A-Z glossary & jargon buster


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Accident, sickness and unemployment insurance (ASU)

This insurance pays out an income for a limited period, typically 12 to 24 months, if you are unable to work due to an accident, sickness or losing your job. This is often sold attached to a particular loan such as a mortgage where it is called mortgage payment protection insurance (MPPI) or payment protection insurance (PPI).

Accidental damage

House insurance option which covers you for any unintentional damage to your property or its contents, such as knocking over a TV or ruining a carpet by accidentally dropping a bottle of wine over it.

Additional voluntary contributions (AVCs)

Extra contributions you can make into a company pension scheme to increase your benefits.

Administration charge

A fee taken out of contributions to investment-type life insurance policies before the rest is invested.

AER

See annual equivalent rate.

Affinity card

A credit card where the issuer makes a small donation to your chosen charity/organisation when you take out the card and then every time you use it.

AIM

See alternative investment market.

Alternative investment market (AIM)

This is the London Stock Exchange's international market for smaller, growing companies. The market includes start-up firms as well as more established companies looking to attract investors. These companies are smaller and more high risk than companies quoted on the main stockmarket.

All-in-one mortgage

This is the same as an offset mortgage where a mortgage is linked to a current account and/or savings accounts. Any positive balance in the accounts is offset against your mortgage. So if the outstanding balance (amount you still owe) on your mortgage was £100,000 but you had £12,000 in your linked current/savings account, you would only be charged mortgage interest on £88,000 (£100,000 minus £12,000).

All risks

House contents insurance option which means items are covered even when you take them outside of your home.

Annual equivalent rate (AER)

A standard way of measuring the interest paid on savings accounts based on how much interest you get and when you get it. The more frequently interest is paid the more quickly it can be reinvested to earn more interest. You can directly compare the AERs of different savings accounts to work out which is paying the highest rate of interest.

Annual management charge

A fee charged each year to cover the cost of managing your investment. The amount is usually a percentage of the value of your investment.

Annual percentage rate (APR)

A standard way of measuring the cost of borrowing based on any fees and interest charged as well as when payments are due. The APR enables you to compare the cost of different loans; the higher the APR the more expensive the loan.

Annuity

A regular income bought with a lump sum from an insurance company. The income can either be for a set period (temporary annuity) or for life (lifetime annuity). Once you have bought the annuity you cannot get your money back or change the terms of the income payments.

Application fraud

Type of identity theft used to take out credit cards and other financial products in your name.

APR

See annual percentage rate.

Arbitration scheme

An independent complaints scheme to help you settle any dispute you have with a firm about its financial products or services. This scheme is cheaper and faster than going to court but you must have first tried to resolve the problem with the firm through its internal complaints procedure.

Arrangement fee

A charge often made by lenders for a particular mortgage deal.

Asset

Anything you own such as savings, investments, property, works of art etc.

Asset allocation

This is where you invest in a range of different types of savings and investments, such as cash, shares, property, bonds and commodities, to spread your risk and maximising your gains. Your asset allocation will depend on factors such as your goals, how much risk you are prepared to take and how long you want to invest for.

Asset classes

Asset classes are groups of similar types of savings and investments in terms of how they work and the level of risk involved. The four main asset classes are shares, bonds, property and cash.

ASU

See accident, sickness and unemployment insurance.

ATM

See automated teller machine.

Automated teller machine (ATM)

Another name for a cashpoint or cash machine.

Authorised firm

A financial company authorised by the Financial Services Authority (FSA). The FSA offers customers of these firms financial protection if anything goes wrong. To check if a company is authorised look at the FSA Register (Tel: 0300 500 5000) at www.fsa.gov.uk/register/home.do.

Automated credit transfer

Where money is electronically transferred from one bank or building society account to another. Many organisations use this method to pay their employees.

AVCs

See additional voluntary contributions.


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