Merchants’ Finance Definitions
Association of British Insurers
stands for Annual Equivalent Rate and usually specifies the interest paid
from current, deposit or savings accounts. This new term replaces CAR
(Compound Annual Rate) which denoted much the same thing.
An offer of life assurance, setting out the terms.
Access To Medical Records Act 1988
The terms of this Act require an insurance company to obtain prior written
consent from an individual before approaching any medical practitioner for
a medical report pertaining to them. The individual has certain other rights
including the right (subject to some restrictions) to see any report before
it is submitted by the doctor.
Accidental Death Benefit
A provision that may be added to a life insurance policy which provides
payment of an additional benefit in the case of death resulting from an
Accidental Death and Dismemberment
Loss of life or limbs through accident. Insurance against such eventualities
is generally available.
Act of God
An accident or event which happens independently of human intervention
and due to natural causes such as storm earthquake etc. which no human
foresight can provide against. Suggesting that an event was an "act of
God" may be a defence in English law against a claim for liability since it
may be held that it could not have been foreseen or safeguarded against.
Actively at Work
A clause in a group insurance policy that requires a new member or one
with an increase in cover, to be at work (or on holiday i.e. not absent due
to sickness, industrial action, etc.) on the day of joining/day of increase.
Activities of Daily Living
Everyday living functions and activities performed by individuals without
assistance. These functions include mobility, dressing, personal hygiene
and eating. The inability to undertake these activities may be used in
some circumstances to define disability in insurance contracts.
A professional trained in the technical aspects of insurance and its related
fields, particularly in the mathematics of insurance, for example, the
calculation of premiums and reserves. An actuary will use complex
mathematical methods, often with the aid of computers, to provide
analysis of claims data and other statistics. In certain circumstances
insurance companies, pension schemes etc. are required to have
documents, calculations etc. certified by an actuary. In this and other legal
contexts the word means a qualified Fellow of the Institute or Faculty of
Accidental Death and Dismemberment
Similar to a traditional current account overdraft. It is the extra money
you can borrow on top of what you've already borrowed. Your Additional
Borrowing = Your Agreed/Total Facility - Total Borrowing.
Additional Voluntary Contributions
Pension contributions over and above the pension scheme member's
normal contributions, which secure additional benefits for the member or
his or her dependants.
See: Loss Adjuster.
Activities of daily living.
Describes a system used for underwriting members of some group
schemes. Once an underwritten member is accepted for insurance at
'ordinary rates', they may increase their cover by a predetermined
percentage in any year without the need for further underwriting.
Where an authorised adviser looks at your individual circumstances and
advises on suitable products for your financial needs.
Advanced Financial Planning Certificate - a professional qualification for
financial advisers obtained by examination through the Chartered
Insurance Institute. Holders are eligible for membership of the Society of
Increased personal allowance for Income Tax for persons aged over 65. A
further increase is available to persons over 75.
Someone who acts on behalf of another. Traditionally, insurance company
salesmen have often been called agents. This has led to a certain amount
of confusion since in some situations they are acting on behalf of the client
and at other times they are acting on behalf of the insurance company:
the distinction is not always clear.
Extension of the cover provided by household insurance to damage, theft
if outside the home, etc. in respect of individual high value items.
This is the percentage of your payment that is actually invested (e.g.
75%) after initial charges have been taken into account.
Alpha is the term used to describe the risk adjusted outperformance of an
investment. A large alpha indicates good performance relative to the
Alternative Dispute Resolution
A means of resolving disputes without resort to the Courts. Particularly
used in relation to disputes between pension schemes, trustees and
Amount purchased or sold in Gift Fund Pools as a result of a contribution
or miscellaneous activity.
Access To Medical Records Act 1988.
person who studies particular stock markets or industry sectors and makes
buy or sell recommendations regarding the shares of specific companies
within them. These are arrived at through a combination of research,
economic statistics and, frequently, visits to the companies themselves.
For example, in 1998 alone, Flemings' analysts have made over 3,000
company visits around the world. (See also Fund Manager)
Annual Percentage Rate (APR)
This rate takes into account all the costs, interest charges, arrangement
fees etc. Theoretically it allows you to compare mortgages on a like for like
basis. However, you need to be careful as different lenders calculate it in
Annual management fee
A charge made every year for running your fund. It is usually a percentage
of the amount you've got invested.
A voluntary report published by a foundation or corporation describing its
grant activities. It may be a simple typed document listing the year's
grants or an elaborately detailed publication. A growing number of
foundations and corporations use annual reports to inform the community
about their contributions activities, policies, and guidelines. (This annual
contributions report is not to be confused with a corporation's annual
report to stockholders.)
Volatility is one measure used to assess the risk of a portfolio as it helps to
describe the likely range of returns achieved by the fund. In statistical
terms it is the standard deviation of the return distribution. Greater
volatility of monthly fund returns means that there is a wider range of
likely returns in the future, or greater uncertainty regarding the fund
return. Most investors would equate this greater uncertainty with greater
The person entitled to receive payments from an annuity contract.
A series of payments, possibly subject to increases, made at specified
intervals until a particular event occurs. Most commonly an annuity will
cease after a specified period or upon the death of the annuitant.
A contract that provides payments for a specified number of years,
regardless of life or death of the annuitant
A pension scheme that is approved by the Inland Revenue under the
relevant legislation. Members and their employers are able to obtain
certain tax advantages in respect of contributions and/or benefits. (See
Exempt Approved Scheme).
1. Annual Percentage Rate. This is the compounded rate used to give a
standard comparison of the amount of interest you are likely to pay on
loans or outstanding credit card balances. 2. A statutory method of
calculating the Annual Percentage Rate of charge to repay the total charge
for credit over the period of the loan. 3. Allows customers to compare like
with like when comparing costs between different lenders.
profiting from the differences in price when the same security, currency or
commodity is traded on two or more markets.
A means of arriving at an acceptable agreement between two disputing
parties. An independent person or body hears the arguments of both
parties and makes a decision that is then binding on all concerned. Often
conducted by members of the Institute of Arbitrators.
another word for the investments which a unit trusts holds within its
The transfer of one person's interest in a legal right or duty to another
person or organisation.
Association of British Insurers
An association representing some 450 insurance companies which account
for over 95% of the business transacted by UK insurance companies. Is
the forum through which UK insurance companies collectively liaise with
Government Departments and other bodies. Brings insurance companies
together to set industry standards and codes of practice.
the Association of Unit Trusts and Investment Funds, which is the industry
trade body of unit trusts and investment trusts management companies.
Apportionment of loss on an equitable basis.
Average Annual Return
Average Annual Return is used to compare returns over different periods
on a consistent basis with the unit being years, hence per annum.
Normally only returns over periods greater than one year are annualised.
The average annual return is the rate that an investor would have earned
in each year to achieve the total cumulative return over the period.
The extra hazard of death or injury resulting from participation in
aeronautics, usually as other than a fare-paying passenger in licensed
aircraft. For insurance, this often requires an extra premium or the
exclusion of certain risks.
A company or group offering a range of financial services to its customers.
Usually applied to banks having subsidiary insurance companies.
A business that holds money for its clients, lends money at interest and
trades generally in money.
Bank Giro Credit (BGC)
A one-off cash or cheque payment to an organisation or individual.
Processing a payment made using a Bank Giro Credit takes three working
A guaranteed payment delivered to your home address by registered post.
If we receive the request before 4 pm we'll send the draft to you on the
the base interest rate determined usually by a country's central bank
(such as the Bank of England) upon which all other lending or savings
interest rates are based.
Basic State Pension
The standard pension which individuals over retirement age receive from
the state (subject to National Insurance contribution conditions). The Basic
State Pension is a fixed amount, not connected to earnings.
The former practice of selling shares one day and buying them back the
following day so as to establish a realised loss (or gain) for tax purposes.
The tax advantages were removed by the Finance Act 1997.
The person who is or will be the ultimate recipient of a benefit. Examples
could be someone named to receive a legacy under a Will or an individual
nominated to receive benefit from a trust fund.
The benefit structure of a group insurance policy or pension arrangement.
It defines the type and level of benefits for each category of membership.
For example, life assurance cover for one category of employees might be
3 x salary and for another category of employees it might be 4 x salary
(the categories must be clearly defined groups in terms of jobs carried out
so as to ensure there is no illegal discrimination).
The monetary amounts payable by the insurance company to a claimant,
assignee, or beneficiary under the terms of an insurance policy.
Benefits In kind
Benefits other than cash, provided to a person through their employment
(for example, cars, or private medical insurance). These benefits are
usually subject to tax. Inland Revenue rules normally allow their value to
be included in the calculation of maximum pension benefits.
A sum of money or other property available upon the donor's death.
Shares, units in unit trusts and other investment vehicles are bought at
one price and sold at another. The higher price is called the 'offer price'
since this is the price at which the unit trust company or other institution
offers the security for sale. The lower price is called the 'bid price' and is
the price at which the investor can sell the security back to the institution
the difference between the prices at which you buy units from us and sell
them back to us. The buying (offer) price is usually higher than selling
(bid) price and the difference between them may vary within the limits of
a formula laid down by the Financial Services Act 1986. Both offer and bid
prices are quoted for each of our funds on the Daily Prices page.
The price at which you can sell a security or a unit in a unit trust.
otherwise known as fixed-interest securities, bonds are basically IOUs
which are issued by governments, financial institutions and companies.
