Glossary T – Z terms used in Financial Services

Tapering Relief: An Inheritance Tax relief in connection with PETs. A PET drops out of consideration after 7 years, but death of the donor within that period gives rise to a tax liability. Tapering relief operates to reduce that liability over the 7 year period so that death in the first 3 years attracts no relief, year 4 attracts 20% relief; years 5, 6 and 7, 40%, 60% and 80% respectively. The gift ‘drops out’ in year 8.
Tax Avoidance: Making full use of reliefs and exemptions to ensure as little tax as possible is paid.
Tax Evasion: A criminal offence, generally involving fraud in escaping tax liability.
Tax Relief: The system of exemptions and deductions on income and expenditure whereby the Tax Inspector can identify taxable income.
The Tax Schedules: The different categories under which different sources of income and capital accrual are taxed. Tax Year. The 12 month period from 6th April to 5th April the following year.
Term Assurance Policy: Life cover provided for a specified number of years. The insurer only pays out if the policyholder dies within this time.
Terminal Bonus: A bonus paid on certain life insurance policies either at maturity, or if a claim is made.
Terms of Business Letter: Effectively an extended Buyers Guide used where business is carried out regularly with the client in question. It is usual for these to be signed by adviser and client.
Testator: Person who makes a will.
Tax Exempt Special Savings Account (TESSA): A government backed scheme introduced in 1991, where a special savings plan held by an approved institution (usually a bank or building society) will generate interest, free of income tax. TESSAs were designed to provide some tax shelter for relatively modest savings. There are a number of conditions relating to TESSAs that include a maximum annual investment and minimum holding period. These have been phased out in favour of ISAs.
Tied Agent: An individual or business which only sells one company’s (or group’s) products (such as life assurance) making no pretence of offering independent advice on all the products available in the market place. It is important to check whether the individual or business is tied or an Independent Financial Advisor (IFA) before making a purchase because an IFA is free to recommend any company’s products and therefore offer a wider choice.
Title Deeds: Documents showing evidence of ownership over land.
Topping Up Loans: A loan taken in addition to an existing loan.
Top Slicing: A method of calculating income tax liability on a chargeable gain.
Trading Period: Also accounting period. Generally a period of 12 months over which the accounts of a business are prepared.
Trading Result: An insurer’s overall profit/loss calculated as the underwriting result plus investment income.
Trail Fees: Renewal fees under unit trusts.
Transfers: In Inheritance Tax terms, taken to mean any item of value where the ownership exchanges hands without cost. A gift.
Transfer Value: Generally taken to mean the cash value of accrued pension benefit in an occupational pension scheme when available to be moved elsewhere.
Treasury: Government department responsible for all the government’s financial decisions and for regulation of the financial services sector. The minister responsible for the treasury is the Chancellor of the Exchequer.
Treasury Bills: A short term bill of exchange, depending on discount to give it value, as it does not pay interest.
Trust: A verbal or written arrangement whereby one person or persons (trustees) agree to take care of assets and to use those assets in particular ways for particular people (beneficiaries).
Trustee: Individual or corporate body who looks after the assets of a trust and manages the trust in accordance with terms and conditions agreed verbally or in writing.
Underfunded: Generally refers to the valuation of an occupational pension fund where the actuary perceives that there are insufficient funds to support liabilities within the investment review period.
Underinsurance: When the sum insured is not enough to cover the maximum possible loss or damage.
Underwriter: Person who decides whether to accept a risk and calculates the premium to be charged.
Uninsurable Risk: A risk where loss is either inevitable (e.g. a house already on fire or a person suffering from a terminal illness). Also applies where damage is gradual e.g. rust and corrosion.
Unit Linked: A life assurance, investment or savings policy, under which the policyholder invests premiums into units in a unit trust-type investment. Performance therefore, is dependent directly on current investment market conditions.
Unit trust: A system where money from a number of investors is pooled together and invested collectively in investments such as shares and bonds. Each investor owns a unit, (or a number of them) the value of which depends on the value of those items owned by the fund. A unit trust allows modest investment to be diversified away from a holding in a single or small number of companies. See Collective Investments and Open Ended.
Unlisted Securities Market: A market established in 1980 by the Stock Exchange for those companies for whom a full listing is not suitable. Joining and listing requirements are much cheaper than the main market.
Unlisted Securities: Securities/shares not listed on an official stock exchange list.
Uplifted Scale (Accelerated Accrual): The Revenue permits pension and cash benefits to accrue/grow at a rate in excess of the basic one sixtieth formula, provided the scale from the Practice Notes is followed.
Utmost Good Faith: The principle of insurance which requires proposers to give all relevant information to the insurer.
Variable and Fixed Interest Rates: Most accounts have variable rates, which means they go up and down with time. In the past interest rates were altered automatically as the rates laid down by the Bank of England changed. Nowadays that doesn’t necessarily happen. In some competitive situations Banks and building societies may not alter rates particularly if changes to the Bank of England base rate is small. A savings account with a fixed rate will pay a pre-determined level of interest for a set period regardless of what happens to interest rates generally. Sometimes rates are fixed for a few months, and sometimes for several years.
Vested Rights: Term used for automatic preserved benefit on leaving occupational pension scheme.
Void: Something that has no legal force from the start.
Voidable: Something which, though it may continue to be valid, may be put aside and be made void, in certain circumstances.
Waiver of Premium: An optional extra on a life policy which means that the insurance company will pay the premiums if the policyholder is unable to because of illness or injury.
Warrant: This is an investment that gives the owner the right to buy new company shares at an agreed price at a future date. These are then traded on the Stock Exchange and tend to have a more volatile price than company shares. Although warrants can be purchased like a share, they are usually introduced as an incentive to an investor to take an offer from the company. An example would be where a new investment trust is launched with warrants on a 1 for 5 basis; this means that the investor receives the right to buy 1 share in the future, at a price fixed now, for every 5 shares he purchases.
Warranty Insurance: This type of insurance provides cover against the cost of repairs to broken down household appliances.
Wealth Warning: General phrase relating to the mandatory requirement to warn clients of the inherent risk in certain courses of action e.g. the value of investments can fall as well as rise, or, failure to maintain mortgages payments could result in the loss of your home.
Whole Life Policy: A policy where premiums are paid for the rest of an individual’s life, or up to a specified advanced age, and benefit is paid on the death of the person insured, whenever that occurs.
Will: A document drawn up by a testator appointing executors to administer the estate on death and laying out how the estate is to be dealt with after death. A testament is a statement relating solely to personal effects, not land.
With Profits: Participation in bonus declaration for with profits policies.
With-Profit Bonds: A single premium policy where a lump sum is paid into a with-profits fund made up of investments like company shares, fixed interest securities, commercial property and money.
Write-off: A damaged vehicle which is not repairable, or one which would cost more to repair than the car was worth before the damage occurred. Also known as a “total loss”.
Yearly Premium: Recurring premiums paid over the term of the policy, at intervals specified in the policy.
Yield: This is the annual return you receive from holding a stock, share or unit trust. It is based on the holding’s current price and the gross amount of annual dividends the company has paid out to shareholders

Glossary T – Z terms used in Financial Services

Legals