Glossary of Wealth Management Terms


Certain financial terms often mean different things to different people, depending on their own particular understanding of the matters relating to finance & policies.

Financial terms will also have slightly different interpretations in different countries. As a general rule for all people not involved  in the financial industry, if in doubt, ask for an explanation from the person or company responsible for producing the figures and using the terms. You may be the only one to ask, but you certainly will not be the only one wondering what it all means. Don’t be intimidated by financial terminology or confusing figures and methodology. Always ask for clarification, and you will find that most financial advisers are very happy to explain.

Below we will give you an ordinary English definition for some terms. As always we are only a phone call away if you need further help.

ACCRUED PENSION

Quantity of pension credited to some plan member based on service, earnings, etc., up to given date.

ACTUARY

an expert within the pension and insurance fields accountable for calculating risks and premiums.

ADDITIONAL VOLUNTARY CONTRIBUTIONS

contributions to some plans made voluntarily by a worker along with those contributions necessary to be produced to attain a pension. Extra benefits might be purchased by additional contributions but no additional cost is borne through the employer. Additional voluntary contributions usually are not locked-in by legislation

ANCILLARY BENEFITS

benefits along with regular pension benefits and survivor benefits, for example bridging benefits and enriched early retirement benefits.

ANNUITY

periodic payments (usually monthly) supplied by the terms of the obtain the duration of a person (the annuitant) or the person and his / her designated beneficiary. An annuity can be a fixed or varying amount, and could keep on being covered an interval following the annuitant’s death.

ASSET MIX

describes the proportions of numerous kinds of investments held with a pension fund, usually expressed like a percentage of total investments held in bonds, stocks, real-estate, etc.

BASIC STATE PENSION

The flat rate state pension accessible to everyone upon reaching State Retirement, provided sufficient N. I. contributions are created.

BENEFICIARY

an individual who within the death of the plan member or former member, could become allowed to one advantage underneath the plan.

BENEFIT

generally, any type of payment to which an individual could become entitled underneath the terms of the plan, but often refers specifically towards the pension normally supplied by the program formula.

BEST FIVE-YEAR AVERAGE

one advantage formula that determines the quantity of a member’s pension by making use of the member’s average earnings throughout the five years when earnings were highest.

CAPITAL GAINS TAX

Capital Gains Tax is really a tax within the profit you make whenever you sell or perhaps get rid of something you possess, eg. property or share. There exists a tax-free allowance and some extra reliefs which could lower your Capital Gains Goverment tax bill.

CAREER AVERAGE PLAN

a detailed benefit plan that applies the device of great benefit to earnings from the member in every year of service, and never towards the final or final average earnings.

COMMUTED VALUE

the quantity of a lump sum payment payable today estimated to become equal in value to some future number of payments.

CONTRACTING OUT INCENTIVE

It was an extra payment more than the Contracting Out rebate, made to encourage certain individuals to contract from SERPS. Incentive payments ceased on 5th April 1997.

CONTRACTING OUT REBATE

Amount through which the employer’s and employee’s National Insurance contributions are reduced by virtue of the employee’s membership of the contracted out pension arrangement.

CONTRIBUTION

Alternative word to premium, usually used regarding the personal payments in to a pension scheme, or investment based products

CONTRIBUTORY PLAN

a pension plan which requires the employees to create contributions by payroll deduction to be able to be eligible for benefits underneath the plan.

CREDITED SERVICE

period of service utilized in the program formula to calculate a detailed benefit.

DATA PROTECTION ACT 1984

Established rules for storage and disclosure of personal details by computer.

DEFERRED MEMBERS

terminated employees that are entitled to a deferred vested pension. Considered by legislation to become former members.

DEFERRED VESTED PENSION

a specified pension determined during the time of termination of employment or termination of the plan however, not payable until some later date.

DEFINED BENEFIT PLAN

a pension plan that defines the pension to become provided (depending on service, average earnings, etc ) however, not the entire contributions. When the plan is contributory, the pace of employee contributions might be specified, using the employer paying the total amount from the cost. To become distinguished from the defined contribution plan.