Generally, the issuer undertakes to pay investors a fixed rate of interest
for a fixed number of years (e.g. 7% for 5 years). The fact that the
interest rate is fixed makes bonds attractive because their return is so
predictable. Bonds are traded in open markets, in the same way as
shares. (See also Gilts)
An amount added to a basic figure. For instance bonus is added each year
to a with-profit life insurance policy, thus increasing the amount ultimately
payable when a claim arises. See also: Dividend
If a house purchase arrangement involves the sale of one property and the
purchase of another it will normally be most convenient if the two deals
are concluded simultaneously. If this is not possible and the purchase of
the second property is to be concluded before the sale of the first is
completed then additional financing may be necessary. This is a 'bridging
loan' & it bridges the gap between the two transactions.
A drive to raise funds for construction or renovation of buildings.
A financial institution owned by its members (rather than by shareholders)
which pays interest on deposits and lends money on the security of
property to enable members to buy their own homes. The distinction
between building societies and banks (which have historically offered a
much wider range of financial services but often at a higher cost) is now
much reduced and the main difference is often the question of ownership.
The transfer of a group of pension scheme members and their scheme
assets from one occupational pension scheme to another.
1) A payment made to reinstate into SERPS a person belonging to a
contracted out pension scheme.
2) Reinstatement of life assurance cover after a claim has been paid on
critical illness under a policy that provides cover against critical illness and
death. (Normally a policy of this type will cease on the claim being paid;
the life assurance cover is then automatically cancelled.)
The purchase of an insurance policy for a pension scheme member in lieu
of benefits from the scheme following the termination of pensionable
This is when you buy a property to rent it out rather than live in.
A provision in an insurance contract that permits the insurer or the insured
to cancel a policy at any time before its expiration date.
The largest amount of insurance or reinsurance available from a company.
It can also refer to the largest amount .of insurance or reinsurance
available in the marketplace
A lump sum of money. This usually refers to the amount you invest in a
fund at the outset - e.g. your original capital.
An organized drive to raise substantial funds to finance major needs of an
organization, including construction, renovations, or endowment.
Capital and Interest Mortgage
Your monthly payments are partly to pay the interest on the amount you
borrowed, and partly to repay the amount you borrowed. At the end of the
mortgage, the capital and the interest is all completely repaid. It is also
known as a repayment mortgage.
An organized drive to raise substantial funds to finance major needs of an
organization, including construction, renovations, or endowment.
Capital Gains Tax
A tax on the realised value of capital gains. Applies only to individuals (a
company may be liable to Corporation Tax on such gains).
Grant to provide funding for buildings, construction, or equipment, rather
than program or operating expenses.
Used in relation to group life policies that provide a pension for the spouse
or other dependant of a member. The capitalised value is used for
underwriting purposes and is an approximation of the lump sum that
would be required to secure the pension.
A person who joins a mutual organisation (usually a building society or an
insurance company) in the hope that the organisation may be converted to
a limited company owned by shareholders and that in this event he will
realise a substantial profit by receiving a cash amount or selling any
shares allocated to him. (See also 'de-mutualisation')
1. Like a fixed rate, but the rate is guaranteed not to go above a certain
level for a set period of time. It can, however, move downwards. 2. An
arrangement that caps your mortgage rate for a specified period of time.
On the first day of the month following expiry of the capped rate period,
the interest rate will change to the then prevailing Standard Variable Rate.
A payment (either a fixed or a percentage of the mortgage amount)
offered by some lenders as an incentive to borrow from them. Sometimes
there are redemption penalties associated with these types of deals.
Cash Surrender Value
The amount of money received when a policyholder surrenders a life
insurance policy with cash value.
CAT stands for low Charges, easy Access and fair Terms. The standards
were brought in by the government as an incentive to offer savers an even
better deal, and to make it easier for you to spot the best value ISAs.
Conditions attached to an insurance quotation.
To transfer all or part of a risk written by an insurer to a reinsurer.
Capital Gains Tax.
A grant that is made on the condition that other funding be secured, either
on a matching basis or by some other formula, usually within a specified
period of time, with the objective of encouraging expanded fundraising
from additional sources.
CHAPS (clearing house automatic payment system) payment
An electronic transfer of money between two bank accounts that will clear
the payee's account on the same working day provided instructions are
received before 3.15 pm.
Companies can charge for financial services in different ways, some more
straightforward than others.
Chartered Insurance Institute. A body controlling professional standards
(educational, ethical etc) in the insurance industry.
Notification to an insurance company that payment of an amount is due
under the terms of a policy.
The relationship of claims to premiums for a period. Usually expressed as
a percentage or ratio.
Amounts set aside by an insurer to meet costs of claims incurred but not
1. A practice whereby a pension scheme will offset an amount
equivalent to the state pension against a target pension so as to
arrive at the amount payable by the scheme.
2. If commission is paid to an intermediary by a financial institution
for the introduction of business and this does not stay in force for a
certain pre-determined period a part of the commission may be
repayable to the institution. This is known as 'clawback'. The
practice is more prevalent among insurance companies.
An arrangement by which a number of insurance companies cover a
Investments such as unit trusts and investment trusts schemes
Insurance for businesses, professionals, and commercial establishments.
An amount paid by a financial institution to an intermediary for the placing
of business. Normally calculated as a percentage of the amount paid (i.e.
of the premium for an insurance policy or of the amount invested in a fund
or used to purchase securities). Commission is also payable in a number of
other situations where the payment for a service is a proportion of the
value of the transaction (eg the provision of foreign currency, the sale of a
A portion of a donor's budget that has already been pledged for future
The giving up of part or the entire pension that would be paid at
retirement in exchange for a lump sum. Applied to any exchange of a
series of payments to which someone is entitled for a lump sum. In the
case of approved pension arrangements the amount that is commutable is
Factors used to determine the amount of pension to be given up in
exchange for a lump sum benefit.
A type of foundation formed by broad-based community support from
multiple sources: trusts, endowments, individual contributions, private
foundations, or corporate grants. A community foundation generally
makes grants only within a specified geographic area and is governed by a
board representing the community it serves. Some community foundations
offer donor-advised funds to contributors.
A financial adviser who can only advise on their own company's products.
Compound interest is interest earned on interest and makes a huge
difference to the value of long term savings. Say you've invested £100,
which is earning 10% interest each year.
Year 1, you earn 10% on £100 = £110
Year 2, instead of earning another 10% on your £100, you earn 10% on
£110 = £121
Year 3, you earn 10% on £121 = £133.10
And so on, so longer you leave it, the more you benefit from
An annuity you buy with the fund built up in your personal pension
Compulsory Purchase Annuity
Some approved occupational pension schemes produce a benefit at
retirement that is expressed in cash terms rather than pension. The cash
sum produced must then be used to purchase an annuity known as a
'Compulsory Purchase Annuity' (but see Commutation).
Provisions in an insurance contract that state the rights and duties of the
insured and of the insurer.
(in Scotland) A court order confirming the validity of a Will and the identity
of Executors. The equivalent under English law is Probate.
A financial loss occurring as the result of some other loss. Also known as
an indirect loss. (eg a shop is destroyed by fire. The loss of the building,
stock etc is a direct loss. The loss of ongoing profit because of the inability
to continue trading is a consequential loss).
Allows employees to continue their group insurance coverage under
certain conditions after their employment has terminated (much less
Continuing Professional Development
A formal procedure by which a professional body ensures that its members
keep their expertise up to date with current developments. Applies to
doctors, lawyers, accountants, financial advisers etc.
A legally enforceable agreement between two parties
This describes a member of an occupational or personal pension scheme
who is also a member of SERPS (or the scheme itself).
This describes a member of an occupational or personal pension scheme
who is not a member of SERPS (or the scheme itself).
A corporate group organized to make grant decisions usually with the
guidance of a corporate foundation or contributions administrator. Typical
responsibilities include setting and interpreting policy, approving an annual
budget, and reviewing grant requests.
Convertible Term Insurance
Term insurance which can be changed into a permanent policy without
further evidence of insurability or medical examination.
The legal process involved with buying and selling of a property.
Cooling Off Period
A period allowed in certain circumstances during which a person who has
entered into a contract (for example, an insurance policy or a personal
loan) may cancel it without incurring any penalty.
Companies issue bonds to raise money and pay interest on the bonds.
Usually bonds expire on a fixed date, when the company repays you. You
can buy and sell bonds easily (like shares). Bond prices tend to change
when interest rates change and are usually not as risky as shares because
a company will pay off all it's debts (including bonds) before the
shareholders get anything.
A general term referring to charitable contributions by a corporation.
Usually used to describe cash contributions only, but may also include
other items, such as the value of loaned executives, products, and
A foundation that receives its income from a profit-making company but is
a legally independent entity. Usually this type of foundation carries the
name of the parent company. Corporations may fund these foundations
with a donation of permanent assets or with periodic contributions. (Also
called a company-sponsored foundation)
Corporate Giving Programme
(Also called a corporate contributions program - see above.) Funding that
is distributed directly by a corporation, rather than through a foundation.
Often such a program is handled by the Public Affairs or Public Relations
A tax payable by companies on their profits.
Cost Adjusting Factor
Used in relation to group insurance in reference to rate-adjusting factors
calculated by actuaries and based on claims experience, occupation,
A temporary certificate confirming that an insurance policy is in force.
Used in motor insurance for taxation/registration purposes and in some
other contexts such as life assurance to confirm that cover is effective on a
temporary basis while further information is being gathered.
Continuing Professional Development.
A credit card gives you the power to buy goods or services now and pay
for them later. It represents an approval by a bank or company to use
their money. Credit card issuers are usually banks, even though the card
may bear another company name or logo. The name of the issuer appears
somewhere on the card.
Trade names such as VISA and MasterCard are not actually card issuers.
