Glossary

C

Call option

An option which gives its holder the right but not the obligation to purchase an asset at a predetermined date (maturity date) for a predetermined price (exercise price). See also put option.

Cancellation period

The period after signing a contract during which a customer can change their mind and decide not to proceed.

Capital

The amount you invest in any type of savings or investment product.

Capital charge

When a unit trust manager takes the management charges out of the fund’s capital instead of the income it has produced.

Capital Gains Tax (CGT)

This is a tax you may pay on the profit you make when you sell (or ‘dispose of’) something (an ‘asset’) that has increased in value.

Capital Gains Tax-free allowance

Each tax-paying individual in the UK is entitled to an annual exemption on their capital gains each year.

This means that they can make a certain level of gains (on for instance share sales) without paying Capital Gains Tax.

See also Capital Gains Tax

Capital markets

The markets for medium- to long-term investments, ie three years and over, in securities such as shares and bonds, as distinct from the shorter term money market.

Capital Protected Death Benefit

An option to protect your original investment (less any withdrawals) against a fall in value.

Capitalisation

The market value of a company’s outstanding (owned) shares. It is calculated by taking the share price, and multiplying it by the number of shares currently held by all shareholders. In the same way, capitalisation of the share market is the total of the value of shares currently listed on the market (available to purchase).

CAPM

Abbreviation for Capital Asset Pricing Model.

Capped drawdown

Capped drawdown is a form of drawdown, which has a maximum annual amount. A maximum annual amount was calculated when you first entered capped drawdown, and this is recalculated by your pension scheme every three years if you are under 75, or every year if you are over 75. You can choose to take nothing, or any amount up to the maximum amount each year. Capped drawdown is no longer available as a retirement option, but existing arrangements remain until such time as they are converted to flexi-access drawdown arrangements.

Carry back

A member can sometimes transfer pension contributions to an earlier tax year for tax relief purposes. This is called carry back. The carry back rules no longer apply after 31 January 2002.

Carry forward

Carry forward allows you to make pension contributions in excess of the annual allowance for a tax year, without incurring a tax charge. Making use of unused annual allowances from the previous 3 tax years.

Cash

The word cash relates to many different terms: cash deposit facility, the cash fund, a cash account, or cash as an asset type. Please refer to each individual entry for further information on each of these.

Cash equivalents

Short-term investments held in lieu of cash and readily converted into cash within a short time span (i.e. bank bills, treasury notes etc.), generally with maturities of no longer than 180 days.

Cash fund

ReAssure has a cash fund called OMW Blackrock Cash fund. This fund invests solely in the BlackRock Cash Fund, which is managed by BlackRock Fund Managers Ltd.

Cash in value

The amount of money that will be paid if the plan holder  closes the policy. It could be lower than the plan value due to charges.

Cash-in value

The amount you might get if you cash in an investment.

Certain Return of your investment money

Referring to an investment product, normally offered by a life insurance company, which includes some form of guaranteed return of capital.

Certificate of Deposit

A written certificate by a bank or financial institution stating that a fixed amount has been deposited with it for a fixed period of time at a predetermined rate of interest.

Certificates

A document showing details of units held within a unit trust, shares or bonds.

Chaps

Clearing House Automated Payment System A process which makes the payment available in the recipient’s bank account on the same day that it is sent. It is subject to a £23 charge.

Charge

The price paid for services provided. There are various levels of charges across our accounts; please check the individual account type for full details. Fund and asset managers will also have their own charges.

Charge basis conversion

When a customer chooses to move or is automatically moved from one Charge Basis to another (certain trigger events can cause a Charge Basis conversion).

See “”Making the cost of investment clear”” guides for full details.

Charity Maturity date (CMD)

This was decided when the account was first opened, depending on whether standard or non-standard commission was selected for the financial adviser. After the set date, certain charges no longer apply.

Chargeable event

An event that results in the distribution of some or all of the bond proceeds/monetary value, giving rise to calculations which could then result in an income tax liability. Such events include, but are not limited to, withdrawals over the 5% tax deferred allowance and assignments.

Chargeable gains

When a chargeable event occurs or arises this is the amount of gain (see Growth/Gain) on which someone may have to pay Income Tax. This depends on the tax position of the person liable.

Chargeable Lifetime Transfer (CLT)

A gift into a discretionary trust. Potentially exempt transfers may become chargeable transfers if certain circumstances are met. There can be complicated tax implications, which you should discuss with your financial adviser.

Chartist

Technical analyst who charts the patterns of stocks, bonds and commodities to make buy and sell recommendations to clients. Chartists believe recurring patterns of trading can help them forecast future price movements. See also technical analysis.

Child

Means a natural or adoptive child.

Chinese wall

An imaginary ‘wall’ comprising procedures and policies adopted to avoid conflicts of interest within an organisation (eg to separate the stock broking and investment management operations of a financial services group).

Churning

The practice of acquiring a holding of shares and then placing both buying and selling order for those shares (usually at about the same price or slightly higher) in order to build up turnover. It may also be used when financial advisers repeatedly move business to generate fees.

Citywire Ratings

The Citywire Ratings provide a totally objective statistical gauge of the individual fund manager’s risk adjusted performance. Citywire considers all managers who run actively managed retail funds within 24 IMA sectors and assigns AAA, AA or A Ratings to managers who achieve or exceed demanding performance thresholds based on their 36 month risk records.

Civil partner

Has the meaning given to it in the Civil Partnership Act 2004 of the United Kingdom (or any

replacement legislation).

Client Money Account

A ring-fenced bank account, holding money belonging to ReAssure’s customers. The FCA has strict rules around how this money is held and administered to ensure it is suitably protected.

Client Money Rules

FCA rules which set how companies have to act when receiving or holding a customer’s money.

Closed funds

Funds which have either stopped trading, or have placed restrictions on new investments.

Closed policy

A policy within the bond that has been fully cashed in as part of a withdrawal.

Closed-end fund

A pooled fund that has a fixed number of shares usually listed on a major stock exchange.

Closing price

The price at which an asset stopped trading at the end of a trading day.

Closure

Taking a withdrawal of the entire account value, resulting in the account closing.

Collar

Referring to a loan facility in which both maximum and minimum interest rates are specified. The maximum acts as a cap while the minimum rate is a floor below which the interest rate will not be allowed to fall.

Collective investment bond (cib)

An investment account which gives access to a variety of asset types. It includes an element of life assurance, which can be beneficial for tax purposes.

Collective investments

Funds which use money invested by a number of customers and pool it together to buy assets and company shares. This method enables investors to invest in a more diverse range of assets  than would otherwise be the case and therefore spread their risk. Examples are: unit trusts and OEICs.

Collective redemption bond

The Collective Redemption Bond is an offshore-based single premium redemption contract. A redemption contract has no life cover and therefore does not end on the death of the policyholder and can be passed to future generations.

Collective Redemption Bond

The Collective Redemption Bond is an offshore-based single premium redemption contract. A redemption contract has no life cover and therefore does not end on the death of the policyholder and can be passed to future generations.

Collective Retirement Account (CRA)

A pension which allows you to invest money in a tax-efficient way and provides flexible options at retirement.

Combined initial transfer charge

This is the charge we make we take when a number of pension transfers are made into an OMW pension. Rather than taking a number of initial charges, we combine them into a single fee, taken once.

OMW and fund managers make charges for our services, advisers have fees.

Commingled fund

The collective investment of the assets of a number of small funds, sometimes through a master fund arrangement, allowing for broader and more efficient investing.

Commission

Money paid to a financial adviser for introducing the investment for a product, or the ongoing servicing of an investment. We no longer offer adviser commission on new business (except Protect).

Commodity

A tradable item that can generally be further processed and sold; for example metals, wheat, sugar, coal etc.