DEFINED CONTRIBUTION PLAN

a strategy under which the quantity of the employer contribution per plan member and, where applicable, the quantity of the employee contribution is specified ahead of time and also the benefits to become received through the pensioner is calculated in the date of retirement in line with the accumulated contributions and also the return within the investment from the contributions.

ELIGIBILITY REQUIREMENT

an ailment for example period of service that needs to be met before a worker is permitted or necessary to join a pension plan. Term may make reference to the eligibility definitely benefits.

EMPLOYEE

means a person, who contributes labor and expertise to an endeavor of an employer and is usually hired to perform specific duties which are packaged into a job. To be remunerated for the work or service you provide

EMPLOYER

a person or business that employs one or more people, especially for wages or salary

EMPLOYMENT PENSION PLAN

is an arrangement to provide people with an income during retirement when they are no longer earning a steady income from employment. Often employment pension plans require both the employer and employee to contribute money to a fund during their employment in order to receive defined benefits upon retirement. It is a tax deferred savings vehicle that allows for the tax-free accumulation of a fund for later use as a retirement income.

ETHICAL INVESTMENT

Making investments only in companies that are considered acceptable based on some criteria concerning the kind of product, environmental issues and political issues.

FACT FIND

An essential stage within the advice cycle, one that enables the adviser to remove all pertinent details about a potential client, and also to update information already held concerning a current client.

FINAL SALARY SCHEME

A pension scheme providing pension benefit by mention of the the scheme member’s salary at or near retirement.

FLAT BENEFIT PLAN

a detailed benefit plan that specifies some pension to become credited for every year of service.

FORMER MEMBER

means an individual whose membership within a plan has terminated and who retains something special or future entitlement to some benefit pursuant to some plan. A pensioner would be described as a former member, as would an individual that is allowed to a deferred vested pension.

FULLY FUNDED

a term describing a strategy which, in a given time, has sufficient assets to supply for many accrued benefits.

FUNDING

systematic monthly obligations in to a pension fund which, with investment earnings on these funds, are meant to provide for benefits because they become payable.

GUARANTEED ANNUITY

an annuity which is covered the duration of an individual or for any certain period whichever is longer, but the point is for any minimum period, e. g., if an annuitant having a five year guarantee dies after 3 years, payment is going to be continued to some beneficiary or the estate for 2 years.

GROUP PENSION

Generally operated by an employer for several employees and can be a ‘conventional’ scheme in which the employer helps fund the arrangement; or can be a group personal pension scheme in which the grouping is just for administrative convenience. Alternative name for occupational pension scheme.

GUARANTEED MINIMUM PENSION

Whenever a group occupational pension scheme contracts from SERPS, the scheme must give a minimum pension according of the quantity of state pension foregone. This is actually the GMP, and it is approximately corresponding to SERPS, for your same period. A part of this type of scheme is going to get a pension at State Pension Age no less than the SERPS equivalent. The GMP principle ceased for benefits accrued after 6th April 1997, once the Reference Share principle was established.

INDEXING

a provision within a pension plan calling for periodic adjustments to benefits (usually after retirement) based on a formula depending on an established index of price or wage levels like the Consumer Price Index.

LEVEL PREMIUMS

The incidence of mortality implies that the chance of death generally increases with age. To fit this risk increase, premiums should, theoretically, increase in the same rate. As this could at some time make the price prohibitive and unattractive, it is among the most norm to calculate reduced which will remain level through the entire term from the contract. This effectively means ‘overpaying’ in the beginning from the contract, that will counterbalance the ‘underpayment’ later.

MANDATE

Instruction, order, permission to permit or permit something to occur. Usually written e. g. bank mandate, such as a standing order to pay for sums to a different account. Mandatory. Compulsory, a thing that should be done.

MEMBER

a worker on whose behalf an employer is needed to make contributions to some pension plan and that has not terminated his / her membership or commenced his / her pension.

MONEY PURCHASE PLAN

see Defined Contribution Plan .

NATIONAL INSURANCE CONTRIBUTIONS

An extra type of tax paid by most employers, employees, self-employed (plus some unemployed) people. For your employed it really is deducted from income through the employer on the scale associated with income levels. The employed pay part flat rate, part income related. The self-employed and also the unemployed may pay a designated rate voluntary contribution to maintain their benefits entitlement updated.