They are termed "membership associations." Banks use them for their
payment processing services, policy setting and marketing assistance.
Many different banks can package their own cards and different terms of
credit using the logo and services of an association membership.
Critical Illness Policy
A Critical Illness policy will provide a lump sum payment to the insured
should he or she be diagnosed as having one of a number of specified
illnesses, conditions or diseases.
A government department responsible for the collection of duties on
imports, VAT and other taxes including Insurance Premium Tax.
A life insurance payment made upon the death of an insured person.
Debit cards look like credit cards or ATM (automated teller machine) cards,
but operate like electronic cash or a personal cheque. When a purchase is
made with a debit card, the amount is automatically deducted from the
associated account. No credit is extended to the cardholder and hence no
debt or interest charge is incurred.
The rejection of an insurance application by an insurance company.
A multi-year grant that becomes smaller each year, in the expectation that
the recipient organization will increase its fundraising from other sources.
Decreasing Term Insurance
Life insurance which pays out a lump sum if you die within the term, but
where the insurance sum assured reduces during the term. The earlier you
die in the term, the bigger the payout your dependants get.
An administration charge made by lenders when you repay the mortgage
to release the deeds of the property. Also known as a sealing fee.
An arrangement by which a premium is paid in return for annuity
payments that will commence at a future date.
1. In relation to Permanent Health Insurance (PHI) / Income
Protection, refers to the period between the commencement of
illness, and the date at which eligibility for payment of benefit
under the insurance policy would commence.
2. In relation to a Deferred Annuity, refers to the period between
payment of the premium and commencement of the annuity
Defined Benefit Pension Scheme
Pensions scheme where the rules that define the benefits of the scheme
are independent of the rules relating to contributions to the scheme. The
benefit will usually be expressed as an amount of pension, often related to
earnings and service.
Deflation is the opposite to inflation and means that the money you have
today will be worth more tomorrow. Unfortunately, it isn't as good as it
sounds, because it makes people reluctant to spend, which is harmful for
the economy. It is also very uncommon.
A grant made to establish an innovative project or program which, if
successful, will serve as a model and may be duplicated by others.
The procedure by which a mutual organisation owned by its members
changes to a limited company owned by shareholders. This will often
result in substantial windfall gains for the members (who are in effect the
owners of a mutual organisation).
An individual, a spouse or child or someone who depends on another for
financial support and maintenance with regard to the normal necessities of
An account with a bank or building society, which pays a variable rate of
interest. Higher rates are often available if you are willing to give notice
before withdrawing your money.
The premium deposit paid when an application is made for an insurance
The decrease in value of property over a period of time due to wear and
tear or obsolescence.
A collective name for futures, options and warrants.
A procedure under which an organisation to whom a payment is due
claims the amount directly from the bank account of its debtor.
Physical or mental condition that prevents a person from undertaking
'normal' duties of a job or the ordinary activities of life. For insurance
purposes the word 'disability' will have a special and particular meaning
which will be defined in the policy concerned.
1. The duty of any person applying for an insurance policy to tell the
insurer all relevant information affecting the risk.
2. The duty of an intermediary to inform his client if commission is
being paid (and, if so, how much) in respect of the business being
An arrangement which gives you a set reduction, or 'discount' off our
standard variable rate for a specified period of time. At the end of the
specified period your mortgage rate will change to the standard variable
rate in force at the time. Sometimes there are redemption penalties
associated with this type of deal.
A member of a group insurance plan who did not have an automatic right
to membership under the eligibility terms of the policy.
Grant monies which are distributed according to a donor's judgement of
requests as they are received, rather than funds whose purpose is
Loss of limb or sight.
The payments of any investment income generated by a fund, usually
made either half-yearly or quarterly. You can choose to have each
distribution paid to you or to reinvest it in the fund for greater capital
1. An amount returned to the holders of certain types of policy, by the
insurance company, out of its earnings
2. An annual payment by a company to its shareholders out of
See also: Bonus
Individual or organisation that receives a grant. Also called a grantee.
Individual or organisation that makes a grant. Also called a grantor.
Payment of twice the policy normal benefit for specific kinds of losses
under certain conditions.
Dread Disease Policy
Also called Critical Illness Insurance Policy (see under that heading).
The portion of an insurance premium for which protection has already
been provided by the insurer.
Since 1989 there has been an upper limit on the amount of salary that can
be taken into account when calculating pensions arising from and
contributions payable under an approved arrangement. This is known as
the 'earnings cap'. In the current year (1999-2000) the amount is
Earnings per share
A widely used indicator of the return on equity investments. Any figure
quoted represents the total amount of a company's earnings (after
deductions) divided by the number of ordinary shares it has issued. (See
The date on which insurance under a policy will begin.
The date at which an individual becomes eligible for benefits.
A specified period of time during which potential members of a group
insurance scheme may join without evidence of insurability.
Requirements imposed for eligibility for coverage, usually in a group
insurance or pension plan.
Employees who meet the eligibility requirements for insurance set out in a
Benefits offered to an employee by an employer and usually paid for at
least in part by the employer. Life, Health and Critical Illness insurance
obtained by an employer on a group basis are examples of employee
A medical questionnaire issued to member of a group insurance scheme
when the members benefit level requires the member to provide evidence
of good health. This is usually the first stage of the Medical Underwriting
An amendment of an insurance policy that alters the provisions of the
A life assurance policy related to a mortgage designed to pay off the
amount originally borrowed at the end of the mortgage term. An
endowment policy will pay you a fixed amount on a set date or if you die
before that date, in other words it's both a way of saving and life
insurance. People often use endowments to repay interest only mortgages.
The drawback of them is that it is often unclear how much you are having
to pay in charges and the plans are often very rigid, so if you start an
endowment and then decide to cancel it, you might not get back what you
You only pay interest to the lender, but you also have to pay a monthly
premium for an endowment policy that you take out with an insurance
company. The endowment policy is designed to produce a lump sum either
at the end of your mortgage term or at your death if earlier, to repay the
capital you borrowed. You must remember though that the amount paid
out is not guaranteed and may not be sufficient to repay the capital
Executive Pension Plan.
1. A shareholding in a limited company. By extension, 'equities' is
generally used to mean the whole range of shares traded on a
2. The amount by which the value of a house exceeds the total of the
loans secured by mortgage(s) thereon.
Another word for stocks and shares.
A type of remortgage where you own your home outright but wish to use
it as security for new borrowing.
Refers to the increase in benefit (usually annual) payable during the
payment term of an insurance claim that is not settled via a lump sum
payment. For example, claims under an Income Protection Policy might
escalate annually in line with the Retail Price Index.
Strictly, an interest in land, but generally used to mean the total (land,
chattels, investments, etc) owned by an individual.
Shares or similar investments (for example, holdings in unit trusts) in
companies supposed to conform to a particular set of moral or ethical
principles. Different ethical values have led to a proliferation of funds of
this nature with different principles & for example, some will avoid
investing in arms manufacture, and others will avoid tobacco companies.
There is ongoing debate as to whether the following of such principles
adversely affects the investment performance of ethical funds.
The European Single Currency.
Ex Gratia Payment
Latin for "from favour." A payment by an insurer to an insured for which
there is no liability under the contract.
Exchange of contracts
The point at which the buyer and seller have legally committed themselves
to the sale and purchase of the property.
Where a customer buys a financial product without receiving advice on its
A fixed amount of money which the insured agrees to contribute toward
the cost of a claim under an insurance policy.
Conditions or circumstances listed in the policy, for which the insurer will
not provide benefits.
Executive Pension Plan
An individual occupational pension arrangement that is normally used for
senior employees / executives. The rules of an occupational pension and
not those of a personal pension govern an Executive Pension Plan.
Exempt Approved Scheme
An Inland Revenue approved pension scheme, which is established under
an irrevocable trust and hence qualifies for tax advantages relating to
contributions, income and capital gains from investments.
The ratio of insurance company operating expenses to premiums.
Process of determining the premium rate for a group risk, wholly or
partially on the basis of that group's claims experience to date.
Express money transfer
This is a foreign currency payment to an individual or organisation
delivered electronically to a bank. It takes around 2-5 days, depending on
the currency and destination.
A type of reinsurance in which the reinsurer can accept or reject any risk
presented by an insurance company seeking reinsurance.
A private foundation created to make charitable contributions on behalf of
a particular family. The board is often limited to family members.
Family Income Policy
A form of term insurance. If the death of the insured occurs during the
term an income will be paid from the date of death to the end of the term.
Federated Fund Drive
A centralised campaign whereby one organisation raises money for its
member agencies. The United Way campaign and the Community Works
Final Salary Scheme
A particular form of defined benefit pension scheme (see under that
heading). Benefit is calculated based upon the final salary of the member
and years of service.
Financial Planning Certificate
A professional qualification for financial advisers obtained by examination
through the Chartered Insurance Institute. Holders are entitled to be
Registered with the Society of Financial Advisers.
Financial Services Authority
The single regulatory authority for the UK financial services industry.
influencing the direction of an economy through the use of taxation (See
also Monetary Policy)
A guaranteed rate that is normally set just below the standard variable
rate and is guaranteed for a certain period of time. If the standard variable
rate falls below the fixed rate you will still have to pay the fixed rate. Once
the fixed rate period ends you will normally pay the lender's variable rate.
Sometimes there are redemption penalties associated with this type of
A program where employees can select from a range of benefits offered by
their employer in order to meet their own specific needs.
A feature of some mortgages that gives you freedom to change the
amount and frequency of your mortgage payments.
