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Category: Guides

Estate planning – Take Control

Inheritance Tax (IHT) is once again in the spotlight following the Chancellor’s decision to freeze IHT thresholds for a further two years until April 2028. Extending the frozen thresholds, together with rising house prices and soaring inflation mean that more estates are likely to be affected. 

 

IHT receipts on an upwards trend 

The latest IHT figures released in October make interesting reading. Total HM Revenue and Customs (HMRC) receipts for April 2022 to September 2022 were £3.5bn, £0.4bn higher than in the same period last year. 

 

Not just a tax on the very wealthy

IHT is a tax payable on all your assets when you die and potentially on some gifts you make during your lifetime. If the estate is liable for IHT, it is usually payable at 40%. These days, you don’t have to be hugely wealthy to be affected by IHT – the hated tax can cost your estate thousands of pounds when you die. 

 

A reminder of the thresholds 

An individual’s current threshold, or nil-rate band, is £325,000. A couple (married or civil partners) has £650,000. Any unused nil-rate band can be passed to the surviving spouse or civil partner on death.

 

 In 2017 the government introduced an additional nil-rate band when a residence is passed on death to a direct descendant. The main residence nil-rate band is £175,000 and when added to the existing threshold of £325,000 could potentially give an overall allowance for  individuals of £500,000. 

 

To reduce the amount of IHT payable, many families consider giving assets away during their lifetime. Some gifts will be automatically free from IHT; for example, £3,000 each financial year, certain wedding gifts and gifts to charities. 

 

Getting the right balance between gifting money during your lifetime and ensuring you have enough for your future years requires careful planning. Expert planning can legitimately mitigate IHT, meaning you can pass on assets to your family as you’d intended.

 

If you would like more information on how to plan for your family’s future, get in touch with our team today – https://audleywealth.com/contact-us/

 

* Content is for educational purposes only.  A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Your investment focus for 2023

Your investment focus for 2023

By any comparison, 2022 was tough for investors with a series of shocks impacting markets and, in 2023, uncertainties remain. One constant on the investment horizon, though, is the requirement to be strategic with your portfolio. A sound strategy based on careful planning; making purposeful decisions, based on thorough research and reliable processes, will stand you in good stead. 

 

Last year saw markets struggle with bouts of volatility as a combination of high inflation, rising interest rates and the war in Ukraine brought about challenging headwinds and markets sought a stable footing. As a result, fund inflows slowed while cash as a percentage of investors’ portfolios rose, prompting warnings that investors need to be aware of limitations to the Financial Services Compensation Scheme (FSCS) for cash balances.

 

Identifying opportunities

With large amounts of money on the sidelines, using our knowledge, we aim to identify opportunities and position portfolios to benefit from recession- resistant companies in which we have conviction. Those who still have the capacity to invest should consider adding back to their portfolios in order to take advantage of any potential low valuations.

 

Battling inflation

Investors also need to be aware of the erosive impact of inflation on cash-based savings. In the current economic climate, anyone holding a significant proportion of their assets in cash, even with savings rates improving, will inevitably see the value of their wealth decline in real terms. In essence, equities offer a better potential defence in the battle with inflation.

 

Trust in our process

Experienced investor or not, staying calm during periods of market turmoil is never easy but adapting your mindset and focusing on investment strategy rather than market sentiment is vital. Investing in the stock market does clearly involve a level of risk but the adoption of a carefully considered strategy based on sound financial planning principles undoubtedly offers investors the best chance of success.

 

If you would like help to refocus your investment portfolio after a turbulent 2022, get in touch with our team at https://audleywealth.com/contact-us/

 

*The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

An Introduction to Pensions

Pensions – Getting to grips with the basics

Pensions are typically viewed as being complex and difficult to understand. As a result, people often delay starting one or ignore the issue altogether. In reality, though, the basics are relatively simple and taking time to understand them now could have a huge impact on your quality of retirement. Here, we’ll provide answers to questions our clients commonly ask and help guide you through the pensions maze.

