Glossary R – S terms used in Financial Services

Rate: The price of insurance, usually expressed as the cost of a unit of cover, e.g. £x per £1,000.
Rebasing: To ensure that capital gains tax is not paid on any inflation linked increase in the value of an asset, the purchase price is index linked from date of purchase to date of disposal. Where the asset was acquired before 01.03.1982, the purchase price is taken to be the market value as at that date; this is the rebasing – rebasing for indexation purposes.
Recognised Professional Body: In addition to the Self Regulatory Organisations, solicitors, insurance brokers, actuaries and accountant’s professional organisations are recognised by SIB as being competent to control their members’ conduct when providing financial advice.
Redemption Penalties: When a loan under a mortgage is repaid before the agreed date, there may be penalties and fees due to cover the lender’s lost investment and administration costs.
Reduced Allocation: A method of recouping initial expenses when setting up a unit linked policy, whereby only a proportion of the investment is allocated to the policy for the first few years.
Registered Individual: A person registered with an SROor a RPB
Registrar: The person responsible for maintaining a company’s share register which involves keeping the list of shareholders accurate. Unit trusts can also use a registrar to issue trust certificates and send out distributions of income earned on the unit trusts.
Reinstate: In certain circumstances, it may be possible to ‘re-start’, or reinstate a policy where premiums have been unpaid for some time. Conditions for different companies and different policies vary.
Reinsurance: Reinsurance is the cover insurance companies can purchase to protect themselves against large losses.
Related Property: Related property means separate assets which, when valued together, have a higher value than when valued separately e.g. a pair of antique candlesticks together may be worth £1000, but separately only £300 each. For Inheritance Tax purposes, when splitting related property, the value of the gift is deemed to be the relevant portion of the joint value not the value of the item on its own e.g. in the case of the candlesticks, £500 each.
Relevant Benefits: One of the proviso’s for an occupational scheme to qualify for ‘exempt approved’ status, and meaning in broad terms any financial benefits provided on death or retirement, rather than a Permanent Health Insurance-type benefit.
Remortgage: Replacement of an existing mortgage loan with another from a different lender.
Residence: A place in which a person has a home. See Domicile.
Resident: Someone living in a country whether domiciled or not, whether a citizen of that country or not.
Retail Price Index: A monthly indication of the average price changes to a particular ‘basket’ of consumer goods, and used as a general indicator of price inflation.
Retained Benefits: Pension benefits earned in previous employments and self employments.
Retirement: The state of having given up full time work.
Retirement Annuity Contract (RAC): The forerunner to the Personal Pension Plan, although there are differences between the two e.g. in terms of contributions and availability of cash sums. New RAC contracts no longer available, but existing contract may continue.
Revaluation: A means of increasing a figure from a base date in line with inflation e.g. pensionable salary or capital gains.
Reversionary Bonus: A bonus which is added to the policyholder’s investment during the course of the policy.
Rights Issue: Issue of shares to existing shareholders in order to raise extra finance.
Risk: In insurance terms, the likelihood of a claim being made on a policy during its term.
Rolling settlement: System for settling share transactions under which bargains are settled a set number of days after being transacted. Bargains are settled a set number of days after being transacted.
Roll-up Funds: An offshore investment fund which does not distribute its dividends.
Self Administered Personal Pension (SAPP): Variation of the SIPP, except with the SAPP the scheme assets are invested by the insurance company and administered as an ‘earmarked’ fund within an appropriate fund under their management.
Save As You Earn (SAYE): A method of saving regularly from salary, by employer deduction. There are various schemes to accommodate this, some tax efficient, others merely savings administration.
Schedule: A sheet attached to a document providing additional or specific information relevant to the main purpose of the document.
Schedule D: Tax collection regime for the self employed.
Schedule E: Tax collection system for employed people.
Scheme Administrator: The person responsible for the management and administration of an occupational pension scheme. All exempt approved schemes must appoint an administrator.
Scheme Rules: All pension schemes will have guiding rules, as they are the practical, day to day guide for the operation of membership and benefits.
School Fees Insurance: A generic term for packages of investment, savings and insurance put together to ensure provision of money to meet education costs. A full package will cover not only fees but incidental schooling costs and go on to cover graduate studies.
Scrip Issue: This is when a company issues free new shares to current shareholders. These are normally in direct proportion to their existing holdings (shares) and can be used when a company’s shares have become so expensive they are not easy to sell. (See also Bonus issue).
Secondary Market: The existing share market on the UK stock exchange.
