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A Priori. Latin phrase meaning, effectively, from cause to effect and used generally as ‘first impressions’.

‘A’ Shares. Ordinary shares that do not have voting rights.

Abatement. A proportionate reduction in payments payable or receivable.

Above the Line. The "line" is in fact a figure showing net income or net profit in income statements or profit and loss accounts.

Absolute Title. Ownership of registered land where the State guarantees that no one has better right to the land. Absolute leasehold title guarantees that the lessor has title to grant the lease.

Absolute Trust. A Trust where the Trustee has no obligation except to pass the trust assets to the beneficiaries at their request e.g. upon reaching majority.
Also: bare trust, naked trust, simple trust.

Abstract of Title. Details of the legal document proving an owners right to dispose of the land.
Such detail is usually supplied prior to completion on a mortgage, and will be compared with the original documents upon completion.

Acceptance Letter. A document issued by life assurance companies in response to an application for cover. Deemed to be a counter offer valid for a limited period only. Details amount of cover and terms on which insurer is willing to proceed. Proposer accepts the terms by payment of first premium.

Account. A record of monetary transactions forming part of an accounting system.

Accounting Period. The period of time from one balance sheet date to the next. See ‘Trading Period’.

Accounting Standards. Rules and guidelines on different subjects issued by the Accounting Standards Board under its SSAPs. See ‘Statement of Standard Accounting Practice’.

Accretion. Increase in value of an asset through natural physical changes, rather than the usual market forces of supply and demand e.g. timber.

Accrual. A payment incurred in one period, but not paid until the next.

Accrual Accounting. The system of accounting for income and expenditure when earned or incurred, irrespective of the actual time the money changes hands.
Compare ‘Cash Accounting’.

Accrual rate. The rate (or formula) used to calculate the pension benefit, in a defined benefit occupational pension scheme. The most common pension accrual rate in the UK is 1/60th of final pensionable salary for each year of pensionable service.

Accrued Rights Premium. A premium payable to the State in respect of a member (under state retirement age) of a salary related contracted out occupational pension scheme which ceases to be contracted out. On receipt of the ARP, the State Scheme will take over the obligation to provide a GMP for the period contracted out. This is no longer available from 6th April 1997.

Accumulation and Maintenance Trusts. A trust in which any investment return or deposit interest accumulates, and is used to support/educate the beneficiaries without disposal of the capital.
Entitlement to the capital must arise, however, before the age of 25.

Acid Test. See ‘Liquidity Ratios’.

ACORN. A Classification Of Residential Neighbourhoods. A market research method for targeting and selecting buying indicators of particular neighbourhoods.

Act of God. Circumstances brought about by the forces of nature, unforeseen by reasonable foresight and not involving human influence.

Activities of Daily Living. Generally used as a basis for assessing claims under a Long Term Care contract.
ADLs are considered to be basic activities essential to an active adult existence e.g. eating, dressing, bathing, using the toilet, getting in and out of bed, walking, climbing stairs.

Actuarial Certificate. A certificate issued by an actuary, normally in order to satisfy the requirements of the Pension Schemes Office. Could relate to the solvency of a scheme or transfer of benefits.

Actuarial Valuation. A valuation carried out by an actuary on a regular basis, in particular to test future funding or current solvency of a pension fund.

Actuary. A person who assesses risks and costs, in particular those relating to life assurance and investment policies, using a combination of statistical and mathematical techniques.

Ad Hoc. Latin: ‘for this particular purpose’.

Ad Valorem. Latin: ‘according to value’. For example, an ad valorem tax or duty will be calculated according to the value of whatever is being taxed, as a percentage rather than a flat rate.

Added Value. An increase in real value resulting from changes in the makeup/content of goods or services.

Added Years. Additional benefit purchased in a final salary related occupational pension scheme by way of transfer-in, additional voluntary contribution(s) or augmentation, and which is expressed in the form of additional years of service.

Additional Component. The amount of State Earnings Related Pension payable in addition to the state basic pension. Only applies to employees, self employed qualify for basic State pension only.