Contributions to a foundation that are used primarily for direct grant
making, rather than for endowing the foundation permanently. Most
corporate foundations depend on these funds each year rather than on
income produced from endowment funds.
the popular name for the FT-SE 100 Share Index, the UK stockmarket's
main benchmark index, which measures the daily share price performance
of Britain's top 100 public limited companies, ranked by their size (See
also Market Capitalisation)
This is similar to a bankers' draft, but is in a foreign currency. Foreign
drafts take around 5 days to arrive depending on where it is sent.
A private non-profit organisation with funds and a program managed by its
own trustees and directors, established to further social, educational,
religious or other charitable activities by making grants. A private
foundation receives its funds from, and is subject to control of, an
individual family, corporation or other group of limited number. In
contrast, a community foundation receives its funds from multiple public
sources and is classified in the US by the IRS as a public charity.
Financial Planning Certificate.
The interest rate is fixed for a set period.
Free Cover Level
The maximum amount of benefit for which an insurance company is
prepared to insure a member of a group insurance scheme without the
member needing to provide evidence of good health.
If you buy a property which is freehold it means that both the land and the
property is yours, unlike leasehold where the land would not belong to
Free Standing Additional Voluntary Contributions
A scheme whereby an individual can make payment into an independent
arrangement to supplement an occupational pension scheme as longs as
the anticipated benefits from the two schemes together are less than the
maximum permitted under the rules laid down by the Inland Revenue.
Similar to a mutual insurance company. A Friendly Society, registered
under the terms of the Friendly Societies Act 1974, is owned and operated
for the benefit of its members. There are limits on the amounts which can
be invested by members but tax privileges are available to policies within
those limits. Some Friendly Societies now operate with separate sections
for 'tax-exempt' and 'ordinary' business.
Financial Services Authority.
Free Standing Additional Voluntary Contributions.
This is an index compiled by the Financial Times and is made up of all the
companies listed on the UK Stock exchange (currently around 835). The
purpose of the index is to provide a benchmark of the performance of the
stock market as a whole. This benchmark is often used to measure the
effectiveness of a fund manager.
An annuity which is payable for a fixed period regardless of whether the
annuitant survives, and thereafter only while the annuitant is alive.
Annuities guaranteed for 5 years are very commonly used in conjunction
with pension arrangements.
general term for any investment vehicle which pools together the money
of many small individual investors and invests it in certain markets and
securities according to a defined set of investment aims and objectives.
Covers such investments as unit trusts, investment trusts and pension
A fund manager is employed to invest money for (amongst other things)
unit trusts and investment trusts. Fund managers aim to outperform their
chosen index by buying shares, which they think will do particularly well.
They can also choose to keep a percentage of their fund in cash if they're
not optimistic about the outlook for the stock market. Naturally, fund
managers get paid to do this, so charges for an actively managed fund
tend to be higher than for an index tracker.
usually refers to the underlying economic factors affecting a particular
market, country or sector and will include such aspects as industrial
output, wages and raw materials costs, currency strength or weaknesses,
trade balance and so on.
short for Futures Contract, which is an obligation to buy or sell a specific
amount of a commodity, currency or financial instrument at a particular
price on a stipulated future date. The price is established between buyer
and seller on the floor of an exchange, such as the London International
Financial Futures Exchange (LIFFE), using an 'open outcry' system. The
contracts themselves may be traded with third parties. (See also Options)
An abbreviation for 'gilt-edged securities'. These are bonds, loans etc
issued by the UK government or UK local authorities and are generally
considered to be one of the safer forms of investment. Although the
interest rate on the underlying value and the price at maturity are
guaranteed, the price will vary during the lifetime of a gilt; so there is
some element of risk.
Gift inter-vivos. A gift made during a person's lifetime as opposed to a
legacy, which passes on death.
Guaranteed Minimum Pension.
Group Personal Pension.
The specified period after a premium payment is due, in which the
policyholder may make such payment, and during which the protection of
the policy continues.
A bond issued by the UK government with enhanced interest or tax
privileges but restricted in availability to persons of pensionable age.
The award of funds to an organisation or individual to undertake charitable
or tax-exempt activities.
Individual or organization that receives a grant. Also called a donee.
Individual or organization that makes a grant. Also called a donor.
A gross interest rate or dividend is one that doesn't take into account the
tax you'll have to pay on that income.
The actual premium paid by the policyholder before any tax relief or
discount is taken into account.
A contract of insurance made with an employer or other entity not formed
for the purpose of obtaining insurance that covers a group of persons
identified by reference to their relationship to that entity. Several different
types of insurance may be arranged on this basis, including life, critical
illness, income protection, private medical, etc.
Group Critical Illness Scheme
A scheme that will pay a cash lump sum to members diagnosed as
suffering from one of a range of specified illnesses and conditions.
Group Health Insurance
Health insurance written on a number of people under a single master
policy, issued to their employer or to an association with which they are
Group Income Protection
Group Income Protection Insurance (also known as Permanent Health
Insurance, or PHI) gives sick and injured employees a replacement
income, and provides the means for the employer to retain staff even
when they are not contributing to the business. The benefit (typically)
becomes payable when the company's sickness scheme ends and
continues as long as the employee's absence lasts, right up to normal
Group Life Insurance
Group Life is designed to pay a benefit, in either lump sum form or as a
dependants' pension, on the death of the member.
Group Permanent Health Insurance
An alternative name for Group Income Protection.
Group Personal Pension
An arrangement between a provider and an employer to offer personal
pensions to employees. Charges may be lower because of the numbers
involved, and the employer may also agree to contribute. A GPP is not an
occupational pension scheme.
Guaranteed growth bonds
Fixed term investments, typically between 3 and 5 years, where you
invest a lump sum and are guaranteed either a minimum return or that
you won't lose capital.
1. The period for which an insurer will guarantee a quoted rate prior
to it being accepted.
2. The period for which a guaranteed annuity will continue regardless
of the survival of the annuitant
Guaranteed Income Bond
A single premium insurance contract providing payments at regular
intervals for a fixed period at the end of which the premium is returned.
Guaranteed Minimum Pension
The minimum pension which an occupational pension scheme must
provide as one of the conditions of contracting out in respect of pre April
Insurance against financial losses resulting from sickness or accidental
bodily injury. Included under this definition are accident insurance,
disability insurance and accidental death and dismemberment insurance.
Private Medical Insurance (to provide for the cost of private - ie not within
the National Health Service - medical treatment also comes under this
a strategy used to offset investment risk. Usually makes use of futures or
Higher Rate Tax
Under U.K. income tax regulations, bands of personal income are taxed at
different rates. The highest rate of income tax is currently set at 40% and
for 1999/2000 it is payable on taxable earnings above £28,000.
Home Income Plan
Home income plans allow elderly homeowners to use the equity tied up in
their home to purchase an income and thus increase their standard of
living. Homeowners can release this capital without having to sell their
With a reversion plan, the home is sold to an insurance company that then
pays a regular income to the owner. On the death of the owner, the house
becomes the property of the insurance company.
With an annuity plan, the proceeds of a new mortgage on the property are
used to purchase a regular income via an annuity. On the death of the
homeowner, the mortgage debt must be repaid.
Independent Financial Adviser.
An estimation of the returns you might get from an investment, based on
standard growth rates and taking charges into account. The actual returns
you get may be higher or lower than this.
An annuity under which payments commence straight away, in contrast to
a deferred annuity, under which the payments do not commence until
later (possibly many years later).
The Investment Management Regulatory Organisation which regulates the
management of our unit trusts.
An option available to members of small self-administered pension
schemes, personal pension schemes and recently extended to occupational
scheme members with money purchase benefits or AVC's. An annuity does
not have to be purchased at retirement and can be delayed up to age 75.
In the meantime the individual can 'draw down' income from his pension
investment. This can be a high-risk approach to pension provision and is
subject to PSO regulation.
A Life Insurance contract that provides income on a monthly or other
periodic basis, as opposed to a policy which pays proceeds in a lump sum.
Income Protection Insurance
Income Protection Insurance (also known as Permanent Health Insurance
or PHI) provides a monthly income during periods of long-term illness or
This is tax you pay on the income you earn each year above a certain
amount. As well as your salary, income tax is also charged on interest and
dividends you receive. The amount of tax you pay depends on the amount
of money you earn and on your allowances.
1. Payment to reimburse a specific quantifiable monetary loss or
2. (Of commission) Paid in full at commencement of a contract on the
assumption that this will remain in force for at least a certain
minimum period. If the contract is terminated within this period
part of the commission may be required to be refunded .
Independent Financial Adviser
A broker or other intermediary authorised to sell or advise on the policies
offered by any insurance company, as well as other financial service
A private foundation that is no longer controlled by the original donor or
A means of continually measuring the movement of a particular set of
statistics over periods of time. Most unit trust fund managers measure
their fund's performance against that of an appropriate 'benchmark' index
with the aim of at least matching its progress or, better still, beating it.
Insurance where the level of cover increases in line with an index of prices
An index tracking fund aims to follow a particular index as closely as
possible. It does not aim to beat it. It invests only in the companies that
make up that index. Index tracking removes the need to employ fund
managers, which means charges tend to be lower.
A method by which benefits are increased at periodic intervals by a factor
derived from an index of prices or earnings.
Individual Savings Account
A means of saving which gives exemption from tax on benefits. Savings
can be through cash, stocks and shares or insurance but must be arranged
through one or more 'ISA manager(s)'. There are limits to the amounts
which can be contributed.
Whole of life and endowment insurance with relatively low value (under
£1000 sum assured). Historically, the premiums were collected by an
insurance company agent at the policyholder's home. However, these may
now be paid by monthly bank transfer. The legislation governing this type
of insurance is less formal than for 'ordinary branch' and if an insurance
company transacts both types of business it is required to keep them
The amount in percentage terms by which prices rise or fall year on year.
