionable income' for the self employed by which Personal Pension Plan contributions are determined. Relevant earnings less business expenses (includes stock relief deductions, losses or capital allowances). NRE for employed PPP holders is effectively gross PAYE pay.

Nikkei Average. Index of prices of certain leading shares quoted on the Tokyo Stock Exchange.

Nil Rate Band. Refers to the ceiling on assets in an estate which do not attract inheritance tax.

No Claims Bonus. Reduction in premium when no claims have been made over an agreed period.

Nominal. Small payment, or value Nominal Capital. Total face value of authorised issuable capital.

Nominal Value. The par, or face, value of something e.g. a share issue.

Nominee. Someone who is nominated to deal with certain matters on behalf of another party.

Nominee Account. An account operated by, say, a trustee or stockbroker, which holds shares or other property for you in the name of a trustee or nominee, not in your name e.g. shares in a PEP are held in such an account.

Non-Profit. A policy where the value of the policy at maturity is guaranteed at outset.

Non-Qualifying Policy. One which does not satisfy all of the qualifying rules.

Normal Expenditure. An exempt lifetime transfer under inheritance tax (IHT) rules, whereby to avoid being classified as a potentially exempt transfer (PET) the transfer must be part of normal expenditure and not affect the standard of living of the donor.

Nostro Account. Bank account held by a UK bank with another bank abroad.

Notary Public. Lawyer with authority to witness written documents and verbal statements, thus making them official. Someone who attests to the validity of deeds and other documents for official use.

Notional. Assumed, unquantified, not known exactly.

Off the Shelf Company. A company which has already been registered but which has not started to trade, so is available for sale at nominal cost if someone wants a new company quickly. Offer and Acceptance. Two of the necessary stages in a viable contract.

Offer Price. The price at which a security is offered for sale. See Bid Price.

Offer to Bid. Compares the original purchase cost or offer price - usually of a unit trust - with its bid price, the price you receive if you sell.

Offer to Offer. Compares the original purchase cost or offer price - usually of a unit trust - with its current offer price.

Office of Fair Trading. Government body charged with ensuring a 'level playing field' for competition in all sectors of the economy.

Official Receiver. Person appointed by the DTI to act in bankruptcy matters and oversee the winding up, and possibly liquidation, of the debtor.

Offshore. Basically, anywhere out of the country not within the authority of the Inland Revenue.

Offshore Bond. An investment bond issued by a company outside the UK and outside the authority of the Inland Revenue. Usually established in countries with little or no tax giving gross fund growth. Popular locations include Luxembourg, Republic of Ireland, Channel Islands and Isle of Man.

Ombudsman. An official who investigates complaints from the public against official bodies, large organisations or industry sector participants.

Open Ended Investment Company. OEICS Collective investment in which investors receive shares, different classes can be issued e.g. UK equities. Single pricing for buying/selling shares, value of shares reflects net asset value of fund assets. Fund assets held by an independent depository.

Open Market Option. An option under pension schemes to take the cash in the pension fund and find the best annuity rate available from other companies in the market. There may be a charge for taking the money, or perhaps enhancement if staying.

Operating Profit. The figure which remains after deducting all operating costs (except capital expenses) from sales revenue.

Opting Out. This is where a member opts out of an employer's pension scheme whilst remaining employed, or may refer to an employee who is eligible to join an employer's pension scheme, but decides not to join.

Option. An option gives a right - not an obligation - to buy or sell a given commodity, at a set price, within an agreed period. A call option gives the right to buy a security at an agreed price, called the strike price. A put option gives the right to sell before a give date. A traded option is one that can be bought and sold on the traded option market run by the Stock Exchange. A traditional option can be exercised on one day only. The premium is the price you pay to acquire the option.

Ordinary Shares. The voting shares of a limited company.

Overdraft. In banking terms, drawing out more money from an account than there are available funds.

Overfunding. It may be possible for the fund of an occupational scheme or a FSAVC to become so large that projected benefits exceed either scheme benefits or Revenue maxima. Remedies may include increasing benefits up to Revenue maxima, contribution holidays or refunds.

Overheads. Everyday costs of running a business.

Overtrading. Shortage of liquidity caused by not having enough working capital to support the level of sales and production. Taking on business which cannot be funded by cash flow.

Salary Sacrifice. A method of increasing input into a pension scheme by giving up existing salary or proposed salary increases, so that the sum foregone can be used as additional company contribution into an occupational pension scheme.