Additional Voluntary Contribution. Extra contributions paid by an occupational pension scheme member to provide additional benefits. Organised on a group basis, unlike FSAVCs. Must not exceed 15% of total taxable earnings, including any existing scheme contribution. Resulting benefits can be money purchase or in a final salary scheme extra years of service may be granted. See 'Free Standing Additional Voluntary Contribution'.

Administrator. In pension scheme terms the person or body responsible for the management of an occupational pension scheme. Required for all exempt approved pension schemes.

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

Advertising File. For IFAs, a compliance requirement in which should be kept all draft and final copies of printed advertising material. Advertising includes publications, circulars, catalogues, posters, labels, notices, personalised circular letters and radio and television items.

Advertising Standards Authority. Independent body set up by the advertising industry which overseas a self-regulatory code of advertising standards. All advertising must be legal, decent, honest and truthful.

Advertorial. Hybrid copy consisting of an advertisement written in newspaper editorial form.

Advisory Conciliation and Arbitration Service. A statutory body established to improve industrial relations.

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

Age Allowance. Personal allowance against income for a person aged 65 or over. The age allowance increases for a person of 75 or more, but is reduced if income exceeds a certain level.

Agent. A person who represents someone else.

Agricultural Property Relief. Applies to lifetime transfers of agricultural land. When certain conditions are met, the value of the transferred property is reduced by certain factors, depending on the type of property, for IHT calculation. Agricultural property does not qualify for relief if subject to a binding contract for sale.

AIDA. Sales/Marketing reminder mnemonic illustrating the ideal progression of the purchaser:
Attention
Interest
Desire
Action

Algorithm. A set of instructions performed in logical sequence to solve a problem.

Alimony. See ‘Maintenance’.

All Employee Share Schemes. Type of approved share ownership plan for employees introduced in April 2000. Shares are given to employees (free share plan) or purchased by employees (partnership share plan). Subject to certain conditions the shares receive preferential tax treatment.

Allocation.

1. The amount of premium actually used to purchase units. Under various charging structures less than the full premium will be allocated for investment in the early years of the contract.

2. Asset allocation is the spread of fund investments between different sectors.

Allocation of Interest Election. Where husband and wife elect to have tax relief on mortgage loan repayments allocated in a split other than 50/50, the latter being the 'norm' without an election.

Allotted Capital. See ‘Issued Capital’.

Allowance. When taken in the context of ‘tax allowance’, it is a figure which reduces income which would otherwise be subject to tax.
See ‘Tax Relief’

Alternative Investment Market. Launched 19th June 1995 to offer new and growing companies a less expensive alternative to a full listing. Although regulation is less stringent than a full listing, companies registering through AIM must have a Stock Exchange approved adviser to monitor their trading and advise on compliance matters. Replaces the USM.

Amortize. To write off a debt over a period of time by putting aside regular fixed amounts. Or, to depreciate or write down the value of an asset over two or more accounting periods.

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

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

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

Annuity. A series of regular payments. Annuities are usually purchased by a lump sum of cash e.g. pension schemes generally discharge their promise of pension benefit by purchasing an annuity. Individuals can purchase using own capital. Wide range of options available e.g. level, escalating, guaranteed, single or joint lives.

Annuity Deferral. Also called Income Drawdown or Income Withdrawal. The option to take income directly from a pension fund at retirement instead of purchasing an annuity immediately. Purchase of annuity can be deferred to age 75. Can be used for personal and occupational pensions.

Annuity Mortgage. More usually called a 'repayment mortgage', but sometimes referred to in these terms because of the make up of the payments i.e. as with some annuities, a mix of capital and interest.

Appeal. A process whereby a decision by one body may be reviewed by another, usually higher, authority.

Appellant. Someone who appeals against a decision.

Appointed Representative. Term used to describe tied agents of a product provider. Although tied to selling the products of one company, they retain their own business identity e.g. state agents and building societies.

Appropriate Personal Pension. A personal pension plan which is used to contract out of the State Earnings Related Pension Scheme.