 

WHAT IS A PENSION?

A pension is simply a type of long-term savings plan designed to help you save money for later life. In essence, it allows you to regularly save some of your earnings during your working life in order to provide an income when you decide to retire or work fewer hours. The money contributed to your pension is usually invested, along with other pension savers’ cash, in some form of investment product. Pension contributions also benefit from particularly favourable tax treatment, which makes them an extremely appealing investment proposition.

 

WHAT TYPES OF PENSIONS ARE THERE?

There are three major pension routes and most people fund their retirement through a combination of one, two or all three of these types.

 

Workplace pensions: These are arranged for you by your employer and are sometimes called ‘company pensions’ or ‘occupational pension schemes’. They work by you automatically paying a percentage of your salary into the scheme every payday. In most cases, the amount you pay is then topped up by a contribution from your employer, as well as tax relief from the government. The phased introduction of automatic enrolment since 2012 has now resulted in companies enrolling the vast majority of their staff into a workplace pension.

 

Personal pensions: You arrange these yourself and they are sometimes called ‘defined contribution’ or ‘money purchase’ pensions. Basically, you pay a portion of your earnings into your pension pot which, along with tax relief, is then placed by your pension provider into a range of investments, such as shares or bonds. The amount you ultimately receive in retirement will depend upon: how much you pay into your pot; the performance of your investment fund; the administration fees charged by your provider, and how you ultimately take your cash.

 

The State Pension: This is a weekly payment from government for people who reach State Pension age. Entitlement is built up by either paying or being credited with National Insurance contributions (NICs) during your working life. To qualify for the new full State Pension you need a 35-year NICs record.

 

WHAT TAX RELIEF DO I GET ON MY PENSION CONTRIBUTIONS?

Whatever type of pension plan you hold, you get tax relief at the highest rate of Income Tax you pay on all contributions you make, subject to annual and lifetime allowances. This effectively means that some of your earnings which would have gone to the government as tax are diverted to boost your pension pot instead. 

 

You receive ‘relief at source’ if you pay money into your personal pension yourself or if your workplace pension contributions are taken directly from your pay packet. In both circumstances, you automatically receive 20% tax back from government in the form of an additional deposit into your pension pot. So, for instance, if you’re a basic-rate taxpayer investing £800 of your take-home pay into your pension, the tax relief would amount to £200; effectively the taxman tops up your £800 contribution to £1,000. 

 

If you don’t earn enough to pay Income Tax at all, you still qualify for tax relief up to a certain amount. The maximum annual contribution you can currently make is £2,880 which, along with tax relief, would amount to £3,600 a year being paid into your pension scheme.

 

IS THERE A LIMIT ON HOW MUCH I CAN PAY INTO A PENSION SCHEME?

You can contribute as much as you like into your pension, but there is a limit on the amount of tax relief you will receive each year. The Annual Allowance is currently £40,000, or 100% of your earnings, whichever is lower. You can, however, carry forward unused allowances from the past three years, provided you were a pension scheme member during those years.

 

For the 2022-23 tax year the ThresholdbAdjusted Income limit is £200,000 and the Adjusted Income Limit is £240,000. If your income plus pension contributions exceeds the Adjusted Income Limit, your Annual Allowance is reduced by £1 of every £2 you are over the Adjusted Income Limit.

 

A Lifetime Allowance also places a limit on the amount you can hold across all your pension funds without having to pay extra tax when you withdraw money. This limit is currently £1,073,100.

 

WHEN CAN I ACCESS MY PENSION?

The pension freedoms introduced in 2015 allow you to access your pension once you turn 55 (57 from 2028); from that point you’re free to take as much or as little as you like from your pension pot, whenever you like. While this has certainly introduced greater flexibility, it has also heightened the necessity to carefully consider your options. It’s therefore imperative to seek professional financial advice before accessing your pension to minimise potential tax implications and maximise the benefit you ultimately receive from your pension funds.