In the UK, the primary measure of this is the Retail Price Index (RPI); the
underlying rate of inflation is the RPI with mortgage repayment figures
In Force Business
Life or Health Insurance that is current and for which premiums are being
paid or for which premiums have been fully paid.
This tax is payable at the time of death, on any items (money or
otherwise) where ownership changes on death or within 7 years before.
There is no inheritance tax on the first portion of the deceased person's
estate and transfers between husband and wife are exempt. There are
other exemptions and the rules governing these can be complex.
Support in the form of goods or services rather than a cash contribution.
The Inland Revenue is the government department responsible for the
assessment and collection of direct taxation on income, capital gains,
stamp duties, corporation tax and inheritance tax.
Inland Revenue Limits
Limitations on benefits and contributions applied to an approved
occupational pension scheme in return for tax relief.
Accounts where you don't lose interest even though you withdraw money
without giving the bank notice. The One account gives you instant access
to your funds. All you have to do is write a cheque, arrange a transfer or
use your Switch or VISA cards.
A principle of insurance that states that someone may only take out
insurance if they stand to suffer a financial loss from an event covered by
An agreement under which individuals, businesses, and other
organisations, in exchange for payment of a sum of money (a premium),
are guaranteed indemnity for losses resulting from certain events or
conditions specified in a contract (policy).
Insurance Premium Tax
UK tax imposed on most non-life insurance premiums.
A person or organisation covered by an insurance policy.
The party to the insurance contract who promises to pay losses or
benefits, usually an insurance company.
A person or organisation that offers advice and arranges policies for
clients. Under UK regulations, intermediaries must be either (1) "Tied",
whereby they represent only one company in the case of life business or a
limited number of companies for general business, or (2) "Independent",
whereby there is no limit on the number of companies with which they can
Interest only method
One of two ways used to pay off your mortgage, the other being the
Repayment method. Your monthly payments are solely used to pay off the
interest you owe on your borrowings. This means, you'll have to make
provision to pay off the amount you actually borrowed at the end of your
mortgage term, for example using an ISA, a pension or an endowment.
Internal Revenue Code
The laws governing taxation in the United States, administered by the
Internal Revenue Service.
Internal Revenue Service
(IRS) The federal agency in the United States with responsibility for
regulating public charities and foundations, as part of its authority under
the Internal Revenue Code.
Dying without having made a Will. If a UK resident dies intestate there are
rules as to the distribution of the estate, which have to be followed
whether or not they coincide with what the deceased person would have
The portion of a company's or an individual's income which is derived from
its investments, including interest and dividends on stocks and bonds.
Investment Management Regulatory Organisation (IMRO)
A regulatory body which governs the way investors money is handled and
Unlike a unit trust, which is 'open-ended', an investment trust is
effectively a company which, for a management fee, invests the pooled
money of small investors in securities for stated investment objectives. An
investment trust is 'closed-end' in that it has a fixed number of shares that
are traded like stock, often on many different exchanges. Visit the
Flemings website for more details.
Insurance Ombudsman Bureau See: Ombudsman.
A trust arrangement that cannot be revoked by the creator.
Stands for Individual Savings Accounts which the Government introduced
on 6th April 1999. ISAs replaced PEPs and TESSAs - no further
investments are allowed into the latter, though you can retain existing
investments within them tax-free. ISAs offer similar tax-free benefits to
PEPs but you can hold a wider range of investments.
A grant project supported by more than one donor, each of whom may
provide monies for a specific component of the overall project or who may
contribute to a common pool of funds.
Joint Life Annuity
An annuity contract that pays a benefit throughout the joint lifetime of two
Key Person Insurance
Insurance designed to protect a business against the loss of income
resulting from the disability or death of an employee in a key position.
Knock for knock
An arrangement between motor insurance companies where each
company pays for its own clients' claims and does not cross claim from the
other company, even if the driver at fault is insured with the other
A record, held by the Land Registry, which lists the registered owner of a
plot and whether there are any legal charges upon it.
Life Assurance Premium Relief.
The termination of an insurance policy due to non-payment of premium(s).
A policy terminated for non-payment of premium(s).
These are individuals who wish to join a group insurance scheme beyond
the date at which they were automatically eligible for membership.
If you buy a property that is leasehold it means that you own the property
but not the land the property is on, unlike freehold where you would own
The legal document held by the Land Registry that identifies who has a
claim on your property. The main lender will normally be identified as the
first charge (i.e., have first claim to the property) but there may also be
other charges registered (i.e., second, third, etc.).
Rating method in which the premium level remains the same throughout
the life of the policy.
Level Term Insurance
A type of term policy where the cover remains the same from the effective
date until the expiration date.
A contract that provides an income during the remaining lifetime of the
Life Assurance Premium Relief
Income tax relief on life assurance premiums. The March 1984 Budget
stopped this relief for new policies, but life policies that commenced before
this date can continue to receive the relief. Relief is granted by means of a
deduction from the premium, which is paid to the insurance company net
of this deduction. The insurance company later claims the balance from
the Inland Revenue so the amount paid and, if appropriate, invested on
behalf of the policyholder is the full gross figure as shown in the policy
Any insurance relating to a risk depending on human life.
This includes contracts providing payment on the insured person's death,
endowments providing payment either on survival to a specified date or on
earlier death and annuities which are paid throughout the annuitant's
lifetime but cease on death.
Limited Price Indexation
Occupational pension schemes are required to provide Limited Price
Indexation on all pensions benefits accruing after 5 April 1997. The annual
LPI increase is 5% per annum or the increase in the Retail Price Index, if
The London-based insurance market, best known for marine and aviation
cover. The name is taken from Edward Lloyd who owned the coffee shop
in Tavern Street from where the market began in 1689.
The extent to which an individual is charged more than the "standard" or
"average" rate for their insurance.
Long Term Care Insurance
A health-insurance variation designed to cover the costs of long term care
at home or in a nursing home.
Long Term Disability Insurance
Insurance to provide a reasonable replacement of a portion of a person's
income lost through serious illness or injury.
A Loss Adjuster is an independent third party who may be used by an
insurance company to assess the value of a claim, particularly if there is a
disagreement between the insurer and the insured.
A Loss Assessor is a professional who can be employed by a claimant to
value a loss and present the insurance company with a supporting case for
this valuation. Loss assessors are most often encountered in respect of
claims under home contents or buildings insurance.
Low cost endowment
A savings plan which includes decreasing term insurance. It pays out at
the end of the term, and also if you die within the term. Usually used to
pay off an interest only mortgage.
Lower Earnings Limit
The minimum amount that must be earned in any period before National
Insurance contributions are payable.
Loan to Value. This is the amount of the mortgage expressed as a
percentage of the value of the property, or the price you are paying for
the property. So a £60,000 mortgage on a £80,000 property would mean
a LTV of 75%.
A settlement whereby the beneficiary receives the entire proceeds of a
policy at once rather than in instalments.
A pooled investment fund which is actively managed. Often, investment is
only possible through a linked life insurance policy issued by the insurance
company which is managing the fund.
the value of a company as measured by the total stockmarket price of its
issued and outstanding shares. This is calculated by multiplying the
number of shares by the current market price of a share. It is also widely
used as a definition of company size - hence, big corporations are usually
referred to as large cap stocks (See also Small Caps)
Matching Gifts Programme
A corporate contributions program that will match contributions made by
employees, retirees, and their spouses to qualifying nonprofit
organizations. Specific guidelines regarding the type of organizations
included, donor eligibility, and the dollar amount which will be matched
are established by each corporation.
A grant or gift made with the specification that the amount donated must
be matched from other sources on a one-for-one or some other prescribed
The date on which a payment becomes due at the end of the term of an
endowment policy or a fixed term security or loan.
The amount payable to the insured at the maturity date of an endowment
Medical Examiners Report. A report by a doctor who is required to
examine the individual concerned especially for the purpose. Used for
Motor Insurers Bureau.
Micropal Star Ratings
Independent investment funds analysts Micropal continually monitor all of
the UK's unit trusts, measuring the balance between each fund's
performance over three years against the up or down movements in its
unit price (i.e. the volatility). They then award stars on a scale from 0 to
5, with the highest number going to those funds with the lowest volatility -
and therefore risk - in relation to their overall performance. Five stars is
the top award.
Mortgage Interest Relief at Source. The mortgage lender will reduce the
monthly payment required from a borrower by the amount of tax relief
applicable to the interest on the loan. The lender can claim the balance
from the Inland Revenue.
influencing the direction of an economy through control of the money
supply (See also Fiscal Policy)
Money Purchase Scheme
A pension scheme providing benefits determined by the contributions
made in respect of a member and the investment return on those
contributions. At retirement the accumulated fund is used to purchase an
annuity. All personal pensions (and some occupational schemes) are
'money purchase schemes'.
Relative incidence of disease and accidents in a well-defined class or
classes of persons.
Actuarial statistics showing the frequency and duration of a sickness.
A statistical table showing the probability of death (death rate) at each
A loan used to buy your house, where your house is used as security until
you've paid off the loan (usually after a fixed period). There are three
main types of mortgage:
A repayment mortgage - you pay off the loan by instalments of
capital and interest so that after the agreed period you have paid
off all the loan
An interest only mortgage - you pay only interest on your
mortgage and make other arrangements to repay the capital, like
an endowment policy.
A flexible mortgage allows you to make overpayments and take
This is the legal document that you sign to say that the lender has a legal
charge over your property.