Sale and leaseback. An arrangement where the owner of property or assets sells and then leases back from the new owner, thus releasing capital value in exchange for the leasing overhead.

Save As You Earn. A method of saving regularly from salary, by employer deduction. There are various schemes to accommodate this, some tax efficient, others merely savings administration.

Schedule D. Tax collection regime for the self employed.

Schedule E. Tax collection system for employed people.

Scheme Administrator. The person responsible for the management and administration of an occupational pension scheme. All exempt approved schemes must appoint an administrator in UK.

Scheme Rules. All pension schemes will have rules, as they are the practical, day to day guide for the operation of membership and benefits.

School Fees Insurance. A generic term for 'packages' of investment, savings and insurance put together to ensure provision of money to meet education costs. A full package will cover not only fees but incidental schooling costs and go on to cover graduate studies.

Scrip Issue. Shares issued to shareholders, in proportion to existing holdings, to increase the number of shares to make them easier to sell in smaller denominations.

Secondary Market. The market for existing shares on the UK stock exchange.

Securitisation. The process of making a loan into a tradeable security by issuing a negotiable document encompassing the loan and selling it on.

Security. A bond or share certificate evidencing ownership or debt.

Segregated Fund. Pension scheme investments managed alongside, but separately from, other investments under control of a particular manager.

Self Administered Personal Pension. Variation of the SIPP, except with the SAPP the scheme assets are invested by the insurance company and administered as a segregated or 'earmarked' fund within an appropriate fund under their management.

Self Assessment. System of collecting tax from: Individuals i.e. the self employed and some others with a tax obligation other than under PAYE. It began for individuals on 6th April 1996. Companies in respect of accounting periods finishing after 1st July 1999. Replaces the Pay and File System.

Self Employed Pension. Generally refers to Retirement Annuities (S226 policies) and Personal Pension Plans, even though both may be taken out by those employed persons not in pensionable employment.

Self Invested Personal Pensions (SIPP). A personal pension plan where the policyholder organises and manages the pension fund investments for themselves.

Share. Part of the capital of a company, grants part ownership of the company to shareholder. Can be unquoted or quoted and ordinary or preference shares. Ordinary shares normally confer voting rights.

Share Capital. The money paid (subscribed) for ordinary and preference shares in a limited company. Authorised share capital means the total amount of shares available to be issued. Issued share capital relates to the total amount of shares actually subscribed for.

Share Exchange. Owners of unit trusts may use shares they already own to make an investment without having to sell them first. This saves dealing charges.

Share Incentive Schemes. Schemes offering tax incentives to encourage employee participation in a business.

Share Option. An offer by a company, usually to its employees and directors, to buy its shares at a given price before a specified date. With a growing company this can be a valuable employee incentive.

Share Warrant. Document giving the holder the right to buy shares at a fixed price at a given future date.

Short Service Benefit. The benefit provided for someone who leaves a pension scheme before Normal Retirement Date, as controlled by Social Security Act 1973 preservation requirements.

Shorts. Short dated gilts with seven or fewer years to redemption date.

Single Pricing. Method of pricing unitised investments. The purchasing and selling price of units is the same. Pricing method always used for OEICs and may be used for unit trusts.

Small Gifts Allowance. An annual IHT allowance, enabling a donor to give up to £200 per year to any number of separate individuals, which do not have to be accounted for in calculating IHT liability.

Small Self Administered Pension Schemes. To all intents and purposes an 'ordinary' pension scheme but without the involvement of a life company other than the provision of death in service benefits. 'Small' refers to schemes with less then 12 members, to which special rules apply. Société d'Investissement à Capital Variable. (SICAV) The most common type of European investment fund. Has variable capital and is similar to OEICs.

Soft Commodities. Foodstuffs traded as investments such as wheat and wool.

Sole Proprietor. Sole owner of a business, usually referring to a self employed person not in partnership.

Split Capital Trusts. Investment trust company which splits the returns from income and capital growth between investors.

Split Level Investment Trust. Investment trust with both investment shares and capital shares. Spot. Price now of something for immediate delivery.

Stag. Someone who buys a large volume of a new issue shares in the hope of the price rising, thus giving them the chance to sell quickly at a profit.

Staggered Vesting. Phased or staged retirement, achieved by taking cash and income from different policies at different times.

Stakeholder Pensions. Introduced in April 2001 to promote wider pension saving which must meet certain minimum standard criteria and where charges are capped. No minimum age restriction.

Standard and Poors. American credit rating organisation, awarding ratings of AAA (triple A) to D. Anything below BB is purportedly a doubtful proposition for investment purposes.

