Glossary N – O terms used in Financial Services

Individuals of Lloyds of London who join together in syndicates to underwrite insurance business. Their liability is usually unlimited and therefore all their personal wealth is at risk however, there are now schemes for limiting this.
National Insurance Contributions
An additional form of tax paid by most employers, employees, self employed (and some unemployed) people. For the employed it is deducted from income by the employer on a scale related to income levels. The employed pay part flat rate, part income related. The unemployed may pay a flat rate voluntary contribution to keep their benefits entitlement up to date.
National Savings
A ‘branch’ of the treasury, selling investment, savings and deposit products over the counter at post offices with the aim of raising money for the government, and providing medium to long term financial planning products for customers.
Needs Analysis
The breaking down of a situation to determine whether there are areas of risk or weakness that should be protected.
Negative Equity
The situation where the value of the property falls below the outstanding loan(s) used to purchase it.
Negative Equity Guarantee=(Equity Release Plans) In the event of the value of your property decreasing, the debt will also decrease, in addition any outstanding debt, following the sale of your property will not be taken from your estate.
Net Pay System
Refers to the situation where employee contributions to an occupational pension scheme are deducted from gross income before tax is applied. This avoids the need to adjust the tax code.
Net Relevant Earnings (NRE)
A definition of ‘pensionable income’ by which Personal Pension Plan contributions are determined for the self employed. Relevant earnings less business expenses (includes stock relief deductions, losses or capital allowances). NRE for employed PPP holders is effectively gross PAYE pay.
Cover for property where an item lost or destroyed would be replaced with a brand new one, with no deduction for wear and tear. Also called “replacement as new”.
Nil Rate Band
Refers to the ceiling on cumulative transfers under Inheritance Tax under which transfers do not attract tax.
No Claim Discount (or Bonus)
A reduction in a renewal premium to reflect a claim-free record; used most often in motor insurance.
Nominee Company
A company that acts as the registered owner of securities, but looks after them on trust for a beneficial owner e.g. a private individual who wishes to remain anonymous might buy or sell shares using a nominee company.
Non-Medical Limits
Refers to underwriting limits, whereby sums assured up to certain levels, other things being acceptable, will not require a medical examiners report.
Non-motor includes all business written under the accident and health, general liability, pecuniary loss and property damage classes. Also known as Fire and Accident.
A policy where the value of the policy at maturity is guaranteed at outset.
Non-Qualifying Policy
One that does not satisfy all of the qualifying rules.
Normal Expenditure
An exempt lifetime transfer under Inheritance Tax rules, whereby to avoid being classified as a PET the transfer must be part of normal expenditure and not affect the standard of living of the donor.
Normal Retirement Age (NRA)
The expected/stated retirement age, usually for pension purposes.
Normal Retirement Date (NRD)
Refers to the expected or usual retirement date assumed when setting up a pension policy e.g. end of the month following 60th birthday.
Not Contracted-out
Someone who is not contracted out of the State Earnings-Related Pension Scheme (SERPS).
Occupational Pensions Board (OPB)
Established to oversee contracting out, and to examine and report on issues of public interest related to pensions and connected subjects e.g. preservation of benefits.
Occupational Pension Scheme
Pension scheme provided by an employer for its employees. Contributions will be paid by the employer and often by employees also. Schemes may be either “defined benefit” where the pension entitlement of an employee is determined by, for example, number of years’ service and salary; or “defined contribution” whereby an employee’s pension entitlement depends only on how much has been paid into the scheme in the form of contributions on his/her account, and the value at retirement of the sum thus accumulated. Employers may delegate responsibility for the running of their pension scheme to an insurance company.
Offer and Acceptance
Two of the necessary stages in a viable contract.
Basically, anywhere out of the country not within the authority of the Inland Revenue.
Office of Fair Trading (OFT)
Government body charged with ensuring a ‘level playing field’ for competition in all sectors of the economy.
Official Receiver
Person appointed by the UK Governments’ Department of Trade & Industry to act in bankruptcy matters and oversee the winding up and, possibly, liquidation of the debtor.
Open Ended Investment Company (OEIC)
Effectively a ‘hybrid’ unit trust/investment trust with a board of directors, shareholders, a variable capital base, single pricing for buying and selling and able to issue difference classes of share.
Open Market Option
An option under pension schemes to use the cash in the pension fund to find the best annuity rate available from other companies in the market. There may be a charge for taking the money or perhaps enhancement if staying.
Opening Years
Special tax rules and options apply to the opening three years of a business.
An option gives the right but not the obligation to buy or sell an underlying commodity or financial instrument at a certain date in the future. Options are often favoured by smaller investors as the risk is limited to the purchase price of the option. An option is a derivative.
Ordinary Annual Contributions
The average of employer’s contributions paid in the last 3 accounting periods, excluding one-off payments. Used especially in connection with Small Self Administered Schemes.
Ordinary Shares
The voting shares of a limited company.
The total expenditure of an insurer in relation to any class of insurance business, comprising the cost of claims and the insurer’s business expenses, including any commission paid to sales staff, brokers or intermediaries.
Own Life
Refers to a policy taken out on one’s own life for the benefit of one’s estate or other specified beneficiaries.