Mortgage Indemnity Premium (MIP)
Insurance that covers the lender in case your property is repossessed and
the lender cannot get the money.
Motor Insurers' Bureau
The Motor Insurers' Bureau is a body funded by motor insurance
companies, which deals with claims for injury compensation when the
driver at fault is not insured, or cannot be traced.
A commercial organisation owned by its members (as opposed to being
owned by shareholders). Examples are Building Societies and some life
A form of taxation which you pay as you earn, used to fund certain state
National Insurance Contributions
An additional form of "tax" paid by most employers, employees and self-
employed people. The money collected is (broadly) used to pay for social
Class 1 Contributions are paid by employers and by employees with
earnings above the lower limit.
Class 2 Contributions are paid by the self-employed at a weekly flat rate.
Class 3 Contributions are voluntary and are paid by those who do not earn
enough to require Class 1 or Class 2 contributions to be made.
Class 4 Contributions are paid by the self-employed.
The Department of National Savings is part of the Treasury and sells
investment, savings and deposit products to raise extra finance for the
government. The products are designed as medium to long-term vehicles
and are sold "over the counter" at post offices.
Interest received from a bank or building society account after basic rate
tax has been deducted. If you're a higher rate taxpayer, you will have to
pay more tax.
Income distributions are paid with a 20% tax credit. If you are liable to
lower rate or basic rate income tax, you will have no further liability to
tax. If you are a higher-rate taxpayer, you will have an additional income
tax liability. If you are a non-taxpayer, you may be able to use the tax
voucher supplied at the time of the distribution to support a tax
repayment claim. Wherever you see a gross income figure quoted, it
means that no tax has been deducted (e.g. as with a PEP investment).
Net Relevant Earnings
A definition of 'pensionable income' used in determining the maximum
contributions to a retirement annuity or personal pension scheme that
qualify for tax relief.
Insurance cover for property or equipment where an item lost or
destroyed is replaced by the equivalent new item without deduction for
age or wear and tear of the old item and regardless of price inflation.
No Extended Tie In
This means that at the end of your fixed, capped or discounted rate
period, you will not have to pay an early redemption charge if you pay off
your mortgage early.
A contract that the insured has the right to continue in force so longs as
premiums are paid. The insurer cannot make changes to or revoke the
insurance during this time.
A term applied to employee benefit plans or insurance schemes when the
employer pays the full cost and the employee is not asked to contribute.
Non-profit - Nonprofit
(Also Not for profit and sometimes Charitable). A term describing the
Inland Revenue (in Britain) and the Internal Revenue Service (in the US)
designations of an organisation whose income is not used for the benefit
or private gain of stockholders, directors, or any other persons with an
interest in the company. A nonprofit organisation's income must be used
solely to support its operations and stated purpose.
Normal Retirement Age
The age at which an employee holding a particular position normally
retires from service.
Normal Retirement Date
The normal date of retirement applicable to a member of an occupational
pension scheme and specified in the rules of the scheme.
Impairment of health caused by continued exposure to conditions inherent
in a person's occupation or a disease resulting from the nature of an
Occupational Pension Scheme
A pension scheme set up by an employer for employees. It is run by
Trustees and usually provides life insurance as well as pension benefits.
The pension earned by the employees is usually based on a percentage of
final salary or on the amount paid in (money purchase basis). An
occupational pension can either be contributory (where members
contribute to the fund) or non-contributory, which is entirely paid for by
Used in relation to group insurance with reference to the occupational split
of the company's workforce E.g. 50% clerical / 50% manual.
Pronounced as "oiks", this stands for Open-Ended Investment Companies.
Although not dissimilar to unit trusts and investment trusts, an OEIC is
basically a company which can be self-contained or it can form an
"umbrella" over a range of individual funds (sometimes referred to as sub-
funds). Instead of units, an OEIC issues shares and these can be of
different classes - for example, for income accumulation, for income
distribution, or classes where income is paid gross or net of lower-rate
income tax. Save & Prosper's New Europe Fund is an OEIC.
The price at which you can buy a security or a unit in a unit trust.
Collective investment funds that are based overseas, often in 'tax havens'
or other locations with particular tax advantages.
An independent official to whom grievances can be aired, free of charge.
Ombudsman is a Swedish word meaning citizen's representative. The
Insurance Ombudsman Bureau aims to increase confidence in Insurance
by offering an independent resource for resolving disputes between
insurance companies and their customers.
Open-ended investment company
An investment company that works in a similar way to a unit trust except
that an OEIC is a limited company. Most OEICS operate as umbrella funds,
where the OEIC is authorised and can then set up multiple sub-funds
without the need for individual authorisation of each sub-fund.
Contributions toward an organisation's day-to-day, on-going expenses,
such as salaries or wages, utilities, office supplies, etc.
Opinion status enquiry
A reference given by a bank or building society to confirm a customer has
run their account responsibly.
The decision by an employee to leave or not join an occupational pension
scheme provided by his/her employer.
an agreement to buy or sell at a specific price at a specific date in the
future. There are basically two kinds of option: a call option gives its
buyer the right to buy a specified number of shares at a particular price
before a specified date. The opposite of a call option is a put option, which
gives the buyer the right to sell a specific number of shares at a particular
price within a specified time period. In practice, call and put options are
rarely exercised; instead, investors buy and sell options before their
expiration, trading on the rise and fall of premium prices.
When the amount of money withdrawn from a bank account is greater
than the amount actually available in the account the excess is known as
an 'overdraft' and the account is said to be 'overdrawn'. If agreed in
advance by the bank this is essentially a form of loan facility. If not agreed
in advance by the bank penal charges may be incurred.
Price/Earnings Ratio. Calculated by dividing the market price of a
company's ordinary shares by its earnings per share figure.
The ratio reflects the market's expectation of the future earnings of a
company in relation to its current earnings; in other words, its
Paid Up Insurance
Insurance on which all required premiums have been paid.
Paid Up Scheme
A pension scheme where contributions have ceased, but which has assets
that are held and used by an administrator in accordance with the scheme
A disability which is less than total (according to the particular definition
relating to the contract in question) but still sufficient to hamper the
individual in his or her occupation.
Pay-As-You-Earn method of income tax collection.
A feature offered by some mortgages that allow you to miss monthly
payments on your mortgage. Payment holidays are particularly useful if
you have some other major expense - like a new baby or a wedding - to
Private foundations are required by law to pay out at least five percent of
the fair market value of their assets each year in grants and administrative
A continuing income that is usually associated with the post-retirement
period of a person's life.
A vehicle by which an individual can make pension provision. This may be
either collective or individual and with or without the involvement (by
means of contributions or otherwise) from the individual's employer.
Pension Schemes Office
A division of the Inland Revenue which oversees the approval of pension
schemes for tax relief purposes.
The earnings on which benefits and/or contributions for a pension scheme
The period of service with an employer that is used in calculating pension
benefits from an occupational pension scheme.
Personal Equity Plan. Introduced in 1987 by the then Chancellor Nigel
Lawson, over 3 million people in the UK invested in a PEP before they were
replaced by ISAs in April 1999. Although you can no longer open invest in
a new PEP you can still transfer your existing PEPs.
Per person, by or for each individual
Per Thousand. The Premium Rate for some types of group insurance is
quoted per £1000 of benefit.
Permanent Health Insurance
Permanent Health Insurance will pay you an income if you become ill for a
long period or if you become disabled and can't work.
Permanent Total Disability
Disability from which the individual is unlikely to recover at any time in the
future. Some insurance contracts may specify that permanent is to be
taken as meaning 'extending to normal retirement date'.
A term used to refer to the length of time insurance remains continuously
in force with a company.
Personal Equity Plan
A Personal Equity Plan allows individuals to enjoy the profits from
stockmarket-related investment free of income tax and capital gains tax.
PEPs were introduced in 1987 but from 6 April 1999, new investment in
PEPs is no longer possible. However, existing PEPs can continue in
existence and for up to five years.
Personal Investment Authority
A Self-Regulating Organisation (SRO) set up under the Securities and
Investment Board (SIB) with responsibility for regulating retail financial
Insurance designed for individuals rather than businesses or organisations.
An amount of money borrowed from a bank or other lender by an
Personal Pension Plan
1. A pension plan which produces income and possibly a tax-free lump
sum on retirement or death. Personal pensions commenced in July 1988
and are designed to allow anyone who is either employed but not a
member of an occupational pension scheme or self-employed to make
provision for a pension in retirement. Personal pensions can be used to
'contract out' of the State Earnings Related Pension Scheme. Employers
can normally contribute to the personal pension of an employee.
Employees who are members of an occupational scheme cannot contribute
to their own personal pension plan. 2. Personal pensions are a way of
making your own pension provision if you are not a member of an
employer's scheme. The return from a personal pension or part of it can
be used to pay off the capital sum of a mortgage at the end of the
mortgage term usually 25 years or, sometimes, earlier. They have the
benefit of being tax efficient but to find out if they are suitable you should
discuss with your financial adviser
An individual or firm which provides counseling and evaluative services to
donors before and after grantmaking decisions.
The Personal Investment Authority, which regulates the way in which
financial products are marketed, promoted and sold.
Public Limited Company. Denotes any company which has share capital of
at least a fixed amount.
Private Medical Attendant's Report.
The requirement for a financial adviser to be either 'tied' to one financial
product provider, or completely independent. A provision of the Financial
The legal document issued by the insurance company to the policyholder,
which states the terms and conditions of the insurance, it may also be
called the policy contract or the contract.
The measure of the funds that a life insurance company holds specifically
for fulfilment of its policy obligations.
The period of time for which an insurance policy provides coverage.