Second Death: An option under a joint life policy whereby the policy proceeds are paid out on the death of the second of the insured persons.
Security: A bond or share certificate evidencing ownership or debt.
Securities and Futures Authority (SFA): The SRO governing stock market, stockbrokers, merchant banks, discount houses and firms dealing in derivatives.
Securities & Investment Board (SIB): An agency which is responsible for the regulation of investment business, having been delegated the majority of the Chancellor of the Exchequer’s powers which were conferred by the Financial Services Act 1986 (FS Act). SIB will be fully replaced by the new Financial Services Authority in 1999.
Securitisation: The process of making a loan into a tradable security by issuing a negotiable document encompassing the loan and selling it on.
Selection: In underwriting terms, this is taken to mean the potential for the less fit and healthy to propose for life assurance and Permanent Health Insurance contracts. This is particularly pertinent where members of group schemes may be offered ‘underwriting free’ continuation options upon leaving the scheme.
Self Administered: Simply, administering something yourself, and applied particularly in respect of occupational pension schemes.
Self Investment: Rather than hiring specialist investment managers, organising the investment yourself; used particularly in respect of some pension arrangements.
Self Invested Personal Pensions (SIPP): A PPP where the policyholders, usually in a group, organises and manages the pension fund investments for themselves.
Self Regulatory Organisation (SRO): SIB delegates day to day management of supervision of investment business to the sector SROs, which provide rules and direct supervision to their members.
Settlement: An arrangement of land or other property by deed, under which a trust is created by the settlor.
Settlor: A person who establishes a trust.
Share: Part of the capital of a company that confers part ownership of the company on the share owner.
Share Incentive Schemes: Schemes offering tax incentives to encourage employee participation in a business.
Simultaneous Deaths: Where husband and wife die ‘together’, say, in an accident, and there is no evidence as to which of them died first, the elder is deemed to have died first. In applying Inheritance Tax rules, however, both are deemed to have died at the same time so that both estates retain full allowances.
Single Premium: A one time only, not repeatable single payment.
Single Premium Policy: A long-term insurance policy where the premium is paid in a single lump sum.
Small Companies Rate: Rate of corporation tax below the standard and marginal rates.
Small Gifts Allowance: An annual Inheritance Tax allowance, enabling a donor to give up to £200 per year to any number of separate individuals, and which do not have to be accounted for in calculating IHT liability.
Small Self Administered Pension Schemes: To all intents and purposes an ‘ordinary’ pension scheme but without the involvement of a life company.
Solvency: The state of being able to pay outstanding debts on their due date.
Solvency Margin: The solvency margin is the excess of the reserves the insurance company holds over its liabilities.
Spread: This is the difference between the offer price at which units or shares are sold and the bid price at which they are bought back from the public. i.e. – the Market Maker or unit trust manager’s bid price is the price at which the investor can sell to him and the Market Maker’s offer price is the price that the investor can buy from him and so is the higher of the two. The difference between the two prices is the spread and includes the market makers profit and his costs.
Stamp duty: A tax that is deducted when purchasing ordinary shares, and preference shares (equities).
State Earnings Related Pension Scheme (SERPS): Earnings related pension based on earnings between LEL and UEL.
State Retirement Age: Fixed retirement ages for men and women, currently 65 and 60 respectively.
Statutory Sick Pay: Payable to employed persons by their employer after 4 days sickness for up to 28 weeks.
Stock: Fixed interest securities, usually issued in denominations of £100.
Stockbrokers: Middlemen, agents, who buy and sell stocks and shares for customers.
Stock Exchange: A market where stocks and shares are bought and sold. Superannuation Fund. Another name for an occupational pension scheme; tends to be used in reference to ‘national’ schemes such as those for teachers, police, local authorities, and so on. All are governed by the same Revenue rules and regulations.
Subrogation: The right of an insurer who has indemnified a policyholder to take over any legal rights the policyholder may have had in respect of that particular claim.
Superannuation Funds Office: Forerunner of the Pension Schemes Office.
Sum Insured: The amount for which property is insured, and the maximum amount that the insurance company will pay for any claim. In life insurance, the amount that is guaranteed to be paid and to which bonuses may be added.
Surrender Value: The amount of money paid to the policyholder when certain types of life policy are discontinued before the full benefit becomes payable. Not all life policies have a surrender value.
Switching: Transferring sums of money from one unitised fund to another. This is done on a bid to bid basis to avoid ‘new money’ charges when buying units at the offer price.
SWOT Analysis: A list and examination of Strengths, Weaknesses, Opportunities and Threats of any situation and course of action.
Syndicate: Group of underwriters at Lloyd’s.

Glossary R – S terms used in Financial Services

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