Commutation

Commutation is the act of exchanging your pension rights for lump sum rights. Normally, this means taking your pension commencement lump sum (PCLS, commonly referred to as Tax-Free Cash), but there are other lump sum options too.

Company name

On the account this can be the company who has involvement with the investment (e.g. corporate/company investor, discretionary fund manager)

Company name can also refer to the trading name of the company which provides that account: ReAssure Ltd, ReAssure Life Ltd.

Company pension scheme

A pension scheme set up by an employer used to provide benefits for their employees; sometimes called an occupational pension scheme or executive pension scheme. Could be a defined benefit scheme or a defined contribution scheme.

Compensation

A payment made to someone in recognition of loss, an error, or trouble and upset cased.

Compliance

Following a rule or law.

Compound interest

In, for example, a deposit account, this is where interest is added to both capital and the accrued interest from time to time. The longer a customer leaves an investment the more advantage they can make of compound interest. Eg in Year 1 a customer is paid 10% on his/her £100 investment. At the end of Year 1 this investment is worth £110. In Year 2 with compound interest taken into account the customer now earns 10% on £110, giving him/her £121 by the end of Year 2. In Year 3 they earn 10% on £121 giving a grand total of £133.10.

Compulsory Purchase Annuity (CPA)

A historical term used for an annuity purchased using your pension savings, as opposed to an annuity purchased with other savings.

Consumer

A person using the services of a professional person or company.

Contact details

Used whenever asking for Home phone number / Mobile phone number / Email address and Confirmation of email address.

Contract

An agreement between individuals, companies or other entities, which binds each party and is legally enforceable.

Contracted in money purchase scheme (CIMP)

A money purchase pension scheme that cannot accept payments relating to its members contracting out. Not applicable after 6 April 2012.

Contracted out money purchase scheme (COMP)

A money purchase pension scheme that cannot accept payments relating to its members contracting out. Not applicable after 6 April 2012.

Contracting out

Redirecting NI contributions paid towards the State Second Pension (S2P) into your private pension. No longer available.

Contribution

The money paid into the plan or account, to buy units in the chosen fund(s). For pensions, contributions may be made by either employers or employees or both.

Contribution servicing charge

A charge applied to certain pensions if contributions are reduced or stopped before the selected retirement date. The charge applies until contributions are increased to their previous highest level, or until selected retirement date, whichever is sooner.

Contribution type

Regular contributions or single contributions (such as lump sums and transfers).

Contributory pension

Term generally used in reference to occupational pension schemes where the employee contributes a proportion of their salary in addition to a contribution made by the employer.

Controlling Director

This is a director who owns or controls 20% or more of the voting capital of a company either directly or indirectly. This 20% includes shares held by the director’s family and associates.

Core funds

Core funds are often considered the essential building blocks or cornerstones of a portfolio because these funds take a ‘middle of the road’ approach to generating returns for shareholders. Core funds are focused on producing solid long-term results while attempting to manage risk.

Core portfolio

A portfolio comprising (generally), the bulk of a fund’s assets, which is invested in a highly controlled fashion in an attempt to secure the fund’s liabilities with a reasonable degree of confidence. The balance may then be invested in a satellite portfolio(s), which may be invested more aggressively.

Corporate bonds

A loan to the company usually with a fixed rate of interest and usually over a specified period of time. The original amount is usually repaid at the end of the loan period.

Corporation Tax

Tax paid by companies on trading profits and capital gains.

Correction

We use ‘Correction’ to mean corrective work carried out on a customer’s account by us, following an error/breach/agreed concession.

Coupon

The interest rate applied to the value of a corporate bond or gilt.

Cover

The amount of the cash sum we will pay out when the customer dies or suffers a terminal illness.

Cover note

A temporary document that can be used as evidence of insurance cover, while the actual policy and insurance certificate are being prepared.

Cover Reinstatement Option (CRO)

The option to reinstate your cover after a claim.

Cover Reinstatement Option Premium

The periodic cost of the Cover Reinstatement Option (CRO) Benefit.

Cover start date

This term is used for our protect product(s) where we offer life cover or life assurance-type benefits to customers. This is the date on which a customer’s cover starts as stated on their policy schedule. This could be before the plan start date. Some of our terms refer to this as the “acceptance date”.

Cover term

The length of time your cover lasts for – this can be a fixed period, or throughout your life. 

Credit risk

The risk of suffering loss due to another party defaulting on its financial obligations.

Credit scoring

A test of an individual’s financial status. Points are awarded on a range of criteria that include income, home ownership, debts and repayment history.

Critical illness

A life threatening illness. On products where we offer critical illness cover, we will pay a cash sum if the customer suffers from, or needs surgery for, one of the listed conditions.

Critical illness insurance

An insurance policy that pays out a capital sum if the life assured is diagnosed as suffering from certain critical illnesses. 

Critical yield

Used to compare the rate of return on your pension savings. It appears on our projections to make it easy to compare the different options available. You should discuss this with your financial adviser when thinking about which pension options to choose.

Cro live

Indicates that Cover Reinstatement Option (CRO) is applicable to at least one life assured on the policy before any proposed change

Crown servant

An officer of HM Government employed under the Crown whose duties are of a public nature and whose salaries are paid out of public funds

Crystallisation

When you use your pension to make withdrawals (usually in the proportions: 25% tax-free cash and 75% taxable income), that part of your pension being used to provide the withdrawals is referred to as ‘crystallised’. So for every £100 you take as tax-free cash, £400 of your pension is ‘crystallised’. The remaining £300 (75% of the crystallised amount), will be treated as taxable income when you withdraw it.

When any of your pension savings are crystallised, this is known as a Benefit Crystallisation Event (BCE).

Crystallised

When you use your pension to make withdrawals (usually in the proportions: 25% tax-free cash and 75% taxable income), that part of your pension being used to provide the withdrawals is referred to as ‘crystallised’. So for every £100 you take as tax-free cash, £400 of your pension is ‘crystallised’. The remaining £300 (75% of the crystallised amount), will be treated as taxable income when you withdraw it.

When any of your pension savings are crystallised, this is known as a Benefit Crystallisation Event (BCE).

Cum dividend

Referring to a share which is trading such that buyers rather than sellers qualify to receive the next dividend payment. This is usually reflected in the price of the security in question.

Cumulative performance

The performance of a fund’s price over a given period of time.

Currency

A country’s unit of exchange that has a value in terms of purchasing goods and services within the country.

Currency option

An option contract which gives the buyer the right (but not the obligation) to buy or sell a specified amount of a foreign currency in exchange for another on or before a specified future date. Sometimes used to hedge securities held in overseas markets.

Currency overlay

An investment management technique aimed at protecting an investor’s overseas currency exposure.

Currency risk

Risk of incurring losses as a result of movements in international exchange rates.

Custodial charges

Charges made a bank or other financial institution for holding stock certificates and/or other assets on behalf of clients.

Custodian

A bank or other financial institution that holds stock certificates and/or other assets on behalf of clients.

Custody

When a financial institution holds assets on behalf of others.

Customer

A person using the services of a professional person or company.

Customer identification form

A document used to confirm the identify of a customer. 

Customer Service Representative

An employee who works in our customer service centre or supporting teams.

Customer Status

The status of the client as per the possible values before a change is performed.

Cut off time

The last point in time for trades to be placed at the next available dealing point. Refer to the funds list for the specific times of each fund.

Cyclical stocks

Shares which move directly with the business cycle; generally they advance as business conditions improve and decline when business slackens.

E

EAFE Index

Abbreviation for Europe, Australia and Far East Index, a stock market index, often used as an ex-United States world equity benchmark by United States investors.

Early Encashment Charge (EEC)

A charge that must be paid as a result of cashing in a policy earlier than the set date. This applies to a small amount of our life products, please check your account details for further information. 

Early retirement

The Government have set an age at which most people can access pension savings (normal minimum pension age). Some pension schemes also have their own set retirement ages. Taking pension benefits before either of these might be referred to as early retirement.

