Financial
Review Common
Questions Jargon
Buster

Jargon Buster

A Day

6th April 2006 – governent simplification rules came into effect on this day.

Annuity

This is a contract that you purchase from an insurance company at retirement, using the proceeds of your pension fund. It guarantees you an annual income during retirement.

APR – Annual Percentage Rate

If you have a credit card you will pay an APR which reflects your overall costs of borrowing money.

AVCs – Additional Voluntary Contributions

Occupational pension top-up scheme set up by your employer into which you may pay additional contributions to enchance your main pension.

BACS Payments

A transfer of money made direclty into your account.

Buildings Insurance

If your home is damaged by an unforseen event, this will pay the cost of any repairs or rebuilding work needed. You should read through your policy thouroughly as this will tell you exactly what you are covered for.

Cash (ATM) Card

You can obtain cash from cash machines, banks and building societies buy using your cash card, and also make payments over the telephone and the internet.

Cheque Book

Requires you to fill in the details of the person you are paying, of which payment will be debited from your account, usually within a few days.

Cheque Guarantee Card

Ensures the person you are paying will be guaranteed to receive the payment. Usually holds a limit which is noted on the back of the card.

Chip and PIN

This is a four digit number which is allocated to you for the use of your card, so that you may withdraw money from cash machines and make payments in-store. It must therefore be memorised by you and destroyed.

Cleared Balances

The amount of which is available in your account.

Contents Insurance

If any of your possessions are damaged or stolen within your home, this will cover the cost of any replacements . You should read through your policy thouroughly as this will tell you exactly what you are covered for.

Cover

Amount of protection provided by your insurance.

Credit Limit

The amount of available credit to you.

Credit Scoring

This is used to make financial checks on you and to ensure that you are creditworthy before you can take out any loans or credit. Your details are usually held by a credit reference company who advise the banks or other companies.

Critical Illness Cover

If you are diagnosed with a critical illness, your insurance will pay out a lump sum to you. You should read through your policy as this will inform you of the critical illnesses that your policy will cover. Many providers vary in the cover they provide so ensuring you choose the right one is vital.

Debit Card

When you use your debit card the money is automatically debited from your account, hence when making a payment you need to ensure you have enough money to make the payment, otherwise your card can be declined.

Dental Insurance

Cover you for your dental care expenses.

Direct Debits

Usually set up to make monthly payments to a company i.e gas or water supplier. You choose the date with which you want the payment to be taken and they inform your bank.

Excess

The amount you would pay in the event of a claim, prior to your insurer paying the remaining part of the bill i.e the initial £150 of any claim.

Exclusions

Things that you will not be covered for.

Final Salary Scheme or Defined Benefit

Pension at retirement is calculated as a proportion of your salary at or near retirement, with the proportion depending on the years you have been a member of your company scheme.

FSAVCs – Free Standing Additional Voluntary Contributions

Runs in addition to your company pension scheme, to allow for extra payments into your pension fund. However it is independent from your employer's main pension scheme.

Group Personal Pension

A Personal Pension Scheme set up by employers for the participation of its employees.

Health Cash Plans

Covers everyday healthcare bills by providing a limited cash sum.

Income Protection - Permanent Health Insurance

If you’re unable to work due to illness or injury, the insurance will pay you a monthly income until such a time when you are able to return to work.

Interest

The charge made by banks and building societies on any money you borrow from them.

Interest-free period

The time in which you can settle your bill without paying any interest on your purchases.

Investment-backed Life Insurance

Acts as an investment as well as protection cover, such as Endowment Policies, Maximum Investment Plans, With-profts bonds, Whole-of-Life, Income and Growth Bonds.

Joint Life

In the event of either or both parents dying, a lump sum will be paid out to the family for their protection.

Lifetime Annuity

Converts the value of your pension fund into a pension income. The income generated from this is taxed.

Loans

An amount of money which you borrow from a bank. The period of time and interest charges are usually agreed upon at the time.

Minimum payment

The minimum monthly repayments that must be made.

Money Purchase Pension – Defined Contribution Scheme

A pension that is dependent on stock market performance in order to determine your final pension. All personal, group personal and stakeholder pension plans operate in this way.

Mortgage Protection Insurance

Effectively used to cover your mortgage repayments in the event of accident, sickness or unemployment.

Motor Insurance

Covers the cost of injury to another person or damage to another person’s property whilst driving.

No Claims Discount

If no claims have been made on your insurance policy within a specific period of time, then a discount may be applicable to your premium.