Pensions Top Tips

IT’S NEVER TOO EARLY TO START SAVING INTO A PENSION…

You should start saving for retirement as soon as possible as the sooner you begin

the longer your savings have to grow. While other financial challenges can make this difficult, investing regular amounts in a pension throughout your working life gives you the best chance of enjoying a prosperous retirement.

 

…BUT BETTER LATE THAN NEVER

Never think it’s too late to start saving for your retirement. The favourable tax treatment pensions enjoy and their potential for investment growth means

any contributions you make later in life can still make a huge difference to your standard of living in retirement.

 

RETIREMENT PLANNING IS VITAL FOR THE SELF-EMPLOYED

As the self-employed are inevitably responsible for their own pension

provision, it’s particularly important that this section of society takes full control of their retirement planning. So if you belong to the growing band of self-employed workers make sure you don’t delay saving for your retirement.

 

KEEP TRACK OF HOW YOUR PENSIONS ARE DOING

It’s good to regularly review your pension arrangements to ensure they continue

to meet your retirement objectives. Your pension provider(s) will send out annual benefit statements detailing your entitlements and you can also request a State Pension forecast. This information will allow you to assess your provision and decide whether you need to take further action, for instance, increasing contributions or setting up an additional pension. Many people only review their pensions when they’re about to retire, by which time it’s too late – don’t fall into this trap.

 

PLAN YOUR INHERITANCE

It’s important to plan what will happen to your pension benefits if you die. Passing on your pension wealth is now relatively easy and some pensions can be inherited tax-free. It’s therefore essential that you keep your beneficiary nomination forms up to date as your providers will use this information when deciding who will inherit your pension savings.

 

TAKE CONTROL OF YOUR RETIREMENT

When you reach 55 (57 in 2028), it’s important to carefully consider what you can do with your pension pot. For instance, you could: keep your savings invested; take a cash lump sum; draw a flexible income (drawdown); buy a fixed income (an annuity), or do a combination of these things. While this flexibility may enable you to retire earlier or semi- retire, it’s vital you take full control of your retirement options at this stage. This should include seeking advice and discussing the pros and cons of the different avenues available to you.

 

GET GOOD ADVICE

Retirement planning is never a case of ‘one size fits all’; so it’s vital you obtain sound financial advice tailored to your individual needs. We offer advice and help with all aspects of pensions and retirement planning, whether you’re just starting out and want help choosing the most appropriate pension products, or you’re approaching the stage of life when you need to utilise your pension pot and want to know the most efficient way to access your funds. Remember: we’re here to help.

 

* It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

An Introduction to ISAs

An Introduction to ISAs – Getting to grips with the basics

If you’re thinking about saving or investing, it can be difficult to decide on the best place to put your money. There are hundreds of different accounts on offer from banks, building societies and investment companies. So how do you make your choice? For many people, taking out an ISA (Individual Savings Account) can be a good place to begin.

 

WHAT ARE ISAS?

An ISA is a simple, tax-efficient way to save or invest. The advantage of these types of account is that you don’t pay tax on the interest you earn, or the increase in value of your investments (no Capital Gains Tax to pay) and some deliver a government bonus. There are now several different types of ISA available, designed by the government to encourage people over 16 to save or invest for their or their children’s future.

 

WHAT TYPES ARE THERE?

The basic types of ISA are:

  • Cash ISAs
  • Junior ISAs
  • Help-to-Buy ISAs (closed to new accounts from 30 November 2019)
  • Stocks and Shares ISAs
  • Lifetime ISAs

With a Cash ISA you never need to pay tax  on the interest you earn on your cash. 

 

Junior ISAs are a tax-efficient way to build up savings for a child and can be opened for any child under 18 living in the UK. The money can be held in cash and/or invested in stocks and shares. 

 

Help-to-Buy ISAs are designed for first-time house buyers as a type of Cash ISA. When the money saved is used to complete a house purchase, the government adds a 25% bonus (up to a maximum bonus of £3,000). The Help to Buy ISA closed to new accounts on 30 November 2019. If you opened a Help to Buy ISA before 30 November 2019, you

will be able to continue saving into your account until November 2029. 