Earnings per share (EPS)

A measure of a company’s performance, calculated by dividing the company’s net operating profit after tax, divided by the number of shares in issue.

Earnings Threshold

This is the HMRC defined limit up to which earnings qualify for a Contracted Out rebate.

Earnings yield

A ratio calculated by dividing a company’s earnings per share by its current share price. The reciprocal of the price earnings ratio.

Efficient Frontier Modelling

An investment portfolio is said to reside on the ‘efficient frontier’ if it is expected to produce returns greater than other portfolios (ie with different asset mixes) of the same or lesser risk, where risk is defined as the standard deviation of the returns. In order to calculate an efficient frontier, future investment returns and their standard deviation need to be known. These are, of course, unknown and need to be estimated from past market data. However, there is no guarantee that the past will be a suitable guide to the future and so efficient frontiers cannot be determined with certainty.

Electronic payment

A system for sending money electronically between banks. This is how we automatically pay out to customers, is free and can take up to 5 working days. 

Emerging markets

Financial markets in countries with developing economies, where industrialisation has commenced and the economy has linkages with the global economy. The financial markets in these countries are immature compared to those of the world’s major financial centres, but are becoming increasingly sophisticated and integrated into the international markets. These markets provide potentially high returns but are subject to high risk and volatility.

Employer Funded Un-Approved Retirement Benefit Schemes (EFRBS)

End Date

The date on which your Policy is due to end.

Endowment assurance

A life assurance policy that pays a lump sum on a fixed date or on death of the life assured.

Endowment assurance

A life assurance policy that pays out a lump sum after a specific period of time or on death of the policyholder. They can be used as a vehicle for saving or as a way to repay a mortgage. It is important to remember that an endowment is a long-term commitment. A customer who surrenders their policy early may not get back the amount of money they have invested. Note: the definition does not apply to either an Endowment or a Pure Endowment.

Engagement

An ethical investment fund may follow an ‘engagement policy’ by using the influence of shareholders to challenge companies about their environmental or social performance. This means entering into a dialogue with companies to improve their environmental or social policies and to promote industry ‘best practice’.

Enhanced protection

A type of transitional protection which lets you crystallise as much as you want without a lifetime allowance tax charge.

Enter

Used whenever asking a customer to enter their details online.

Equalisation

When you invest in buy a fund between income payment dates , the price you pay relates to the value of the fund, including includes any income that it has been generated received by the fund since the last income distribution payment date and this is rolled up in the price you pay. From your tax perspective this is capital and not income, since you did not hold the units when the income was earned. Therefore as you have paid an inflated price, caused by the accrued income, at the next distribution the fund manager will reimburses you that part of your capital you with rather than paying all income in the first income payment. It is called an ‘equalisation payment’.

This is treated as a return of capital and as such is not taxed.

Equities

Stocks and Shares with no fixed interest. Investors are entitled to a share of the profits which are paid as dividends.

Equity Funds

An investment fund that invests in shares in UK or overseas companies. Investors are entitled to a share in the profits which are paid as dividends.

Equity risk premium

The difference between the rate of return available from risk-free assets (such as government bonds) and that available from assuming the risk inherent in more volatile investment such as shares.

Escalation rate

When a pension in payment is automatically increased at regular intervals by a fixed percentage rate or the increase of a specific index such as the Retail Price Index (RPI).

Ethical investment

An investment approach which takes into account considerations other than solely the financial return potential of particular investments. An ethical portfolio might, for example, avoid investing in alcohol or tobacco.

Excess return

The return achieved by a security over and above that obtained from a risk-free asset (such as a short-term government bond) held over the same period.

Exchange rate

The price of one currency in relation to another.

Exchange rate risk

The risk that the value of an investment may be diminished by movements in the exchange rate on a foreign currency.

Ex-dividend

An asset is deemed to be ‘ex dividend’ for the time between the announcement and payment of a dividend/distribution. An investor must own the asset before the ex dividend period begins to be entitled to the dividend/distribution.

Executive pension scheme

A pension scheme set up by an employer used to provide benefits for their employees; sometimes called a company pension scheme or occupational pension scheme. Could be a defined benefit scheme or a defined contribution scheme.

Executor(s)

Individual(s) or company(s) who are appointed in a will to deal with the wishes of the deceased, in administering their estate.

External audit

The risk associated with investments in a particular industry sector, country, company etc. Assessments of exposure risk are routinely conducted by responsible investors, as some risk element is inherent in all forms of   investment other than cash.

External manager

An organisation (eg an investment management company) engaged to manage and invest funds on behalf of a client.

Extranet

This is the extension of a company’s intranet, to allow selected customers, suppliers and mobile workers to access the company’s private data and applications via the internet. It is usually in addition to, the company’s public website which is accessible to everyone.

G

Gearing

A measure of indebtedness, ie the extent of borrowing as against the equity held by a person or company in an asset. The ability to increase exposure by investing in futures contracts without making the underlying cash available. See also Leverage.

Gift

Is a transfer of goods or property to another party. There are limits to the amount of gifts you can make without any tax liability.

Gilt

A loan to a government usually with a fixed rate of interest and usually over a specified period of time. The original amount is usually repaid at the end of the loan period.

Gilt edged

Low risk investment with high security.

Gilt rate

The yield on a basket of 15 year UK government issued securities. It is set by the Government used in the calculation for the maximum income available in capped drawdown. Can change each month

Global CAP:Link

A stochastic asset model built by Tillinghast Towers Perrin (now Towers Watson), which uses mathematical formulae to project many hundreds of plausible, although not necessarily likely, paths for future investment returns for the asset classes. Whilst every effort has been made to make this as accurate as possible, actual future investment returns could be significantly different to those projected by the model. It focuses on the longer term and does not try to predict short term factors that might make one asset class relatively attractive compared to other classes, as such it should not be used for short term, tactical investments.

Goodwill payment

A payment made, which we are not legally obliged to make. Often in respect of trouble and upset caused. It is not subject to tax.

Government Actuary’s Department (GAD) Rates

The tables of annuity rates produced by the Government Actuary, on behalf of HM Revenue and Customs, which are used to work out the maximum income which may be withdrawn from unsecured pension funds and alternatively secured pension funds (income drawdown)

Graphical User Interface

Graphical User Interface.

Greenback

A colloquial term for the US dollar.

Greenmail

A term that describes when a hostile bidder threatens a company with takeover by purchasing a large number of its shares, forcing the management of the company to repurchase the shares at an above market price.

Gross

The total before any deductions are made.

Gross contribution

The total amount paid into a pension including any tax relief.

Gross Domestic Product (GDP)

A measurement of the aggregate goods produced and services provided within an economy over a year and excluding income earned outside the country. Considered one of the main yardsticks of the health and vitality of an economy. See also Gross National Product.

Gross interest

The amount of interest you receive before any income tax is deducted.

Gross National Product

An economic statistic which includes GDP (Gross Domestic Product) plus any income earned by residents from their overseas investments, minus income earned within the domestic economy by overseas residents. See also Gross Domestic Product.

Gross pension withdrawal amount

Amount of the payment to the customer, before the deduction of any income tax

Group 2 units

Group 2 units are units purchased during the fund’s distribution period. They may constitute all or part of your total holding.

Any dividends paid in relation to group 2 units will be taxed differently to dividends paid in relation to group 1 units.

Group 2 units will automatically become group 1 units at the end of the fund’s distribution period.

Group of Seven (G7)

The seven major capitalist powers: Canada, France, Germany, Italy, Japan, UK and the US.

Growth investor

One who seeks capital gain from expected further growth in company earnings. Typically, growth investors care less about price/earnings ratios and other valuation measures and more about earnings growth.

Growth or gain

The increase in value of an asset or investment. It is measured using the current value, compared to the amount originally invested. If the current value is more than the original amount, or cost, this difference is the capital growth.

