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AITC. The AITC (Association for Investment Trust Companies) is the trade association for investment trust companies. It offers background reading and useful material that provide an explanation of investment trusts.
Its address is Durrant House, 8 -13 Chiswell Street, London, EC1Y 4YY.
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. See Bare trust
Acceptance Letter. The Acceptance Letter issued by an insurance company in response to a proposal is deemed a counter proposal, acceptance by the proposer being by payment of the first premium.
Accident & Health. Class of insurance under the Insurance Companies Act including two main types of business - personal accident and medical expenses. Personal accident policies will pay a lump sum or weekly benefits in the event of accidental death or injury. Medical expenses insurance will pay the costs of treatment for acute conditions.
Accounting Period. See Trading Period
Accumulation Units. One way of recouping expenses under a unit linked contract is to issue two types of unit: Capital Units, purchased by 'new' contributions and which bear a heavy charge or deduction for a defined period, and Accumulation Units, purchased by existing contributions after the end of the capital unit period, when the charges are reduced.
Accumulation and Maintenance Trusts. A trust in which any investment returns or deposit interest accumulates and is used to support/educate the beneficiaries without disposal of the capital. Entitlement to the capital must arise, however, within 25 years.
Activities of Daily Living. Generally used as a basis for assessing claims under a long-term Care contract. They 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.
Act of God. An event that is not the fault of any individual. Acts of God can be insurable.
Actuary. A professional person qualified to apply mathematical principles to solving long-term financial problems, primarily in connection with pensions, life insurance and investment.
Additional Voluntary Contributions. Additional contributions made voluntarily by company pension scheme members to boost their eventual retirement income. They are organised on a group basis, unlike FSAVCs and must not exceed 15% of remuneration when added to any existing scheme contribution.
Advance Corporation Tax. When companies pay dividends to shareholders, they must also pay to the Revenue Advance Corporation Tax (ACT), effectively a payment on account of the shareholders tax due on the dividend, and the company's corporation tax.
AEI. See Average Earnings Index
AER. See Annual Equivalent Rate
Agent. A person who acts for one or small number of companies, particularly in selling insurance.
Agricultural Property Relief. Applied to lifetime transfers of agricultural land. When certain conditions are met, the value of the transferred property is reduced by up to 100% depending on the type of property, for Inheritance Tax calculation.
Allocation. The amount of premium actually used to purchase units. Under various charging structures less than the full premium will be allocated to purchase units in the early years of the contract.
Allocation of Interest Election. Where husband and wife may elect to have the tax relief allocated in a split other than 50/50, the latter being the 'norm' without an election.
Allowance. When taken in the context of tax 'allowance', it is a figure that reduces income that would otherwise be subject to tax.
All Risks. Wider cover than given under a normal property insurance policy. Covers any loss or damage apart from exclusions stated in the policy.
Alternative Investment Market. AIM is a separate market within the London Stock Exchange designed as a forum for the sale and purchase of shares in small, young and growing companies. It is aimed at giving investors the opportunity to invest and trade in the shares of these companies on a market regulated by the Exchange. Due to the nature of the companies, shares traded on this exchange are likely to be more volatile than those traded on the official list of the London Stock Exchange itself. AIM is a trademark of London Stock Exchange PLC.
Alternative investments. These can include works of art, horses, antiques, classic cars, and fine wines. It is advised that investors seek highly specialised advice before investing, as investments can be quite erratic, i.e. when highly sought after, you could receive a high return but economic recessions or fashion trends can lead to lower returns on your investment.
Annual Equivalent Rate (AER). Appears in adverts relating to all interest-bearing accounts. This shows the advertised interest rate as if it were paid and compounded once a year. It should allow consumers to compare products more easily. From 1st January 1999 all adverts will have to include the AER.
Annual Management Charge. General term for a charge levied on an investment fund for its management and administration.
Annual Percentage Rate (APR). Standard measure of true interest on a loan measured over one year, reflecting the cost of paying on a monthly basis.
Annual Premium. See Yearly Premium.
Annuity. A contractual arrangement by which an insurance company pays someone a regular income, usually for life, in return for a lump sum premium.
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.
Appointed Representative. Under Financial Service Act regulations, a Registered Individual may appoint others to act on their behalf. Such an individual or business would be an Appointed Representative. Such individuals are not registered directly with a regulatory organisation or professional body.
Appropriate Personal Pension. A personal pension plan that is used for contracting out purposes.
Approval Categories. Because of changes in Revenue approval of company pension schemes introduced in 1987 and 1989, there are now effectively three categories of Revenue approval, even though new schemes may only be approved under the 1989 rules.
Approved Share Schemes. Revenue approved share incentive schemes offering certain tax advantages to the participants.
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.
Ask Price. Price at which a Market Maker will sell stock. Also known as the Offer price.
Assessment of Risk. Risk in the context of financial planning relates to the possibility of losing money. Assessment of risk can be generalised for initial discussions but must be personalised for final decisions to take account of the clients' subjective view of the options.
Assessmentism. See Pay as You Go.
Asset. Property that has value e.g. plant, machinery, shares or 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 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.
Asset Reduction. An Estate Planning device to reduce the value of a taxable estate by making use of suitable gifting arrangements.
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 to another
Assignor. Someone who assigns property.
Assistance. The provision by an insurer or a service company of immediate practical help to resolve an insured problem (e.g. arranging medical treatment abroad/organising a roadside repair).
Associated Operations. Actions that are deliberately linked, one to another, to produce, by a series of actions, a particular long-term result. When used in relation to tax planning, such operations no longer escape the tax evasion net.
Association of British Insurers. The ABI is the trade association to which most UK insurance companies belong. One of its main functions is to monitor quality so that minimum standards of customer service can be maintained.
Association of Unit Trust and Investment Funds. AUTIF is the representative body for over 100 unit trust and investment fund managers, which together have around £100 billion funds under management. It provides investor information on funds. For more information contact AUTIF at: 65 Kingsway, London, WC2B 6TD
Assurance. See Insurance.
Audited Accounts. Accounts which have been checked and examined to determine how the figures have been achieved.
Authorisation. Required by the Financial Services Act 1986 for any firm that wants to conduct investment business in the UK. Authorisation is achieved by obtaining admission to one of the front line regulators, i.e. PIA, IMRO or SFA. SIB (the chief watchdog) maintains a Central Register which provides information on all authorised firms and registered representatives and is where you can check if your firm or adviser is authorised and for what type of business.
Authorised Business. A business suitably registered with an SRO or RPB to deal with particular types of business.
Automatic Accrual. A type of business agreement whereby the shares or business share of an individual pass automatically on to the remaining shareholders or partners.
AVC. See Additional Voluntary Contributions
Average. A policy condition that requires the amount of a claim payment to be reduced proportionately if the policyholder has not insured his property for the full amount of its value or replacement cost.
Average Earnings Index (AEI). 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, promotion increases. Relates to England, Wales and Scotland.