NET RELEVANT EARNINGS

A definition of ‘pensionable income’ for your self-employed through which Personal Pension Plan contributions are determined. Relevant earnings less business expenses (includes stock relief deductions, losses or capital allowances). NRE for employed PPP holders is effectively gross PAYE pay.

NON-CONTRIBUTORY PLAN

a pension plan by which all required contributions are created through the employer.

NORMAL RETIREMENT DATE

the date where the member becomes allowed to retirement benefits without reduction or increase.

OCCUPATIONAL PENSION SCHEME

A pension scheme established by an employer, usually on the group basis.

OMBUDSMAN

The who investigates complaints through the public against official bodies, large organisations or industry sector participants.

PENSION

generally any periodic payment payable for your duration of an individual that has become allowed to this type of benefit pursuant towards the terms of the pension plan.

PENSION FUND

General term utilized to describe an investment fund accumulated during working life and used at retirement to buy an annuity to supply a relentless income.

PENSION INCREASES

Once in payment, pensions may remain in the same level, increase occasionally in the discretion from the company or have contractual annual increases, as much as increases in RPI.

PENSION PLAN

a strategy, scheme or arrangement organized and administered to supply pensions for members and former members pursuant to which an employer is needed to make contributions.

PORTABILITY

possibilities to certain members on termination of employment.

QUALIFYING SERVICE

The time required to entitle a pension scheme member to short service benefit; currently 2 yrs. Might include previous scheme service, in case a transfer payment continues to be converted to the present scheme. Quantify. Illustrate the result of something when it comes to figures.

REMUNERATION

In pension planning terms generally delivered to mean the entire and total earnings package i. e. salary and benefits in kind.

RETIREMENT

withdrawal through the active employees due to age; could also be used within the sense of permanent withdrawal through the labour force for just about any reason, including disability.

SCHEME ADMINISTRATOR

The individual accountable for the management and administration of the occupational pension scheme. All exempt approved schemes must appoint an administrator in UK.

STATE EARNINGS RELATED PENSION SCHEME

Earnings related pension depending on earnings between LEL and UEL. State Pension Age. Fixed retirement ages for women and men, currently 65 and 60 respectively. To become equalised to 65 for women and men, from April 2020 (with several years phasing in from 2010).

SURPLUS

in case a pension plan’s assets exceed the plan’s liabilities, the difference is known as a surplus.

SURVIVOR PENSION OR SURVIVOR BENEFIT

a monthly benefit payable under a pension intend to the surviving spouse of the deceased member or former member.

TAX EFFICIENT

There are a variety of various kinds of tax efficient investments and investment strategies. INvestoocan provide you with suggestions about that are the best ones for you personally.

TAX FREE CASH

Both occupational and personal pensions permit a particular account of cash to become taken rather than pension through the pension fund at retirement. This may not affect FSAVCs, and Rebate Only pension arrangements Tax Haven. A country which legally enables individuals and companies from a foreign land to prevent or pay lower rates of tax by letting them live or base their operations there.

TAX RELIEF

The system of exemptions and deductions on income and expenditure whereby the Tax Inspector can identify taxable income.

TERMS of BUSINESS LETTER

Document which should be provided to client by financial advisers a lot of transaction of business. Normally signed by client and adviser. Contents vary based on nature of services on offer. Must include information on advisers status, polarisation, approach to remuneration, adviser’s obligations and complaints procedure.

TERMINATION OF MEMBERSHIP OR EMPLOYMENT

severance from the employment relationship for just about any reason besides death and retirement.

TERMINATION OF PLAN

this occurs whenever a pension plan ceases to work. All members are vested and allowed to get a pension.

TRANSFER VALUE

Generally delivered to mean the money value of accrued pension benefit within an occupational pension scheme.

UNFUNDED LIABILITY

any amount through which the assets of the pension plan are under its liabilities on the going concern basis.

VESTED BENEFITS (VESTING)

benefits to which a worker has unconditional entitlement underneath the plan due to satisfying age or service requirements.

WINDNG UP

The termination of the pension scheme, where assets are more comfortable with buy the accrued liabilities from the pension scheme, either by purchasing immediate and deferred annuities, or transfer to a different pension scheme.


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