Growth stocks

Stocks, whose earnings have grown at an above-average rate over a number of years, and which are expected to continue to grow at a high rate for some time to come.

Guaranteed Increase options

A guarantee that we will allow an increase to the sum assured at the time of certain life events, without any further health assessments.

Guaranteed minimum pension

A guaranteed pension amount paid, as a condition of contracting out of SERPS (State Earnings-Related Pension Scheme) under a Final Salary Scheme, up to and including 

5 April 1997, from which point different rules apply.

Guaranteed minimum pension (GMP)

A guaranteed pension amount paid, as a condition of contracting out under a Final Salary Scheme, up to and including 5 April 1997, from which point different rules apply.

Guaranteed Pension Fund (GPF)

A fund previously run by Skandia. No longer open.

Guaranteed product

An investment product sold by life insurance companies that guarantees a return for a specific length of time on a large, lump-sum premium. ReAssure does not offer any such products.

Guaranteed whole life cover

Cover which lasts throughout the customer’s life, and for which premiums never change unless the customer changes the level of cover.

Guaranteed Whole of Life policy

A plan where the sum assured is guaranteed to be paid as long as the plan holder pays the required premium (which is not guaranteed to remain the same throughout).

I

ICVC

Investment Company with Variable Capital.

The generic term for an OEIC (Open Ended Investment Company) or similar investment vehicle where investors pool their contributions with those of other people, to create a portfolio of assets.

Illustration

A key features illustration is a regulated document that must be given to customers starting a new investment. It gives an example of the potential growth a customer might expect to receive from an investment, under various economic conditions, taking into account the charges made. The format of illustration is set by the Financial Conduct Authority, our industry regulator. It is important to remember that the actual return received could be higher or lower than those shown on the illustration.

Illustration Expiry Date

The date the prepared quotation ceases to be valid (generally 30 days after it was generated).

IMA sectors

Grouping of funds for performance measurement by the Investment Management Association.

Immediate tax-free cash

The payment of tax-free cash, before the lump sum or transfer amount is invested. Fees and charges will only apply to the invested amount.

Incapacitated

Either unable to carry out at least three Activities of Daily Living, even with the use of Assistive Devices, or suffering Mental Impairment.

Incapacity

Means physical or mental inability to do something. We use the Activities of Daily Work or Activities of Daily living to assess this.

Income

Money received by an individual as a salary, or from investments.

Income Beneficiary

Person to whom income from the Trust Property is payable either as a right or at the discretion of the Trustees.

Income portfolio

A portfolio consisting of securities which aim to provide income to the investor.

Income tax

Tax paid by individuals on income received over a certain threshold. The amount paid will depend on the amount earned during a tax year.

Income unit

Units in a fund where the income it generates is paid to investors. Investors can choose to receive the income as cash or reinvest it to buy more units in the fund.

Indemnified

Determines whether initial commission is paid up front (indemnified) or not.

Indemnified Commission Terms For New Regulars

To identify if the commission payment is ‘upfront’ or on receipt of each regular contribution

Indemnified initial commission

This is calculated as a percentage, for a set number of months, from when a regular premium starts or is increased. The amount is paid as a one off lump sum to your adviser, when the first regular premium, or increased premium is paid. The amount you agree with your financial adviser at outset cannot be changed. Commission is paid to your adviser by ReAssure out of the charges collected from your plan.

Indemnity insurance

An insurance designed to compensate a policy holder for any loss suffered.

Index

A  statistical measure of change in an economy or a securities market. 

Index

In the stock market, an index is a device that measures changes in the prices of a basket of shares, and represents the changes using a single figure. The purpose is to give investors an easy way to see the general direction of shares in the index.

Index fund

A portfolio of securities structured in such a way that its value will closely follow a nominated market index, eg an equity index fund may be designed to track the FT/S&P All Share Index.

Index linked

A way of managing a fund. An index-linked fund simply follows as closely as possible the movement within a chosen market. It does not aim to outperform the market like active management does.

Index linked gilts

A UK government bond (gilt) whose redemption value and interest payments are linked to inflation (as measured by the Retail Prices Index).

Indexation

Making an adjustment to allow for the effects inflation can have on money, used to reduce the amount payable in Capital Gains Tax. Another name for Index Tracking. An investment strategy designed to produce a rate of return in line with a specific financial index.

Indexation

Making an adjustment to allow for the effects inflation can have on money, used to reduce the amount payable in Capital Gains Tax.

Another name for Index Tracking. An investment strategy designed to produce a rate of return in line with a specific financial index.

Individual protection

A means by which an individual is allowed to have a personal Lifetime Allowance (LTA) which is higher than the standard LTA.

Individual Savings Accounts

An investment solution that provides savings for individuals in a tax efficient product.

Inflation

An increase in the level of prices of goods and services in the economy. It is typically measured by examining a basket of goods and services.

Information

We will generally require some personal information about you (eg your address), some information about your policy/plan and about your financial adviser.

Inheritance Tax (IHT)

A tax payable on property and money acquired by gift or inheritance valued over a certain limit. This is a complex tax area, please speak to your financial adviser for more information.

In-house

Referring to an activity which is conducted within an organisation rather than contracted out to an external party.

Initial charge

A charge that is made to cover the cost of setting up the investment.

Initial fee

Initial fees deducted from your plan and paid to your adviser each time you make a contribution. You can agree a different level for each regular premium increase or single contribution.

Initial Fee/Commission

A fee charged to a borrower at the commencement of a loan, or a commission levied on an investor to buy into a unit trust. Also known as a front end load.

Initial Period

Period in months for which initial commission is paid.

Initial price funds

This refers to the range of ReAssure funds where there is an initial charge included within the offer (buying) price.

Initial Public Offering

(IPO) The first sale of shares of a company to the public.

Insider trading

The illegal practice of trading in securities on the basis of ‘inside’ or secret information which is not available to the public at large.

Insurable Interest

A valid reason to take out insurance on somebody else’s life. This must exist when the application is done, for a life assurance policy to be issued.

Insurance Policy

An independent insurance contract, which can be one of several in a plan. It can be cancelled or altered independently of the others.

Insurance premium tax

A tax levied on most non-life insurance policies.

Insured

A person covered by an insurance policy.

Insured Occupation

The occupation you have disclosed in your application or subsequent correspondence.

Insurer

A company that provides an insurance policy.

Interest

The return earned on funds which have been loaned or invested (ie the amount a borrower pays to a lender for the use of his/her money).

Interest rate

The amount of money you can earn on an investment. It is usually expressed as a percentage of the total sum invested.

Interest rate risk

The risk borne by fixed interest securities, and by borrowers with floating rate loans, when interest rates fluctuate. When interest rates rise, the market value of fixed interest securities declines and vice versa.

Interest rate sensitivity

The degree of movement in the price of a security, usually that of a bond, resulting from moves in interest rates.

International Monetary Fund (IMF)

An international organisation founded in 1947 to promote maintenance of equilibrium in the balance of payments among the various nations of the world. The functions of the IMF include the levying of quotas on member nations to create a pool of funds available to be loaned to nations facing balance of payments problems.

International Securities Identification Number (ISIN)

An international system used for numbering specific securities, such as stocks and shares, bonds, options and futures.

Inter-spousal transfers

A  transfer of assets between spouses or civil partners. Under Inheritance Tax rules this is tax free. Under Capital Gains Tax rules this is on a no gain/no loss basis.

Intestate

This describes when a person dies without a valid will.

Investment

An asset acquired for the purpose of producing income and/or capital gains for its owner.

Investment analyst

A financial expert trained to analyse the activities and future prospects and earnings of companies and securities for the purpose of investment.

Investment Assets

These are the different types of assets held within the account. These may be described on statements as Collective Investment Funds, ETFs (exchange traded funds), Investment Trusts and Equities. 

