Financial Jargon Buster - A
- ABI
- Association of British
Insurers
- AER
- 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.
- Acceptance letter
- 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 accident.
- 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.
- Actuary
- 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 Actuaries.
- ADD
- Accidental Death and
Dismemberment
- Additional Borrowing
- 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.
- Adjuster
- See: Loss Adjuster.
- ADLs
- Activities of daily living.
- Advance Underwriting
- 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.
- Advice
- Where an authorised adviser looks at
your individual circumstances and advises on suitable products for your
financial needs.
- AFPC
- 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 Financial Advisers.
- Age Allowance
- Increased personal allowance for Income
Tax for persons aged over 65. A further increase is available to persons over
75.
- Agent
- 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.
- All Risks
- Extension of the cover provided by
household insurance to damage, theft if outside the home, etc. in respect of
individual high value items.
- Allocation rate
- This is the percentage of your payment
that is actually invested (e.g. 75%) after initial charges have been taken into
account.
- Alpha
- Alpha is the term used to describe the
risk adjusted outperformance of an investment. A large alpha indicates good
performance relative to the market.
- Alternative Dispute Resolution
- A means of resolving disputes without
resort to the Courts. Particularly used in relation to disputes between pension
schemes, trustees and members.
- Amount
- Amount purchased or sold in Gift Fund
Pools as a result of a contribution or miscellaneous activity.
- AMRA
- Access To Medical Records Act
1988.
- Analyst
- 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 different ways.
- Annual management fee
- A charge made every year for running
your fund. It is usually a percentage of the amount you've got
invested.
- Annual Report
- 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.)
- Annual Volatility
- 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 risk.
- Annuitant
- The person entitled to receive payments
from an annuity contract.
- Annuity
- 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.
- Annuity Certain
- A contract that provides payments for a
specified number of years, regardless of life or death of the annuitant
- Approved Scheme
- 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).
- APR
- 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.
- Arbitrage
- profiting from the differences in price
when the same security, currency or commodity is traded on two or more markets.
- Arbitration
- 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.
- Assets
- another word for the investments which
a unit trusts holds within its portfolio.
- Assignment
- 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.
- AUTIF
- the Association of Unit Trusts and
Investment Funds, which is the industry trade body of unit trusts and
investment trusts management companies.
- Average
- 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.
- Aviation Hazard
- 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.
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