 

With a Lifetime ISA (LISA) you are able to hold your money in cash or invest in stocks and shares. LISAs are designed for those aged 18 to 40 wanting to save for their first home or retirement, with the added attraction that they can save until they are 60 if they wish to. People under the age of 40 are able to contribute up to £4,000 in each tax year. Government bonuses apply up to age 50.

 

If you choose a Stocks and Shares ISA, there is no Capital Gains Tax and no tax on dividend income. ISA dividends have no impact on the dividend allowance.

 

HOW MUCH CAN I SAVE IN AN ISA?

The ISA allowance is a generous £ 20,000 for the 2022-23 tax year. You can put all the £20,000 into a Cash ISA, or invest the whole amount into a Stocks and Shares ISA or Innovative Finance ISA. You can also mix and match, putting some

into cash, some into stocks and shares and the rest into innovative finance if you wish. However, the combined amount can’t exceed your annual ISA savings allowance (£20,000). 

 

In the 2022-23 tax year, £9,000 can be saved in a Junior ISA. 

 

With a Lifetime ISA, if you are aged between 18 and 40, you can save up to £4,000 each year. The government then provides a 25% bonus on these contributions at the end of the tax year. This means that people who save the maximum each year will receive a £1,000 bonus each year from the government. Savers are able to make Lifetime ISA contributions and receive a bonus from the age of 18 up to the age of 50. Savers need to be aware of the risks associated with a LISA, early withdrawal charges,nrestrictions and accessibility.

 

We can help you make the right choice of ISA based on your age, the length of time you want to save for and your plans for the future. We can save you time and make recommendations that are right for your personal financial circumstances.

 

SHOULD I OPT FOR CASH OR SHARES?

Cash is solid and reliable, and with a Cash ISA you are guaranteed to get back all the money you have put in – but with interest rates continuing to remain low, there is a risk that inflation will erode the value of the money saved over time.

 

If you are able to lock your money away for a reasonable amount of time – a minimum of five years for example – it is often better to invest in stocks and shares which historically have offered a better return. Unlike cash savings, money invested in stocks and shares rises and falls in line with what is happening in financial markets. So the value of your investment can go up and down.

 

Given that you can put your money into both Cash, and Stocks and Shares within an ISA, people often find this a tricky decision to make. This is where we can offer practical help and guidance based on your attitude to risk, and the length of time you have to

save or invest.

 

CAN I HAVE MORE THAN ONE ISA?

You can have multiple ISAs, but you can only open and subscribe to one Cash ISA and one Stocks and Shares ISA per tax year. However, you can’t exceed the combined allowance, which for tax year 2022-23 is £20,000. You can continue to hold ISAs set up in previous years.

 

DO I LOSE THE TAX BENEFITS IF I TAKE MONEY OUT?

ISAs can be flexible, which means that if the account terms allow, you can take cash out and put it back during the same tax year without reducing your current year’s allowance and without losing the tax benefits.

 

DO I INCLUDE MY ISA ON MY TAX RETURN?

No, there is no requirement to do this under current tax rules. You don’t need to declare income and capital gains from ISA savings or investments on your tax return.

 

ISA Top Tips

REMEMBER, CASH IS NOT RISK FREE

With interest rates currently low, there is a risk that over time inflation will erode the buying-power of your savings. You can hold a wide variety of assets in an ISA. We’ll explain these options to you.

 

THINK ABOUT YOUR TIME HORIZONS

If you intend to save or invest into an ISAnover the longer term, say five to ten years, then you may want to consider investing rather than saving in cash, giving your money more time and scope for growth.