Investment Bond

A single premium plan that allows you to invest in a variety of funds, with an element of life cover. Normally designed to produce long-term capital growth, but can be used to generate an income.

Investment company

A company whose main business consists of specific activities relating to investments. For example stockbrokers and investment fund managers.

Investment confirmation statement

Confirmation of the investment that has been made. This shows details of the shares or units brought and sold, and the values. 

Investment environment

The general economic, political, legal and market conditions within which an investment is made.

Investment Grade Bonds

Bonds which have a credit rating which is sufficient for them to be purchased by most institutional investors.

Investment horizon

The total length of time that an investor expects to hold a security or portfolio. The investments made to provide for future retirement income, for instance, would almost always be different from those for short-term purposes.

Investment Management Agreement

A contractual agreement between an investor and an investment manager which states the terms and conditions applying to management of the stated assets.

Investment Management Regulatory Agreement (IMRO)

A regulatory organisation for the UK investment management industry.

Investment manager

An organisation or individual that buys and sells shares or other assets on behalf of others.

Investment philosophy

The set of principles or systems used by investors to govern the way they manage portfolios. Sometimes confused with investment style, which tends to be more associated with the level of risk in the portfolio.

Investment trust

A form of collective investment. Investment trusts are closed-ended investment vehicles which means that the value of shares in the investement trust is affected by supply and demand (as the number of shares is fixed). 

Investor

A person who commits money to something, expecting financial returns.

Irreversible

We use this when describing a disability that cannot be cured by medical treatment and/or surgical procedures used by the National Health Service in the UK at the time of the claim.

Irreversibly

The disability cannot be cured by medical treatment and/or surgical procedures used by the National Health Service in the UK (or any service which replaces it) at the time of the claim.

Irrevocable designation

An instruction to designate the account in favour of another person(s) (e.g. a child).  It changes the legal ownership by creating a trust, with the account holders as trustees.  The designation cannot be changed or removed.

K

Key Features Document (KFD)

A document containing key information about a financial product, such as its aims, commitment and risks involved, an explanation of the charges, as well as answers to some of the most commonly asked questions.

Key features illustration

A key features illustration is a regulated document that must be given to customers starting a new investment. It gives an example of the potential growth a customer might expect to receive from an investment, under various economic conditions, taking into account the charges made. The format of illustration is set by the Financial Conduct Authority, our industry regulator. It is important to remember that the actual return received could be higher or lower than those shown on the illustration.

Key Investor Information Document (KIID)

A document giving key facts about the way each fund works and its investment risks. Designed to assist customers in making an informed investment decision.

Key person insurance

A life assurance policy to cover the death of a business’s key employee. It pays out a lump sum that is designed to cover the costs of finding and training a replacement, as well as covering any loss of profitability.

Keyman policy

A policy which is taken out by a Company or Limited Liability Partnership to cover the loss of profit and/or the cost of replacing a key employee (the Life Assured) in the event of death or critical illness.

M

Macroeconomics

Economic analysis concerning broad trends and influences on the economy, such as the interaction of fiscal and monetary policies, GDP, balance of payments etc. As opposed to Microeconomics which focuses on individual units such as companies and markets to assess their influence on the economy.

Maintenance Charge

An administration charge that ReAssure makes for running the plan. This only applies on certain products.

Managed fund

An investment fund run on behalf of an investor by an agent (typically, an insurance company). A fund manager chooses the investments.

Managed Portfolio Service

Available to those invested in the WealthSelect investment range, this provides a convenient and complete investment solution. It enables advisers to fully outsource portfolio construction and management to a team of investment specialists.

Mandate

The agreed objectives given by an investor to his or her investment manager, often including a benchmark, guidelines as to sector exposures and prohibited investments.

Mandatory review

For capped drawdown only. This is a review which takes place at the end of the client’s 3 year review period.  It is mandatory i.e. the client has no choice, the maximum limits will change and will be calculated based on the GAD rates at the time of the review.

Marginal tax rate

The highest income tax rate you currently pay.

Market capitalisation

The market value of a company’s outstanding shares. This figure is found by taking the stock price and multiplying it by the total number of shares outstanding.

Market price

With reference to a security, the last reported price at which the security sold. Alternatively, the highest price which a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Market risk

The risk that the value of an investment will decrease due to moves in factors affecting the overall market.

Market timing

A trading strategy where you make decisions to buy and sell based on anticipation of changes in market prices/movements.

Market value

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

Market Value Reduction (adjustment)

On some types of with-profits policy, if you surrender the policy early the company may apply a Market Value Reduction (MVR) also called a Market Value Adjustment (MVA) or Surrender Value Reduction (SVR). This will reduce the surrender value of your policy to reflect poor investment conditions. The purpose of the MVR is to ensure that the surrender value is not unfairly higher than the market value of the policy’s assets, and that a fair share is left for the remaining policyholders.

Marketing Allowance

This is the percentage uplift to be applied to the initial commission as part of a marketing incentive for sales.

Matching

The arrangement of assets, and the return from those assets, to meet future liabilities and obligations.

Maturity date

The date on which your plan will end.

Maximum contribution limit

Before A-Day, pension contracts had maximum contribution levels, known as “age vs earnings” which were based on a calculation the pension scheme would carry out.

Maximum contributions

Pension contracts have maximum contribution levels. The levels are set by HM Revenue & Customs because tax relief is available on these contributions.

Maximum gain

The maximum gain represents the best possible return, over a minimum of three months within the performance period.

Maximum loss

The maximum loss represents the worst possible return, over a minimum of three months within the performance period.

Mean

A type of average. The mean average is the total of a collection of values divided by the number of values in the collection.

Median

A type of average. The median is the middle value in a set of data. For example, if five items cost £20, £80, £100, £300 and £500 respectively, the median value would be £100.

Medical consultant

A person who holds an appropriate appointment as a consultant or equivalent at a hospital in the United Kingdom, the Channel Islands or the Isle of Man and with qualifications and experience that are acceptable to our Chief Medical Officer.

Member

A person who is in a pension scheme.

Member choice

A facility made available to the members of a defined contribution fund allowing them to decide the proportion of funds to be allocated between high and low risk investment strategies, sectors and/or managers. Typically, a fund with a member choice facility will allow members the opportunity to switch between investment options at certain intervals.

Mental health

Mental illness is often the silent secret be it money problems, stress, anxiety, or depression. Your RedArc Personal Nurse Adviser can offer a listening ear and help you seek the support you need.

Mental Impairment

Impairment due to organic brain disease or brain injury, where the Relevant Life Assured’s ability to reason, remember and understand has deteriorated to such an extent that the Relevant Life Assured can no longer look after themselves without the constant supervision and assistance of another person.

Microeconomics

Economic analysis dealing with individual companies or markets and their impact on the economy, as opposed to macroeconomics which focuses on broader influences and trends.

Middle band earnings

Earnings between the lower earnings limit and upper earnings limit.

Minimum Contribution

Contributions payable to a personal pension or stakeholder pension by HM Revenue & Customs for a member who has contracted out of SERPS (State Earnings-Related Pension Scheme) or the State Second Pension. This could also refer to minimum contribution levels that can be paid into a financial product.

Minimum Income Guarantee (MIG)

A forerunner of the Government issued Pension Credits. A means-tested benefit paid by the government to individuals on low income at retirement. 

Minimum Regular Premium

The minimum regular premium allowable at the frequency the plan is being paid

MIP

A flexible, tax-efficient method of getting growth through regular investment over a time frame of 10 years or more. The plan includes a small amount of life cover, the cost of which depends on age and the amount paid into the plan. 

Mirror Fund

Our fund which is set up with the aim of replicating a fund provided by an external fund manager.

Mixture/mixed

This is used to describe a bond withdrawal carried out using a combination of methods, e.g. selling (surrendering) entire policies, then a partial withdrawal across the remaining policies to make up the amount requested.