Standing Order. Regular payment system whereby the purchaser of goods or services instructs their own bank to pay direct to the supplier's bank.

Stock. In the UK, refers to fixed interest securities, usually issued in denominations of £100. In the USA, relates to ordinary shares.

Stock Exchange. A market where stocks and shares are bought and sold. Stock Exchange Automated Quotation System. Screen based system used by Stock Exchange market makers to advise the market of their trading prices.

Stockbrokers. Middlemen, agents, who buy and sell stocks and shares for customers.

Stop-loss. A notional price, perhaps 20 per cent below the buying price, at which a share will be sold to avoid further losses.

Straddle. the simultaneous purchase of put and call options in the same underlying security in the traded options market. sometimes used in the sense of the difference between the bid and offer price.

Subordinated Loan. Often an unsecured loan, and one which would only be repaid after secured loans had been repaid.

Sunrise Industries. New, high-tech, electronics based industries which are replacing 'sunset industry', or old style heavy industries, as the source of major employment and capital investment.

Surrender Value. The amount paid to a policyholder who stops paying premiums into a policy before the expected date. The amount depends on the period the policy had run and expenses still to be recouped by the insurance company.

Swap. Exchanging one thing for another, and used in the financial arena e.g. currency swap, for trading purposes, or interest rate swap, where borrowers swap fixed rate for variable rate investments.

Switching. Transferring sums of money from one unitised fund to another. This is done on a bid to bid basis to avoid 'new money' charges when buying units at the offer price.

SWOT Analysis. A list and examination of the Strengths, Weaknesses, Opportunities and Threats inherent in any situation and course of action.

Taper(ing) Relief. An IHT relief in connection with PETs. A PET drops out of consideration after 7 years, but death of the donor within that period gives rise to a tax liability. Tapering relief operates to reduce that liability over the 7 year period so that death in the first 3 years attracts no relief, year 4 attracts 20% relief; years 5, 6 and 7, 40%, 60% and 80% respectively. The gift 'drops out' in year 8. A CGT relief which for individuals has replaced indexation relief for the portion of an asset gain since 6th April 1998. The taper applies over a 10 year period and is different for business and non business assets.

Tax Allowance. An allowance creates reduction in taxable income, unlike a tax relief, which arises when an expense is incurred.

Tax Avoidance. Making full use of reliefs and exemptions to ensure as little tax as possible is paid. Tax Break Investment. Used to describe an investment which offers a method of tax avoidance - legally reducing the amount of tax normally paid. Tax Code. A code that tells your employer how much tax to deduct from your salary.

Tax Evasion. A criminal offence, generally involving fraud in escaping tax liability.

Tax Voucher. Statement that an amount of money has been paid in tax, for example, when tax is deducted from a share dividend.

Tax Year. The 12 month period from 6th April to 5th April the following year.

Tenants in Common. Individual shares in a property, not automatically on a 50/50 basis. On death, the individual shares may pass under a will separately, not automatically to the other party. See 'Joint Tenancy'. Tender. A proposal to carry out a particular job or project.

Term Assurance. A life assurance policy without investment content which lasts for a specified period, provides a guaranteed sum assured in the event of death within that period, and terminates at the agreed date.

Terminal Bonus. Additional bonus which may be paid at maturity of an endowment policy or possibly on prior death of the policyholder.

TESSA only ISA (TOISA). Special type of ISA used to transfer money into from an existing TESSA, which was the previous tax-free cash wrapper brought in by the government to encourage saving.

Third Market. A market in the shares of smaller, unlisted companies, who do not want to go to the expense of a listing on the stock exchange, nor wanted the regulations of the AIM. Effectively replaces the 'over the counter' market.

Tied Agent. A financial adviser which deals with the products of one company only. Multi-tied agents deal with a limited number of companies' products.

Top Slicing. A method of calculating income tax liability on a chargeable gain from certain packaged products.

Tracker Fund. An investment fund which invests mainly in shares which make up a particular Index with a view to duplicating its performance.

Traded Option. The right to buy or sell certain shares at a fixed price over the life of the option. The writer of the option receives the premium paid in return for the liability of being called upon to buy or sell shares at the fixed price. If the option is not exercised, it expires worthless.

Trading Period. Generally a period of 12 months over which the accounts of a business are prepared. See 'Accounting Period'.

Trail Fees. Renewal fees under unit trusts.