 

CONSIDER INVESTING MONTHLY

If you’re thinking of putting your ISA subscription into the stock market, but are worried about the volatility that stocks and shares can sometimes experience, then you can always choose to make regular contributions. By making regular contributions, returns are smoothed over the longer term, with the objective of hedging the risk of a falling market over time. This simple concept is known as ‘pound-cost-averaging’ and is based on the principle that when markets are low, your set amount buys more shares or units, and when markets are high it buys fewer.This investment philosophy offers the opportunity to make inevitable market fluctuations work in your favour; by gradually drip feeding money into the market over a longer term, you can reduce the impact of market timing and volatility on purchase prices.

 

DON’T FORGET YOUR PENSION

Both ISAs and pensions are forms of tax wrapper that offer valuable tax concessions. One of the key differences between ISAs and pensions is that contributions to ISAs are made from taxed income, while those made to pensions are not. Savers contributing to a pension within HMRC annual and lifetime allowances receive tax relief at the same rate they pay income tax. With a pension, you can’t generally access your money before you are 55. For many people, contributing to an ISA and a pension makes good financial sense.

 

GET GOOD ADVICE

ISAs have an important part to play in organising your money in a tax-efficient

way and making provision for the future. We can offer advice about the type of ISA that would work best for you, whether you’re investing for a child through a Junior ISA, or accumulating funds for future goals such as a comfortable retirement.

 

WE’RE HERE TO HELP

We’re only a phone call away, so if you have queries or would like to discuss the different

types of ISAs and consider what would work best for you or your family, please do get in touch.

 

* It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

 

Audley A-Z: A Wealth Of Knowledge

Understanding the financial industry and its jargon can be a challenge, even for those in the field. That’s why the team at Audley Wealth has compiled an A-Z list of financial terms to make it easier. Our comprehensive guide provides a clear explanation of the most commonly used terms, so you can stay informed and up-to-date.

 

A

Asset – A resource that has economic value that a person owns or controls. There is an expectation that this will provide a future benefit to the owner. For example a house or high-quality jewellery.

 

Annuities – a fixed sum of money paid to a person each year, for the rest of their life. For example, a contract issued by an insurance company is designed to provide a secure income stream throughout the entirety of your retirement years.

 

Accrual rate – This is the rate by which a pension from an earnings−related occupational pension scheme builds up from one year to another. The rate is shown as a fraction or a percentage of the member’s final yearly salary. 

 

APR – Annual percentage rate (APR) is the official rate used to help you understand the cost of borrowing from a lender. It takes into account the interest rate and all lenders have to tell you what their APR is.

 

Arrangement fee – This is the fee that banks charge their customers for arranging the facility for an overdraft.

 

AER – Annual Equivalent Rate. The AER is the official rate of savings accounts. When you put your money into a savings account, the AER shows you how much interest you will receive from that deposit, regardless of when that interest is paid.

 

B

Bond – A fixed-income security that represents the ownership of debt and serves as a loan between a company or government and an investor.

 

Balloon payment – Some loan and finance agreements have lower repayments than normal in return for a high final payment. This is called a balloon payment.

 

Basic state pension– This is the retirement pension the Government pays to people who have paid enough national insurance contributions. Some people may receive a reduced basic state pension because they have not paid enough contributions.

 

Beneficiary – This is someone who benefits from a will, a trust or a life insurance policy

 

Bequeath – If you bequeath something, you leave it to someone in your will. You cannot bequeath land or real property but you can devise them.

 

Base rate – The standard interest rate set by the Bank of England which other financial institutions use as a guide when setting their interest rate. The Bank of England changes the base rate according to whether they are trying to encourage borrowing or spending to stimulate the economy.

 

C

Credit Score – A credit score is a number from 300 to 850 given to everyone. The higher the score, the better a potential borrower looks to potential lenders.

 

Compound Interest – When you save money, as well as earning interest on the savings, you also earn interest on the previous interest you have gained.

 

Capital gain – You make a capital gain if you sell or dispose of a long−term asset (such as a building) for more than it cost you.

 

Cash ISA – You can invest money in a cash ISA to earn tax−free interest.