Money market

The market for trade in short-term securities such as Bills of Exchange, Promissory Notes and Government and Semi-Government bonds. Participants in the money market include banks and other financial institutions, life offices, stockbrokers, pension funds and Government authorities. See also capital markets.

Money purchase pension

A pension scheme where the final pension a member receives depends on the value of their savings on retirement. The amounts put into the pension are defined, but the amount a person will get out is not.  Also referred to as defined contribution schemes.

Moody’s

American credit rating organisation – operates in similar fashion to Standard & Poor‘s.

Mortality rate

This is used when calculating the cost of life cover. It is based on the number of deaths in a given area or period, or from a particular cause. 

Multi-manager

Multi-manager is a means of investing where you can access a wide range of different fund managers through a single investment product.

Mutual fund

An American term for certain forms of collective investments. A mutual fund is a professionally managed scheme that pools money from many investors and invests typically in funds, other securities (stocks, bonds, short-term money market instruments), other mutual funds, other securities, and/or commodities.

O

OBSR Ratings

Fund ratings awarded are AAA, AA or A.

There are several key factors which lead to the final OBSR Rating determination. These are: Strength of investment process and length of time it has been in place; Continuity of investment personnel; Investment style that has proven durable over time; Clearly defined investment objectives; Strong and consistent past performance record.

Occupation

A trade, profession or type of work undertaken for profit or pay. 

Occupational pension scheme

A pension scheme provided by an employer for its employees. Occupational pension schemes are mainly ‘defined benefit’ or ‘defined contribution’. Sometimes called a company pension scheme or an executive pension.

Occupational Pensions Regulatory Authority (OPRA)

Historic regulatory body. It was replaced by the Pensions Regulator on 6 April 2005.

Offer Price

The price at which a person or company is willing to sell (Also known as ask price). For example, a seller will present their stock for sale at the offer price. As a buyer, you will buy at the offer (or ask) price.

Offshore

Anywhere outside the UK not within the authority of HM Revenue & Customs.

Offshore investing

When you invest in a territory other than where you are resident.

Offshore sector

The group of funds all registered outside the UK.

Ombudsman

See Financial Ombudsman.

One off contribution

The money paid into the plan or account on a single occasion, rather than an instruction for multiple, regular contributions.

One off fee

A fee paid to your financial adviser from your account. This payment will only be made following a specific instruction from you. 

One off premium

A one off payment into your plan.

Ongoing Charge Figure (OCF)

Represents the total ongoing costs to the funds, which includes the Annual Management Charge (AMC) and other charges for services such as keeping a register of investors, calculating the price of the fund’s units or shares and keeping the fund’s assets safe. 

Online Customer Centre

The name of our secure online services for customers.

Open ended investment company (OEIC)

An OEIC is an investment company which purchases a variety of assets to generate return for investors. Shares can be created or cancelled to match demand.

Open market option

An option for a customer to take pension benefits by moving the value of their pension to an insurance company to purchase a pension income known as an annuity. Allows them to shop around to gain a higher annuity rate.

Opening price

The price at which an asset started trading at the opening of a trading day.

Option

An agreement which conveys the right to the holder to buy (receive) or sell (deliver) a specific security at a stipulated price and within a stated period of time. If the option is not exercised during that time, the money paid for it (but no more than that amount) is forfeited. See also call option.

Options transfers

An electronic pension transfer system, provided by Origo.

Opt-out

An agreement which conveys the right to the holder to buy (receive) or sell (deliver) a specific security at a stipulated price and within a stated period of time. If the option is not exercised during that time, the money paid for it (but no more than that amount) is forfeited. See also call option.

Ordinary residence

For the purposes of taxation an individual may be ordinarily resident in the UK although he or she is not physically resident in a particular tax year. The term ‘ordinary residence ‘is broadly equivalent to habitual residence. If an individual is a resident in the UK year after year, he or she is ordinarily resident here and liable for UK tax.

Ordinary shares

A share in a company which entitles holders to dividends if any are available.

ORIGO

Owner of the Options electronic transfer system used by the large proportion of pension providers to transfer pension savings from one provider to another.

Outperformance

Achievement of a higher investment return than a benchmark or other measure against which that return is being compared. For example an equity fund would be said to have outperformed the index if the fund achieved a 5% return against a 3% return by the index over the same period (As opposed to underperformance).

Overfunding

Where a pension arrangement has assets which exceed those required to meet its liabilities.

Overweight

Where a pension arrangement has assets which exceed those required to meet its liabilities.

Own Occupation

This is referred to in relation to certain products that pay out a benefit when you are unable to perform your own occupation, as we have it recorded.

Q

Qualifying policy

A qualifying policy is one where any money you receive from investment growth is usually free from personal income and capital gains tax. The qualifying policy rules were established by statute.

Qualifying Policy Statement

This statement is a requirement of HM Revenue & Customs (HMRC) and must be completed when you make certain changes to your policy. Failure to complete and return the statement within 3 months will affect the tax effectiveness of the policy.

Qualifying Recognised Overseas Pension Scheme (QROPS)

An overseas pension scheme that meets certain requirements set by Her Majesty’s Revenue and Customs (HMRC). A QROPS is the only type of overseas pension scheme that a UK registered pension scheme can transfer to, without incurring unauthorised payment charges.

Qualifying Settlement

When we use this term, we mean any Settlement, wherever established, under which every person who may benefit is a Beneficiary of this Settlement.

Quantitative management

An approach to investment management which seeks to use statistical or numerical methods to create efficient portfolios, with the optimum risk/return trade-off. Quantitative managers generally attempt to add value by exploiting pricing anomalies, or by providing particular levels of risk control, rather than by subjective forecasting of market behaviour.

Quartile

The division of a spread of values divided into four. A statistical division generally used in financial services to denote performance of, say, a particular type of fund. Comparisons of similar funds are shown in a league table, which is divided into four quarters or quartiles.

S

S2P

State Second Pension.

Salary sacrifice

The act of giving up some of your annual salary in return for a benefit of a different kind. This is usually but not limited to, pension savings and can be tax-efficient.

Satellite funds

These funds are often used to complement the Core Funds in an investor’s portfolio. They tend to be more specialised and have a higher risk/return profile. 

Savings Account

A savings account from a bank or building society that pays interest on the amount of money held in it.

Screening

Examination of various investment options, with a view to then include them or exclude them from the investment portfolio.

Second medical opinion

If you feel that you require a second medical opinion regarding your diagnosis or treatment, your RedArc Personal Nurse Adviser can help you find the best way forward.

Secondary market

A market where investors can purchase securities or assets from other investors, rather than from the issuing companies themselves.

Sector

A sector is a grouping of funds with a similar investment objective and make up.  An area of the economy where businesses share the same or a related product or service, for example, pharmaceuticals, telecommunications or retail. It can also refer to investments from a particular geography or demographic.

Sector averages

The average performance of all funds within a particular sector (e.g. pharmaceuticals, or technology).

Sector index

Sector performance takes into account the contributions of all existing funds the sector comprises of and is therefore referred to as the ‘sector index’.

The sector index performance may not match the straight average of the existing sector members, as the latter will not take into account the performance of new funds which have entered the sector during the nominated performance period and which would have affected the sector index performance. Over a long period these differences will be cumulative, resulting in wider divergence between the sector index and the straight sector average. 

Sector Risk Rating

A number issued and used to compare the volatility of fund sectors. They rate the danger that the stocks of many of the companies in one sector will fall in price at the same time because of an event that affects the entire sector industry.

Securities

A term used to describe stocks and shares.

Security

In relation to financial markets, the paper right to a (generally tradable) asset. In this context the term includes Bills of Exchange, bonds, share certificates or any other interest-bearing paper traded on financial markets; An asset pledged to ensure the repayment of a financial obligation (eg loan), and forfeited in the event of a default on that obligation.