Transfer Premium. A payment made from a contracted out defined benefit scheme to the state scheme, to buy the member back into SERPS. Is used when a member transfers from a contracted out to a contracted in scheme, which cannot accept GMP liability. The only transfer premium allowed after 6th April 1997 is the Contributions Equivalent Premium (CEP).

Transfer Value. Generally taken to mean the cash value of accrued pension benefit in an occupational pension scheme.

Treasury Bills. A short term bill of exchange, depending on discount to give it value, as it does not pay interest. Treasury Stock. Loans to the government for an initial period exceeding 90 days. See Gilts.

Trivial Pensions. A pension from an occupational pension scheme which is deemed to be too small to warrant being paid periodically and, therefore, can be paid in lump sum form, subject to preservation and contracting out requirement.

Trust. A verbal or written arrangement whereby one person or persons (trustees) agree to take care of assets and to use those assets in particular ways for particular people (beneficiaries).

Trustee. Individual or corporate body who looks after the assets of a trust and manages the trust in accordance with terms and conditions agreed verbally or in writing.

Umbrella Fund. An offshore fund offering a variety of sub-funds allowing an investor to switch between them, e.g. different currencies, different stockmarkets. This formerly offered capital gains tax benefits, but these were removed by the 1989 Budget.

Underfunded. Generally refers to the valuation of an occupational pension fund where the actuary perceives that there are insufficient funds to support liabilities within the investment review period. Undertaking for Collective Investment in Transferable Securities. Essentially, unit trust-type investments which may be marketed in any of the European Union member countries.

Underwriting. Has two meanings: taking up shares not purchased by the public, or review and analysis of relevant factors affecting an insurance proposal.

Uniform Business Rate. Tax charged on business property.

Unit Linked. A life assurance, investment or savings policy, under which the policyholder invests premiums into units in a unit trust-type investment. Performance, therefore, is dependent directly on current investment market conditions.

Unit Trust. A collective investment which invests in a range of assets e.g. equities, fixed interest and cash. Can either be general fund or more specialist investing particular type of asset e.g. property or geographical area e.g. Far East.

Units. When investing in a unit linked contract, the individual's contribution is used to buy units of equal value. These units will fall or rise in line with the underlying investments.

Unlisted Securities. Securities/shares not listed on an official stock exchange list.

Unsocial Hours. A financial services legislation concept, concerning times not to contact clients and prospective clients without prior approval. Generally taken to be between the hours of 9pm to 9am, Monday to Saturday. During this time firms should not cold call potential customers.

Value Added Tax. An indirect tax levied on each stage of the production of most goods and services. Currently it stands at 20%.

Venture Capital Trust. A special type of investment trust on the Stock Exchange designed to provide start up or expansion capital for unquoted companies.

Vested Rights. Rights that have accrued to a person e.g. automatic preserved benefit on leaving an occupational pension scheme, after minimum of 2 years qualifying service.

Voidable. Something which, though it may continue to be valid, may be put aside and be made void, in certain circumstances.

Waive. To give up a right to something.

Waiver of Premium. A policy option which provides for the insurance company to waive payment of the policy premium in certain circumstances e.g. sickness or disability.

Warrants. Certificates giving the holder the option to buy shares at a fixed price at a future date.

Wealth Warning. General phrase relating to the mandatory requirement to warn clients of the inherent risk in certain courses of action e.g. 'the value of investments can fall as well as rise', or, 'failure to maintain mortgages payments could result in the loss of your home'.

Whole of Life. Essentially a protection policy with investment content that remains in force until death, at which point it pays out. As the contract is capable of acquiring value, it is possible to surrender the policy.

Winding Up. The termination of a pension scheme, where assets are used to purchase the accrued liabilities of the pension scheme, either by purchasing immediate and deferred annuities, or transfer to another pension scheme.

With Profits. A class of policy which participates in the distribution of surplus in the form of bonuses. Such policies are termed 'with profits'.

Withholding Tax. Tax deducted by many countries from income payments such as dividends, interest and royalties. May be offset, reduced or negated by Double Taxation Relief.

Writ. Court order instructing someone either to do, or not to do, something.

X – no definitions

Yield. A measure of the income received from an investment compared to the price paid for the investment. Normally expressed as a percentage.

Zero Dividend Preference Shares. A share with a predetermined growth rate, but which does not pay dividends.

Zero Rated. Goods (such as food, books and periodicals) taxed at the lowest band of VAT, which is zero. A supplier can reclaim VAT paid in the course of production. All exports are zero rated. Do not confuse with exempt supplies.