Occupational Pension Scheme

Set up by your employer to provide pension and or other benefits, to its employees.

OMO - Open Market Option

Enables you to shop around for the best annuity rates and arrangements available to you on the open market.

Outstanding Balance

The amount of money you owe.

Overdrawn

You will go overdrawn when you spend more money than you have and there are usually charges incurred for this. Some banks agree to set up an overdraft facility for you in the event that you may spend more than you have which in turn can reduce the charges they make on your account.

Payment Protection Insurance

Over a limited period of time you would receive regular payments to cover the cost of repayments due i.e on a loan taken out. This would be payable if you were unable to work due to health reasons or redundancy.

Personal Pension

Contributions are payable by you and the policy is set up by yourself through a financial adviser. It is more suited to those who are self employed or to employees who do not have an occupational scheme available.

PMI - Private Medical Insurance

Insurance for you to receive private medical treatment.

Policy

Full details of your insurance cover and costs.

Premium

The amount you pay for your insurance, usually monthly or annually.

Protected Rights Annuity

You must purchase a protected rights annuity from the part of your pension fund that was used to contract out of the State Second Pension.

Protected Rights Pension

Used to contract out of the State Second Pension (SERPS or S2P) and is a part of your pension fund.

Schedule

Specific policy details of what is and isn’t included.

Stakeholder Pension

Introduced by the government in 2001. Low costing and targeted at those who were unable to afford a personal pension or for those with no access to an occupational or group scheme.

Standing orders

Payments can be set up on a regular basis to another person or company.

State Pension

According to your National Insurance contribution record, The Pension Service pays into a basic State Pension for you.

State Second Pension

In addition to the basic State Pension you may be eligible for the State Second Pension. This will be dependent on you earnings and National Insurance contributions. This is unavailable to those who are Self-employed.

Statement

This shows full details of your account over the last month.

Tax Free Lump Sum

A lump sum payable at retirement which is free of tax. The amount payable is set by tax law and is subject to change.

Term Insurance or Assurance

Life cover to provide protection for a period of your chosen time i.e 25 years.

Travel Insurance

Travel insurance is intended to cover financial, medical expenses and other losses incurred while traveling, either within one's own country, or internationally.

Uncleared Balances

The amount of which is due to be available in your account. This usually occures when you pay in a cheque. However you can’t be certain that the cheque has fully cleared as there may be a chance that it will bounce, so you need to be careful when checking your balance.

Unsecured Pension

This allows you to draw an income from your pension fund whilst leaving your funds invested up until the age of 75. .

Variable Interest Rate

The rate of interest on a loan or deposits which, depending on the interest base rate set by the Bank of England, are liable to change.

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Jargon Buster

A Day

Annuity

APR – Annual Percentage Rate

AVCs – Additional Voluntary Contributions

BACS Payments

Buildings Insurance

Cash (ATM) Card

Cheque Book

Cheque Guarantee Card

Chip and PIN

Cleared Balances

Contents Insurance

Cover

Credit Limit

Credit Scoring

Critical Illness Cover

Debit Card

Dental Insurance

Direct Debits

Excess

Exclusions

Final Salary Scheme or Defined Benefit

FSAVCs – Free Standing Additional Voluntary Contributions

Group Personal Pension

Health Cash Plans

Income Protection - Permanent Health Insurance

Interest

Interest-free period

Investment-backed Life Insurance

Joint Life

Lifetime Annuity

Loans

Minimum payment

Money Purchase Pension – Defined Contribution Scheme

Mortgage Protection Insurance

Motor Insurance

No Claims Discount

Occupational Pension Scheme

OMO - Open Market Option

Outstanding Balance

Overdrawn

Payment Protection Insurance

Personal Pension

PMI - Private Medical Insurance

Policy

Premium

Protected Rights Annuity

Protected Rights Pension

Schedule

Stakeholder Pension

Standing orders

State Pension

State Second Pension

Statement

Tax Free Lump Sum

Term Insurance or Assurance

Travel Insurance

Uncleared Balances

Unsecured Pension

Variable Interest Rate

A Day

Annuity

APR – Annual Percentage Rate

AVCs – Additional Voluntary Contributions

BACS Payments

Buildings Insurance

Cash (ATM) Card

Cheque Book

Cheque Guarantee Card

Chip and PIN

Cleared Balances

Contents Insurance

Cover

Credit Limit

Credit Scoring

Critical Illness Cover

Debit Card

Dental Insurance