Segregated fund

Pension scheme investments managed along side, but separately from, other investments under control of a particular manager.

Segregated mandate

A written agreement with a fund manager on how we want our customers’ investments to be managed. This money may be invested as part of the offered fund, but the mandate means it is kept separate from other investments and run in accordance with any additional requirements or boundaries that our mandate sets out.

Selected Retirement Date

The retirement date selected by the customer when opening their account. This date is used for illustrations and projections and does not oblige the customer to take pension benefits at that time.

Self Invested Personal Pension (SIPP)

A UK government approved type of personal pension scheme. It allows individuals greater freedom to make their own investment decisions from the full range of investments subject to HM Revenue and Customs rules.

Self-serve

Where a customer is doing a transaction with us directly, without the use of a financial adviser.

Seller’s market

A condition of the market where goods or shares are scarce so sellers can charge higher prices. 

Selling (bid) price

The price at which you can sell shares or units in a unit trust or units in a life policy.

Serious ill health lump sum

If you are in serious ill health (you have a life expectancy of less than 12 months) you can take all your pension savings as a tax-free lump sum.

Serious Illness

Your RedArc Personal Nurse Adviser can help you understand your illness and the implications it may have on you and your family, as well as arranging specialist support.

Settlement

In relation to share trading, an arrangement between brokerage houses for the payment or receipt of cash or securities. It represents the final consummation of a securities transaction and is handled through a clearing house.

Settlement date

The date on which the final consummation of a securities transaction takes place and payment is made.

Settlement risk

In relation to foreign exchange transactions, the exposure of one party to another on the value date of the contract. It is the risk that one party, having received settlement of one currency amount from the counterparty, is unable to effect settlement of the other currency amount.

Settlor

The settlor is the owner of the asset being put into a trust and transfers legal ownership of it to the trustees. Can also be referred to as the Donor.

Share

The ownership of part of a company; a contract between the issuing company and the owner of the share which gives the latter an interest in the management of the corporation, the right to participate in profits and, if the company is dissolved, a claim upon assets remaining when all debts have been paid. See also equity.

Share capital

The money paid (subscribed) for ordinary and preference shares in a limited company. 

Share certificate

A piece of paper representing legal evidence of ownership of a stipulated number of shares in a company. Also known as scrip.

Share Class Conversion

Converting units in a fund from one type of share class to another type in the same fund.

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 holder

The owner of one or more issued shares of a company.

Share Holder Register

A register recording all of a company’s shareholders and the number of shares they each hold.

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. A number of approved share option schemes offer tax-free capital growth.

Share Price Index

An index measuring movements in the price of shares, but not of their dividends (as opposed to an Accumulation Index, which measures movements in both price and dividend income).

Shares

A unit of ownership of part of a company. Owning shares in a business does not mean you have direct control over the business’s day to day operations, but being a shareholder entitles you to a portion of the profits, paid as dividends, and if the company is dissolved, a claim upon assets remaining when all debts have been paid. 

Sharpe Ratio

The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations. The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.

Shorts

Bonds or Gilts that have a redemption date within five years. Some institutions use seven years as the cut-off date.

Short-term annuity

An option available in drawdown which allows you to use part of your pension savings to purchase an annuity which will pay you an income for no longer than 5 years, while leaving the rest of your pension savings invested.

SIB

Skandia Investment Bond

Single life annuity

An annuity that is paid for the lifetime of the annuity holder.

Single price fund

A fund where buying and selling takes place at the same price (there is no bid/offer spread). Available under some of our pension products.

Single price pension

This refers to pensions where buying and selling of funds takes place at the same price (there is no bid/offer spread).

Single price units

Units with the same buying and selling price.

Single pricing

Single pricing means that there is just one price for buying and selling units or shares. This differs from dual pricing where there is a buying price and a lower selling price.

Single Settlor Trust

Where there is only one settlor, at the time of making the trust.

SIPP

Self-Invested Personal Pension.

A UK government approved type of personal pension scheme. It allows individuals greater freedom to make their own investment decisions from the full range of investments approved by HM Revenues and Customs.

Small gifts exemption

An annual allowance enabling a donor to give up to £250 per year to any number of separate individuals (donees) free of Inheritance Tax (IHT).

Small lump sum

A payment made by a scheme to a former member, when a small amount of money arises unexpectedly after full transfer has been made away from the scheme. Taxable at basic rate.

Small Pots lump sum

A method by which small sums, up to £10,000 can be taken from your pension. A small pots lump sum does not use Lifetime Allowance.

Small Self Administered Scheme (SSAS)

A UK Government approved occupational pension scheme. It allows individuals greater freedom to make their own investment decisions from the full range of investments subject to HM Revenue and Customs rules.

Smaller companies

Generally, companies with a market capitalisation of less than US $1 billion or the bottom 25% of the market, although definitions differ.

Smoker status

Whether you meet our definition of a smoker or a non-smoker.

Soft Dollars

Payment for research-related services by commissions generated from trading rather than fees.

Specialist manager

An investment manager which confines its investment activity to specific asset classes (eg equities, fixed interest, property, overseas shares, etc.) instead of (or as well as) balanced funds. See also balanced manager.

Specific risk

Uncertainty in the return of a share arising from factors specific to the company concerned. It is unrelated, or, at most, distantly related, to events that impact on other comparable firms or the market as a whole. Unlike market risk, specific risk can be diversified away.

Specified Growth Rate

The growth rate the client want to use to  project the cost of the requested benefits. This is NOT the rate used to show future projected values that illustrate the policy worth a point in the future.

Stamp duty

A flat rate tax on the purchase of certain types of assets for example shares, or property. 

Stand alone lump sum

A type of transitional protection. It allows you to take the full value of your pension pot as a tax-free lump sum, subject to criteria being met.

Standard deviation

A statistical measure of the dispersion of a set of numbers around a central point. If the standard deviation is small, the frequency of distribution is concentrated within a narrow range of values. For a ‘normal’ distribution, about two thirds of the observations will fall within one standard deviation of the mean. Standard deviation is a commonly used measure of risk because the higher the standard deviation the higher the uncertainty of the return. As standard deviation measures the volatility of investment returns, it is an important measure of risk. Also known as standard error.

Standard lifetime allowance (SLTA)

The maximum amount of pension that you can take benefits from is known as the lifetime allowance. The standard allowance is where no enhanced or protected allowance applies.

Start date

A date on which an account starts, as specified by the contract.

State Earnings Related Pension Scheme (SERPS)

Also known as the additional state pension. The scheme was run by the UK government until 5 April 2002 when it was replaced with the State Second Pension. Employees who paid full National Insurance contributions whilst the scheme was live, earned a SERPs pension in addition to the basic state pension.

State pension

A regular payment that you can get from the government, when you reach the State Pension age.

To get it you must have paid or been credited with National Insurance contributions.

State pension age

The age at which you can receive your state pension.

State pension schemes

If you have a full National Insurance contribution record you are entitled to the full basic state pension.

State Second Pension (S2P)

See: additional state pension.

Statement

Confirmation of a transaction that has been completed.

Stock

A generic term for equities (shares) and, less frequently, bonds.

Stock broker

A professional person who buys and sells securities on behalf of others in return for a commission (or brokerage).

Stock exchange

A market where stocks and shares are bought and sold.

Stock market

A place where shares or other securities are bought and sold e.g. the London Stock Exchange.

Stock selection

The selection of an individual security within an asset class. For example, stock selection in relation to equity investments is made after analysing the financial standing, future earnings prospects and valuation of the shares of the company concerned. Along with asset allocation, stock selection is a key way in which investment managers add value.

Stockbrokers

Agents who buy and sell stocks and shares for customers.

Stocks and shares

A stock generally refers to fixed interest securities, usually issued in denominations of £100. Shares are sold by a company to raise money. Shares give the owners an interest in the company and a right to a share in the profits.