Approval Categories. Pension schemes approved by the Inland Revenue fall within one of three categories: automatic, discretionary or exempt approval.
See also: Automatic Approval, Discretionary Approval, Exempt Approval.

Approved Share Schemes. Revenue approved share incentive schemes offering certain tax advantages to the participants.

Arbitrage. Dealing in two or more markets (e.g. currencies, commodities) at the same time to benefit from rate differentials in situations where prices and returns are fixed.

Arbitration. Settlement of a dispute by independent third parties, rather than by a court.

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

Articles of Association. One of the establishing documents of a limited company, which sets out the internal operation of the company, including the powers of the directors.

Assessment of Risk. Risk in the context of financial planning relates to the possibility of losing money. For example, assessment of risk can be generalised for initial discussions with a client but must be personalised for final decisions to take account of the client’s subjective view of the options.

Assessmentism. See ‘Pay as You Go’.

Asset. Property which has value e.g. plant, machinery, shares, invoices.

Asset Backed Investments. Investments based on tangible, working capital/assets that have the potential for growth e.g. investment in the shares of an industrial or commercial concern, rather than investment in deposits.

Asset Conversion. An Estate Planning device to change assets which do not attract tax relief into assets which do attract relief.

Asset Freezing. An Estate Planning device to ensure that any growth in an asset is outside the estate e.g. an interest free loan payable on demand invested by the borrower will produce growth in the borrowers hands, rather than the estate of the lender.

Asset Reduction. An Estate Planning device to reduce the value of a taxable estate by making use of suitable gifting arrangements.

Asset Stripper. Someone who purchases a business with a view to selling its assets, individually, at a profit.

Assignee. Someone to whom control over property is assigned.

Assignment. The transfer of a right (e.g. to claim on a policy) from one person (assignor) to another (assignee).

Assignor. Someone who assigns property.

Associated Company. A company where another company owns between 20% and 50% of the ordinary (voting) shares.

Associated Operations. Actions that are deliberately linked, one to another, to produce, by a series of steps, a particular long-term result. When used in relation to tax planning, such operations no longer escape the tax evasion net.

Association of Unit Trusts and Investment Funds. The trade association of unit trust managements. Most managements are members. The Association has the aim of promoting unit trust sales, so is not impartial.

Assurance. Often interchangeable with insurance and usually used in conjunction with life assurance.

At Best. A buy or sell order which means that it should be executed immediately at the best obtainable price.

At or Better. An instruction to trade at a given level or better.

Attestation. The signature of a witness to the signing of a will.

Audit. Close examination of something e.g. the trading books, papers and accounts of a company, or the relationship between plans and desired outcomes.

Audited Accounts. Company accounts which have been checked and examined to determine how the figures have been achieved.

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

Augmentation. An increase. For example, provision of additional employee benefits for particular individuals where the cost, usually, is born by the employer.

Authorisation. In the context of financial advice, the process of qualifying to be able to sell and advise on investment products. Under current regulations, for example, IFAs need to qualify by examination and experience.

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

Authorised Capital. The total of the shares a limited company is permitted to issue to raise capital. The permitted limit will be stated in the Memorandum of Association, along with the number of shares and their nominal value.

Authorised Investment. Investments in which a trustee may invest trust assets.

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

Automatic Accrual. A type of business agreement where the shares or business share of an individual passes automatically to the remaining shareholders or partners.

Automatic Approval. The Inland Revenue must approve occupational pension schemes which meet the requirements of s.590 of the Income and Corporation Taxes Act 1988 (ICTA 88). This section imposes strict benefit requirements relating to pension entitlement and retirement cash.
See: Discretionary Approval, Exempt Approval.

Average. The mid-point of a set of data.

Average Clause. Where a person underinsures property, this clause in the policy allows the insurance company to pay only a proportion of the insured amount, the policyholder bearing the balance of the claim.

Average Earnings Index. A government produced index of the measure of increase in average earnings in all industries, and includes basic pay and all related fluctuating payments e.g. bonuses, commissions. Relates to England, Wales and Scotland.