The person or organisation who owns an insurance policy.
Pooled Investment Fund
A vehicle for bringing together the investments of many people or
organisations and using the combined funds to obtain economies of scale
and investment management skills not available to individuals. Examples
include unit trusts, investment trusts, etc.
All the interest rates in this range are portable. This means that if you
move home during the discounted or fixed rate period, you can enjoy the
same rate, on the amount outstanding on your original loan, for the
remainder of the discounted or fixed rate period. Conditions apply - please
ask for details.
Pound cost averaging
Pound cost averaging is a benefit of making regular savings in the stock
market, especially when the market is volatile. In practice it means that
you can get more for your money by investing in smaller, regular
Any physical or mental conditions that exist prior to the effective date of
The single or regular periodic payment made to an insurance company in
respect of an insurance policy.
Pre-tax Net Income
A corporation's annual net income before it has paid taxes. In the USA,
The Internal Revenue Service currently allows corporations to deduct
charitable contributions as much as 10 percent of their pre-tax net
A foundation that receives most of its income from, and is subject to
control of, an individual or other single or limited source. See Foundation.
Also in the US, the technical IRS term for an organisation which is tax-
exempt under Section 501(c)(3) and classified as a private foundation
under the Internal Revenue Code. In the US, a private foundation is
referred to as 'having a 501(c)(3) status'.
Private Operating Foundation
A legal classification for an endowed organisation which uses its income to
operate a charitable activity, such as a school or camp, rather than to
Private Medical Attendant's Report
A report from an individual's own doctor ('Private Medical Attendant')
which does not require a medical examination to be carried out. Used for
Private medical insurance
Pays towards private medical treatment if your condition is covered by the
The date the contribution was credited to the account by the Charitable
Gift Fund (USA).
The process by which the Will of someone who dies while living in England
or Wales is validated. A local Probate Office will issue a Grant of Probate to
validate a will and authorising the executors to administer the estate. This
Grant has the status of a decree of the High Court. Hence anyone dealing
in good faith with the executors named in the Grant has legal protection
against any other party claiming to represent the deceased.
Professional Indemnity Insurance
Protects professionals against liability claims resulting from negligent
Pro Rata Premium
A rate charged for a period of insurance cover shorter than the normal
period. For example, if an insured had cover for one quarter of a year, the
Pro Rata premium might be only one quarter of the annual premium.
Pension Schemes Office.
In the USA, charitable organisations (those designated under Section
501(c)(3) by the Internal Revenue Code) that qualify as public charities,
private operating foundations, or private foundations. A public charity as
defined in Section 509 (identified by the Service as "not a private
foundation") normally receives a substantial part of its income, directly or
indirectly, from the general public or from government sources. The public
support must be fairly broad, not limited to a few individuals or families.
A company listed on the stock exchange and hence one whose shares are
available for public investment.
A nonprofit organisation that receives at least one-third of its annual
income from the general public (including government agencies and
foundations). Public foundations may make grants or engage in charitable
Purchased Life Annuity
An income for life purchased from an insurance company. That part of the
annuity that is deemed to be return of capital is tax-free but any balance
is treated as interest and is subject to income tax.
A life insurance policy which has been certified by the Inland Revenue as
complying with the 'Qualifying Policy Regulations'. Proceeds on maturity or
death will not give rise to a tax charge.
The period for which an employee must be employed by a company before
becoming eligible to join a group scheme. Also refers to the service to be
taken into account to entitle a member of a pension scheme to 'short
most UK funds are grouped into specific sectors as defined by AUTIF, with
each sector being divided into four quarters or quartiles. The midway point
is known as the median; all funds want to see their performance stay
above the median but the real target is to be consistently in the top
quartile (i.e. the top 25% of all funds in that particular sector). To use a
soccer analogy, The top quartile is like being in the premiership and is the
place to be.
The illustration provided to show the costs of insurance cover. The
quotation document forms the basis of a new contract or the renewal of an
existing one. It contains details of the conditions, benefits, caveats and
premiums for the policy.
The pricing factor upon which an insurance premium is based, it is the cost
of a given unit of insurance.
Used in group insurance to describe the review of premium rate at the end
of a rate guarantee period.
Describes coverage issued at a higher rate than standard, usually due to
impairment of the insured life.
The date the contribution was credited to the account by the Charitable
Gift Fund for tax purposes.
For all our mortgages, if you pay off the whole or any part of the loan
before the end of the mortgage term, you will have to pay a redemption
charge. This will be the amount specific to the mortgage product specified
on the relevant web page and in our brochures. There will also be an
Administration fee at redemption. If you decide to redeem your Standard
Variable Rate mortgage, you would only pay an administration fee. Fees
applied in addition to any interest charges at the time the mortgage is
redeemed are charged to cover our reasonable administration costs. These
include retrieving and checking the Deeds and Documents, formal sealing,
recording of documents sealed and secure postage. (Please note that with
some products, for example the Base Rate Tracker products, certain
specific criteria apply allowing part repayment without a charge.)
The amount that would be redeemed if you held the assets for their full
term - to their redemption date.
If you want to pay off your mortgage early, you may have to pay a fee
during the early years of the loan. The fee may be equivalent to a certain
number of months' interest, or it could be a percentage of the loan. Some
lenders only charge a redemption penalty during the time of the special
deal they offer. Others may tie you in for a number of years afterwards. If
you think you may want to repay early, check what conditions apply
before you decide which type of mortgage you want
An estimate of the total long term returns, including income and capital,
on fixed income investments like corporate bonds and gilts.
Redundancy protection insurance
Insurance that continues to meet mortgage payments, usually for a
limited period, if you are made redundant.
The practice whereby one insurer transfers part or all of the risk it has
accepted to another insurer (the reinsurer).
This is when you switch your mortgage from your current lender to
another one. You take out a new mortgage to repay your current one. You
may be able to get a better rate that saves you money.
Renewable Term Insurance
Term insurance providing the right to renew at the end of the term,
without evidence of insurability. The premium rates may increase at each
renewal as the age of the insured is increasing.
An agreement to continue insurance beyond any original term. For group
insurance it is often used to refer to the annual update of membership
details and production of annual accounts.
Repayment (Capital & Interest) method
One of two ways used to pay off your mortgage, the other being the
Interest only method. Your monthly payments are used not only to pay
the interest on your borrowings but also a proportion of the actual amount
borrowed. At the end of the term, both the borrowing and interest on this
borrowing would have been paid in full.
Your monthly payments are partly to pay the interest on the amount you
borrowed, and partly to repay the amount you borrowed. At the end of the
mortgage, the capital and the interest is all completely repaid. It is also
known as a capital and interest mortgage
A schedule you agree with us for repaying your One account borrowings
over the mortgage term. Your monthly One account statement will help
you to keep track of whether you are ahead or behind your repayment
This is when a borrower fails to pay back their loan in accordance with the
Terms and Conditions of that loan and the lender exercises their legal
charge over the borrower's property by taking legal ownership.
Termination of an insurance contract by the insurer on the grounds of mis-
statement by the insured.
The sum set aside by an insurance company as a liability to fulfil future
Grants which are made for a clearly specified purpose and can be used for
The amount of risk retained by an insurance company and not reinsured.
Also used in reference to the portion of premium that is used by the
insurance company for administration costs.
A process by which a reinsurer obtains reinsurance from another company.
A bonus added to the value of your With Profits policy each year.
An amendment to an insurance policy that modifies the policy by
expanding or restricting its benefits or excluding certain conditions from
A means whereby a company may raise capital from its own shareholders.
It does this by offering additional newly-issued shares to the shareholders
at a discount on the price at which they will later be offered to the public,
usually on the basis of a certain amount of new shares for every old share
held. Most rights issues are handled by investment bankers who also
underwrite the issue by agreeing to buy any of the newly-issued shares
which are not taken up by shareholders.
An estimate of the annual rate of interest paid out by fixed income
investments like corporate bonds and gilts. It doesn't take into account
any increases or decreases in the capital value of the investment.
Used in group insurance to agree the definition of employee salary to be
applied in calculation of insured benefit.
A charge made by some lenders when they release their legal charge over
Another name for stocks and shares but also applies to any approved or
registered financial instrument, such as bonds.
Securities & Futures Association (SFA)
A regulatory body which polices investment businesses like stockbrokers.
Securities and Investments Board
The overall regulator of financial services set up under the Financial
Services Act 1986.
A grant or contribution used to start a new project or organisation.
The option to take a proportion of the investment and leave the rest
invested, i.e. to take 10% of your pension and leave the other 90% still
Self Administered Scheme
Occupational pensions scheme where the assets are invested and
managed by the trustees or an in-house investment manager.
Self Insured Scheme
A program financed entirely by the employer for insuring employees
instead of purchasing coverage from an insurance company.
Self Regulating Organisation
A body authorised by the Securities and Investment Board to regulate and
supervise investment business or financial service activities.
A general PEP where you can choose which funds you'd like to invest in.
If you're employed, part of your National Insurance contributions go
towards the State Earnings Related Pension Scheme, which is paid on top
of your basic state pension when you retire. You can choose to contract
out of SERPS, in which case the Government will pay the money that
would have gone into SERPS into a personal pension of your choice.
See: State Earnings Related Pension Scheme.
Shares are issued by a company to raise money. Unlike bonds, which are
a straightforward loan, shares give you ownership of part of the company.
Most shares are listed on a stock exchange, which makes them easy to
buy and sell, although dealing costs may be expensive, which is another
attraction of investing in a unit trust as the costs are shared with lots of
Securities and Investments Board.
Sickness and accident
Pays you a benefit if you're unable to work through sickness or accident.