Straight-Through Processing

Straight Through Processing occurs when a Business Transaction is executed from submission to completion without any manual intervention, subject to legal and regulatory requirements.

Strategic asset allocation

The composition of the asset mix within a portfolio, constructed with the objective of meeting the long-term views of relative performance of the various asset classes. Usually a benchmark is derived in this fashion. See also asset allocation, tactical asset allocation.

Sub account

A proportion of the amount within the account, separate from the rest.

Subsidiary

A company which is wholly or partly owned by another company but which (unlike a branch office) is still a distinct legal entity responsible for its own tax, regulatory compliance, etc.

Successor

After the plan holder’s lifetime, flexi-access drawdown benefits can be paid to the nominated beneficiary (also known as nominee). On that beneficiary’s death, the remaining drawdown pension fund can be provided to a successor, or successors.

Sum assured

A pre-defined amount which will be paid out when a claim is made which meets the criteria of the policy.

Sum insured

For non-life insurance it is the maximum amount the insurance company will pay out for a claim. For life assurance it is the amount that is guaranteed to be paid on death.

Superannuation

A type of pension scheme, usually overseas, most commonly Australia and USA. 

Swap

An interest rate, currency or equity exchange transaction involving two parties. In the case of an interest rate swap, one party is obliged to pay a fixed interest rate to the other party in return for a floating interest rate. In the case of a currency swap, one party is obliged to make payments in another specified currency.

SWIFT Code

Society for Worldwide Interbank Financial Telecommunication.  A non-profit electronic trade confirmation system that provides secure messaging services and interface software to financial institutions globally.

Swing Pricing

A mechanism used to protect the interests of long-term investors in funds against the trading activities of short term investors, especially during times of market volatility. It adjusts the fund price to recover trading costs from those who are doing the trading, rather than penalising long-term holders by paying these costs from the fund’s assets.

Switch

Selling some or all current funds then using the proceeds to buy other funds.

Switch statement

Confirmation of the investment that has been made. This shows details of the shares or units brought and sold, and the values. 

Switching

Selling some or all current funds then using the proceeds to buy other funds.

Switching authority

When the account holder gives permission to another person or company (usually a financial adviser) to switch investments on his or her behalf.

Switching facility

The ability to transfer units between two funds or components of a unit trust or life policy.

Systemic risk

Risk pertaining to the fundamentals of a system as a whole – eg in the case of banking, the risk of failure of the payments system or, in the case of property, a collapse of valuations owing to there being no buyers in the market. Systemic risk should not be confused with systematic risk, which relates to risks associated with individual securities rather than markets as a whole.

U

UK tax resident

Your tax residency can be different from your physical residency or domicile. HMRC will confirm whether you are a UK resident for tax purposes based on a number of factors. You should discuss this with your financial adviser or with HMRC.

Unbundled

Unbundled share class funds generally feature a lower AMC where the charge is only paid to the fund manager. Occasionally this will be discounted further, as a result of our negotiations, via a fund manager rebate that will be passed on to you.

Uncrystallised

When you use your pension to make withdrawals (usually in the proportions: 25% tax-free cash and 75% taxable income), that part of your pension being used to provide the withdrawals is referred to as ‘crystallised’. Any other pension savings remain ‘uncrystallised’.

Uncrystallised funds pension lump sum (UFPLS )

A payment from uncrystallised pension savings as a lump sum, there is a 25% tax-free element and the balance is taxed at the member’s marginal tax rate. This is an alternative to flexi-access drawdowns for schemes that cannot provide drawdown. Not all pension scheme providers offer this; ReAssure do not, because we provide flexi-access drawdown. 

Under funded

Generally refers to the valuation of a final salary occupational pension fund where the actuary perceives that there are insufficient funds to support liabilities within the investment review period.

Under insured

When the maximum sum a company will pay out to cover a claim is less than the value of the loss or damage.

Underlying fund

This is the fund that your investment choice is in invested in.

Underlying inflation

A calculated measure that takes the headline inflation rate and excludes certain volatile items or series that are affected by factors other than general economic conditions (e.g. government taxes, or the effect of weather on fruit and vegetable prices). The resulting rate is based on only those items directly related to the economy.

Underperformance

Achievement of a lower investment return than a benchmark or other measure (eg competitor portfolios) against which that return is being compared (As opposed to outperformance).

Undervalued

Referring to a security or currency which trades below what is perceived to be its proper market value, taking account of statistical or fundamental research or other relevant information.

Underweight

Having a lesser exposure to a particular sector in an investment portfolio, compared with a neutral or benchmark position. (As opposed to overweight).

Underwriter

An individual who decides whether we can offer cover and on what basis.

Underwriting

Review of whether we can offer cover and on what basis.

Unearned income

Income received from sources such as dividends from shares and bonds, which has not been earned by working.

Unit

The funds available for you to invest in are split into units. The value of each unit and the number of units help represent your share of the fund’s total value.

Unit deductions

The sale of units from your from your plan, for example, to pay for charges.

Unit linked

A fund’s assets (such as stocks and shares) are divided into units of equal value. Units in the funds you have chosen are allocated to your Plan and the value of your Plan is defined by the number of units held on your behalf.

Unit trust

A pooled investment that is divided into units run in accordance with a trust.

Unitised with profits

Contracts where premiums are invested in units, either in the with-profits fund or in the linked funds or a mixture of both.

Units

When investing in a unit-linked contract, the individual’s contribution is used to buy units. These units will fall or rise in line with the underlying investments.

Unlisted company

A company whose shares are not available for purchase or sale through the stockmarket.

Unsecured pension (USP)

A drawdown option available before 6 April 2011, for those under 75. This was replaced by capped drawdown on 6 April 2011.

Upgrade

To raise something to a higher standard, in particular improve by adding or replacing components.

W

Waiver of premium

An optional feature on some life policies where we will pay the premiums if the policyholder becomes ill.

WealthSelect

An investment range of researched funds. The range is used to build portfolios within the Wealth Select Managed Portfolio Service.

Weighting

Measuring the proportion of each asset type held within one investment portfolio.

Whole of life policy

Life assurance that pays out when the life assured dies.

Will

A legal document which lays out how the estate is to be distributed after the death of the Testator. The estate is administered by Executors on death.

Winding up

This term is used in relation to employee pension schemes. Winding up a workplace pension scheme means closing the scheme and ending the trust. The trustees are responsible for valuing the scheme, and the way the money is distributed to all of the members.

Winding up lump sum

When a scheme winds up, the scheme makes payments to all members and it ceases to exist. If the value of your pension savings in the scheme is lower than a limit set by the Government, you may be able to take these as a lump sum when the scheme ends, without having to transfer to a new pension scheme.

Withdrawal

Selling some of the units held in the account.

Withdrawal

When withdrawing from a bond there are different ways in meeting the withdrawal. The customer can either sell (surrender) entire policies within the bond, sell units across all policies, or do a mixture of the two.

Withdrawal statement

Confirmation of the investment that has been made. This shows details of the shares or units brought and sold, and the values.

Withholding tax

The tax payable on payments such as dividends, interest and debt repayments, sent to foreign entities.

Working Day

Monday to Friday, excluding bank or public holidays in England.

Y

Yield

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

Yield curve

A visual representation of the term structure of interest rates. It shows the relationship between bond yields and maturity lengths. A normal or positive yield curve signifies higher interest rates for long-term investment, while a negative or downward curve indicates higher short-term rates.

Yield to maturity

The yield provided by a bond which is held to its maturity date, taking account of both interest payments and capital gains or losses.

Your yearly pension income review

A pack sent to customers telling them they can increase their contributions (or they can accept the automatic increase  option (AIO) if they have this).

Your yearly pension statement

A yearly statement that is sent to personal pension clients to show the amount of contributions paid in the year, and a current valuation. Customers who do not receive one of these get a different annual statement, more like a Unit Statement.