 

Chargeable asset – This is an asset on which capital gains tax may have to be paid if it is sold or disposed of.

 

Capital – This is the amount of money that you invest or borrow – the initial lump sum. 

 

Credit history – This is a record of the loans you have taken out in the past and any payments you have missed. This information is used by credit reference agencies to advise banks and building societies of your credit rating when you apply for new loans.

 

Child Trust Fund – The Child Trust Fund (CTF) is a long-term savings and investment account for children. In December 2010, the Government decided to stop opening CTFs, but those which had already been set up by then are designed to make sure that your children have savings up until the age of 18.

 

Conveyancing – This is the process of transferring legal ownership of property from one person to another.

 

D

Deductible – A fee paid out of pocket by a policyholder before an insurance company compensates for a claim.

 

Dividend – A periodic payment made to investors who own stock in a company, fund, or partnership, as a way to distribute earnings.

 

Diversification – The practice of spreading your investments around so that your exposure to any one type of asset is limited.

 

Depreciation – Depreciation is the drop in value of an asset due to wear and tear, age and obsolescence (going out of date) as recorded in an organisation’s financial records.

 

Devise – Devise means to leave land in a will

 

Deposit – Either a small amount paid towards the overall cost of a purchase to secure the item.

 

Debt –  If you’ve borrowed money, then you are ‘in debt’, typically owing interest as well as the money initially borrowed.

 

E

Earnest money – A good-faith deposit you put on a property to demonstrate intent to buy it and pull it off the market.

 

Equity – Equity is the value of the shares issued by a company.  

 

Equity Release – Equity release is the process of using the value of your home to raise cash – releasing the equity. There are two main types of equity release schemes available: lifetime mortgages and home reversion schemes. When the property is sold, the plan provider reclaims their loan and any interest due with the remainder going towards the plan owner or to their estate. 

 

Estate Planning – For inheritance tax purposes, an individual’s estate is calculated as being their total assets minus any liabilities at the time of their death. Proper estate planning could save your family hundreds of thousands of pounds because IHT (sometimes called ‘death duty’) will be charged on what you leave behind. Currently, IHT is due at 40% of the value of all the assets you leave behind on death above the IHT threshold.

 

F

Fixed Rate – This is an interest rate which does not change during the life of a loan. 

 

Floating charge – A floating charge is used to provide security for money lent to a company. The charge is over the company’s liquid assets(such as stocks and debtors) but it is only triggered by an event such as liquidation.

 

G

Grant – Financial aid that doesn’t need to be repaid. Can come from the government.

 

Gross interest – This is interest which has not had any income tax taken out of it.

 

Gilts – These may also be called Treasury bonds. They’re bonds that are issued by the UK government. They’re regarded as being very low-risk, secure investments because it’s the government promising to pay you back.

 

H

Hard inquiry – A type of credit check that lenders undertake to review an applicants creditworthiness.

 

Hedge fund – Hedge funds are a high-risk investment: they comprise a complicated set of strategies that aims to make attractive returns on the stock markets.

 

I

Interest – The amount of extra money you will need to pay back when you borrow money from a lender. It is generally expressed as a percentage, such as an annual percentage rate (APR).

 

Inflation – This is the name for general price increases. 

 

ISA – Individual Savings Account. There are 4 types, cash ISAs, stocks and shares ISAs, innovative finance ISAs and Lifetime ISAs

 

Inheritance Tax – This tax is charged on certain gifts, and on the value of the estate left by someone who has died.

 

Intestacy – This happens when someone dies without leaving a will. Their estate is divided up between their relatives following the rules set by law. 



J

Joint lives – Some life insurance policies cover two people’s lives and then pay out on the first death.

 

Joint lives last survivor – This sort of life insurance is on two people’s lives and pays out on the second death.

 

JISA – Junior ISA. For children under the age of 16. This can be invested into cash or equities and grows tax-free. Once the child reaches 16 it converts to an ISA but they are  unable to withdraw any amounts until they turn 18.