Normally pays out for a set period, i.e. one or two years.
The system most often used to administer group insurance. Designed to
keep administration overheads to a minimum. Normal changes in
membership and benefit need only be advised to the insurer on a periodic
(usually annual) basis.
Single company PEP
A tax efficient investment where you invest in the shares of only one
Single Premium Costed
A method of cost calculation used for group insurance schemes with a
small number of members (typically less than 20). The overall premium is
based on the costs calculated in detail for each member and based on age,
sex and other factors.
Single Premium Policy
A Life Insurance policy paid for in advance by one single premium rather
than in periodic premiums.
Another name for smaller companies, as measured by their market
capitalisation. Our definition of a smaller company is one which has a
market capitalisation of less than US$500 million, which is still quite
sizeable by most standards. Usually a switch discount of up to 3% off the
offer price is given.
Society of Financial Advisers. A professional body linked to the Chartered
Insurance Institute. Membership is open to those who have passed the
Institute's examinations for the Advanced Financial Planning Certificate.
A service to inform a customer paying in a cheque that the payer's bank
will make the payment. This does not reduce the time taken for the
cheque to clear - this will still take three working days.
Self Regulating Organisation.
Small Self-Administered Scheme. A self-administered occupational pension
scheme with usually less than 12 members.
The name given to the new personal pension, which will be introduced by
the government in two years' time. The details are not yet finalised, but it
promises to be one of the biggest shake-ups of the pensions industry for
A tax levied on certain legal transactions, these include share dealing and
the purchase of property.
Standard Variable Rate
A lender’s standard mortgage rate. This goes up and down with interest
Pre authorised payment in which the customer gives instructions to their
bank to pay fixed sums at regular intervals or on defined dates.
State Earnings Related Pension Scheme
The earnings related part of the state pension scheme, which provides
benefits which are additional to the basic state pension.
The basic state pension is paid to everyone. The level of pension you get
depends on the amount of National Insurance contributions you pay over
your working life.
A forum for the trading of stocks, shares and other securities. The London
Stock Exchange is the main stock exchange in the United Kingdom.
Protection purchased against the risk of large losses or a severe adverse
Where the risk of a claim against a policy is higher than average.
The designation, in writing by a donor, of a person to be assigned the
rights and duties associated with the donor's account at the Charitable Gift
Fund upon the donor's death. Successors are eligible only after the deaths
of all donors named on the account. The donor designates an individual as
the successor, or the donor may choose to recommend that one or more
charitable organizations receive the proceeds of any remaining units in the
account upon the donor's death.
Where you cancel an investment or policy and usually receive a reduced
payout, due to the impact of charges.
The amount of money paid to the policyholder by the insurer when certain
types of life policy are discontinued before the full benefit becomes
Refers to moving an investment (or part of it) out of one fund and into
another. When you switch you sell at the bid price and sell units in the
new fund at the offer price.
A card linked to the UK Switch network. If you pay for goods and services
with a Switch card, the money leaves your account straightaway. You can
use your One account Switch card in just about every cash machine in
Britain and tens of thousands of Cirrus machines worldwide, and to pay for
goods abroad wherever you see the Maestro sign.
The amount which an ISA manager can reclaim from the Inland Revenue
in respect of share dividends received. This is 10% of the amount received
until April 2004, when it will no longer be available.
Tax Exempt Organisation
A nonprofit or not-for-profit, charitable organisation which, because it
engages in charitable activities, does not have to pay taxes. An
organisation must submit evidence of its charitable work and fulfil other
requirements to receive tax-exempt tatus.
A period during which a member of a group insurance scheme can be
away from work and continue to be covered by the insurance.
The period of time for which a policy or bond is issued.
Provides a lump sum on the death of the life or lives assured during a
specified period of time (term). If no death occurs during the term, then
the policy will lapse, with no redemption value.
Additional bonus which may be paid when a claim arises under a with-
profit policy, either at maturity or on death of the policyholder.
Tax-Exempt Special Savings Accounts (TESSAs) are five-year savings
accounts that do not incur tax charges on the interest paid. It has not
been possible to open a new TESSA account since April 1999. However,
TESSAs in existence before that date can continue up to the end of their
A term signifying one who has made a valid Will.
abbreviation for the United States Federal Reserve Bank, America's central
bank and its equivalent to the Bank of England.
Someone other than the policyholder or insurer who is involved in an
A legal right or document proving legal right.
This is the legal document that not only identifies the owner of a property
but also other details about the property and the land it is built upon. This
will be kept by the lender until your borrowing and interest on that
borrowing has been repaid.
the total amount you've actually borrowed on your account. Your Total
Borrowing = Agreed/Total Facility - Additional Borrowing.
Inability to undertake either occupational duties or aspects of normal day
to day life. In an insurance policy providing cover against this contingency
the definition applying to that contract is normally spelled out in detail.
The exact definition may vary considerably between policies.
the combination of capital growth and reinvested income at the end of any
given period. Total return performance figures are always stated on an
offer-to-bid price basis.
Instead of receiving a preserved pension when leaving an occupational
pension scheme, a member has the right to transfer its value to a scheme
operated by a new employer or a personal pension plan. The transfer
value is the amount that is transferred. (N.B. An occupational pension
scheme is not bound to accept a transfer value)
A legal arrangement whereby assets are held by one or more appointed
persons (trustees) for the benefit of others (beneficiaries). Normally a
trust is established by a legal document known as a Deed but a trust may
be established by other means. Use of a trust can be an effective way of
reducing one's liability for tax. This is a complex area of law and specialist
legal advice should normally be sought by anyone dealing with a trust.
The concept of a trust is not recognised in all legal systems.
A legal document which establishes and governs the operation of a trust.
(1) A board member of a foundation. Trustees are responsible for setting
foundation policy and making fund decisions. (2) An individual or
corporation named or appointed to administer the terms of a trust
An occupational pension scheme that is not approved by the Inland
Revenue and which cannot benefit from the same favourable tax
treatment as an approved scheme.
A technician trained in evaluating risks and determining rates and
coverage for them. The term derives from the practice at Lloyd's of each
person willing to accept a portion of the risk writing his name under the
description of the risk.
Where an insurance company takes into account known facts like your
age, sex and health, in order to assess the likelihood of you making a
claim on the policy. Your insurance premiums are calculated after taking
these factors into consideration.
The amount to which the benefits pertaining to a member of a group
insurance scheme may increase without the need for further underwriting.
A decision made by insurance underwriters based on evidence supplied. In
group insurance, it is often used to refer to decisions pertaining to
individual members based on medical evidence.
That portion of a premium already received by the insurer for which
protection has not yet been provided.
Unit linked endowment
A fixed term savings plan with an element of life cover. Your savings go
into an underlying fund of investments like shares and the eventual return
you get depends on the performance of these investments.
A Unit rate is often used in determining the premium for large (more than
20 lives) group insurance schemes. In this basis of costing, the Unit Rate
is applied to the total benefits provided under the scheme. The rate is
determined with reference to banded membership data and other
underwriting adjustments. For group life insurance the rate is usually
expressed per £1000 of death benefit and for dependants pensions per
£100 of insured pension.
A trust set up as a pooled investment fund. The portfolio of investments is
unitised in order to allow investors to buy and sell units.
In the context of funding, those grants which do not specifically stipulate
how the money is to be spent by the grantee.
Upper Earnings Limit
The maximum earnings on which National Insurance contributions are
payable by employees.
Utmost Good Faith
The principle of insurance which requires a proposer to give all relevant
information to the insurer.
Carried out by a professional surveyor to establish how much the property
is worth and whether it is suitable to lend a mortgage on. There are 3
types of valuation that can be done, a basic valuation, homebuyers report
or full structural survey.
Value added tax (VAT)
An indirect tax payable by adding it onto the value of most goods and
A rate that can move up or down at any time. Usually linked to changes in
the Bank of England Base Rate.
A card linked to the VISA network worldwide. Payments made using your
One account VISA card are added to your account the following Thursday.
You can use your One account to pay for goods and services or to
withdraw cash anywhere in the world you see the VISA sign.
the degree by which share prices in a particular stockmarket or sector go
up or down. Usually measured by the movement in a particular index.
A pension or other benefit scheme in which the members choose the
extent and levels of benefits provided. These are normally schemes in
which members pay the contributions or premiums. For example, a trade
union or other affinity group may offer membership of a scheme providing
life assurance cover.
An agreement attached to the policy and accepted by the insured, to
eliminate a specified pre-existing physical condition or specified hazard.
Waiver Of Premium
A provision that sets certain conditions under which an insurance policy
will be kept in full force by the company without the payment of
A security issued by a company, allowing you the right to acquire ordinary
Whole of Life Insurance
A life insurance policy providing payment on death, whenever this occurs.
Premiums may be payable throughout life, or for a shorter period.
A legal document specifying how an individual's property is to be dealt
with on his or her death and appointing Executors to carry out these
(Of life insurance policies) Entitled to a share of the insurance company's
profit. Each year a bonus is added to the guaranteed sum insured to
reflect the company's profit. Usual practice is to 'smooth' such bonuses so
that a comparatively unsuccessful year will not necessarily lead to a lower
bonus but a succession of poor years will be reflected by a gradual
reduction of bonus rate (and conversely for a series of successful years).
(Of life insurance policies) Not entitled to any bonus. The sum payable will
only ever be the amount guaranteed in the policy however profitable the
insurance company may be.
With profits endowment
A fixed term investment with life cover. The guaranteed sum insured is
increased by bonuses, representing a share of the profits of the life fund.
The total premiums on all policies written by an insurer during a specified
period of time.