 

K

 

L

Leverage – Financial leverage is when you borrow money to make an investment that will hopefully lead to greater returns. It’s built on the idea of spending money to make money.

 

Liquidity – The amount of money that is available to meet debts or to use for investment, whether in cash or assets that can be quickly converted to cash.

 

Liabilities – These are debts that a person or an organisation owes

 

Lifetime annuity – A lifetime annuity will give you a regular income for the rest of your life. You buy an annuity with the cash sum that’s built up in your pension fund so that you can have a regular income during retirement. There are different types of annuities to suit your needs and circumstances.

 

M

Mortgage – A loan to buy a property, which is then ‘secured’ on the property. This means that the lender may eventually have the right to take over the property if you do not keep up with the repayment terms of the mortgage.

 

Mutual fund – An investment portfolio that uses a pool of money from large numbers of people to purchase stocks, bonds, or other securities.

 

Mature/maturity –  If an investment policy comes to the end of its life, it has reached maturity

 

N

Net Income  – The amount of money you bring home after taxes and deductions are taken out of your paycheck.

 

O

Occupational pension – Schemes are set up by employers to provide pensions for their employees.

 

Output tax – This is the value-added tax (VAT) charged by a business registered for VAT, on the goods and services it sells.

 

P

Premium – A fee paid in either monthly or yearly increments toward an insurance policy. 

 

Portfolio – The collection of all your financial assets.

 

PAYE –  An employer collects income tax and national insurance are collected from employees’ pay and pays it to the Inland Revenue. This system is called Pay As You Earn (PAYE). 

 

Pension mortgage –  This is a mortgage which will be repaid out of the lump sum from a pension policy or retirement annuity. 

 

PPI Payment Protection Insurance was an insurance normally taken out alongside a loan which would cover the repayments in the event of you being unable to work and make payments

 

Premium Bonds Government Back Savings through National Savings & Investments. Capital is guaranteed but pays no interest. Instead, you are entered into a monthly prize draw where you could win up to £1,000,000.

 

Pensionable age – This is the age people have to reach to be entitled to draw their state pension

 

Q

 

R

Retail investor – A nonprofessional trader who buys and sells securities through a brokerage account.

 

Remortgage – When you apply for a new mortgage with a different lender, but stay in your current home.

 

Reserves – These are amounts set aside in one year’s accounts, which can be spent in later years. Some types of reserve can only be spent if certain conditions are met. 

 

Recession a period when an economy declines, as measured as a reduction in economic output.

 

S

Stamp Duty – Stamp Duty is a tax you might have to pay if you buy a residential property or a piece of land in England or Northern Ireland over a certain price

 

Stocks and Shares  – Both terms mean the same thing: companies’ stocks and shares that can be bought and sold. Owning a share in a company means owning a part of that company, or owning some of that company’s stock. 

 

Standing order  – This is an instruction by a bank’s customer to the bank, to pay an amount of money regularly to another bank account.

 

T

Tangible assets – If an asset can be physically touched, it is a tangible asset.

 

Trust – A legal entity that can hold almost any asset, including real estate, bank accounts, investment accounts, business interests, and life insurance policies.

 

Term – A term is any of the clauses which form part of a contract.

 

Trustee– A trustee is a person who takes responsibility for managing money or assets that have been set aside in a trust for the benefit of someone else.

 

U

Unsecured loan – An unsecured loan is a loan that doesn’t require any type of collateral. Instead of relying on a borrower’s assets as security, lenders approve loans based on their credit score.

 

V

Valuation – Valuation is the process of determining the worth of an asset, such as a house, or company. This will help with the sale of an asset or calculating your wealth in assets.

 

Variable Interest Rates – Rate on a loan or security that fluctuates over time.

 

Volatility How quickly the value of an investment fluctuates.

 

W

Whole of life assurance – This is life assurance cover which lasts the lifetime of the person whose life is assured

 

X

 

Y

Yield – How much income an investment generates.

 

Z



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