What are Adhoc Equity Release payments?

Some equity release products allow borrowers to make monthly interest payments, helping to control the growth of the overall debt.

What is the Annual Pension Allowance?

The annual pension allowance is the maximum amount of money that can be contributed to a pension scheme in a tax year without incurring tax penalties.

An annuity is a financial product that provides a series of payments made at equal intervals. Annuities are often used as a way to provide a steady income stream during retirement.

What is Asset Allocation?

Asset allocation is the distribution of investments among different asset classes, such as stocks, bonds, and cash, to optimise risk and return.

What is an Assignment?

An assignment is the transfer of rights or benefits from one party to another. In business protection insurance, a policy may be assigned to a lender as collateral for a loan.

What is a Beneficiary?

A beneficiary is the person or entity that you legally designate to receive the benefits from your financial products. In relation to a pension, beneficiary is a person or entity designated to receive the benefits of a pension plan in the event of the pension holder's death. In relation to business or personal protection, it is the person/peopl designated to receive the benefit from your policy if you pass away.

Bonds are debt securities that investors buy from companies or governments in exchange for periodic interest payments and the return of the bond's face value at maturity.

What is Business Continuity Insurance?

Business continuity insurance is coverage that helps a business recover and continue operations after a covered loss, such as property damage or a key person's death.

What are Capital Gains?

Capital gains are the profits earned from the sale of investments, such as stocks or real estate.

What is a Commercial Property SIPP?

A commercial property SIPP is a pension designed to hold commercial property e.g. shops, restaurants offices or industrial units. The property is sometimes leased back to the pension holders own business.

What is Compound Interest?

Compound Interest is interest that is calculated not only on the initial amount borrowed but also on the accumulated interest from previous periods.

What is Critical Illness Cover?

Critical Illness cover is a type of insurance that provides a tax-free lump-sum payment if the insured person is diagnosed with a critical illness specified in the policy.

What is a Defined Benefit (DB) Pension Scheme?

A defined benefit pension scheme is a pension plan where the benefits are based on a formula, usually involving the employee's salary and years of service.

What is a Defined Contribution (DC) Pension Scheme?

A Defined Contribution (DC) Pension Scheme is a pension plan where the pension size depends on the contributions made and the investment performance of those contributions.

What is diversification?

Diversification refers to spreading investments across different assets or asset classes to reduce risk.

What is Equity Release Downsize Protection?

Downsize protection is a feature that allows individuals to move to a smaller property without incurring early repayment charges on their equity release plan. If the new property is not suitable based on the lenders criteria.

What is an Employee Pension Scheme (EPS)?

An employee Pension scheme is a pension scheme in the UK that provides retirement benefits for employees.

What is an Equity Release Age Band?

Age band refers to the specific age group that qualifies for equity release products. Eligibility normally starts around age 55.

Who are the Equity Release Council?

The Equity Release Council are a trade body in the UK that represents providers of equity release products and aims to protect the interests of consumers. Financial Planning by TaxAssist is a member of the Equity Release Council.

What is Equity Release Drawdown?

Drawdown is a method of receiving equity release funds in instalments rather than as a single lump sum.

An excess is the amount that the insured must pay before the insurance coverage takes effect.

What are Exchange-Traded Fund (ETF)?

An exchange traded fund is an investment fund that is traded on stock exchanges, similar to stocks. ETFs often track an index, commodity, or a group of assets.

Exclusions are specific events or circumstances that are not covered by the insurance policy. It's crucial for businesses to understand the exclusions in their policies.

What are Exit Fees / Early repayment charges?

Exit Fees / Early repayment charges are charges incurred when the equity release plan is terminated, either due to repayment or death. In addition Early repayment charges may be payable during a defined period if you pay off the amount in full.

What is a Final Salary Pension Scheme?

What is a Final Salary Pension Scheme? A final salary pension scheme is another term for a Defined Benefit Pension Scheme where the pension is based on the employee’s final salary.

What is Financial Underwriting?

Financial underwriting is the process of evaluating the financial status of a business to determine the appropriate level of insurance coverage.

What is a Fixed Interest Rate in Equity Release?

A fixed interest rate is an interest rate that remains constant throughout the equity release period, providing predictability for borrowers.

What is Fixed Protection?

Fixed protection is a way of fixing your lifetime pension allowance when the lifetime pension allowance was reduced.

Futures are financial contracts that obligate the buyer to purchase, or the seller to sell, an asset at a predetermined future date and price.

What is a Gilt? A gilt is a British government bond.

What is Group Life Insurance?

Group life insurance is coverage that provides a lump sum or ongoing payments to employees' beneficiaries in the event of their death while employed by the business.

What is a Guaranteed Inheritance?

Some equity release plans allow for a guaranteed portion of the property value to be passed on as an inheritance.

What is a Guaranteed Minimum Pension (GMP)?

A guaranteed minimum pension is the minimum pension benefit that a Defined Benefit Pension Scheme must provide for individuals who were contracted out of the State Earnings-Related Pension Scheme (SERPS).

What is a Hedge Fund?

A hedge fund is a pooled investment fund that employs various strategies to earn returns for its investors.

What is a Home Reversion Plan?

A home reversion plan is a type of equity release where the homeowner sells part or all of their property in exchange for a lump sum or regular payments and the right to live in the property until death.

What is Income Drawdown?

Income drawdown is a method of using a pension fund to provide retirement income by leaving the money invested and drawing an income from it.

What is an Indemnity?

An indemnity is the principle of compensation for a loss or damage. Business protection insurance aims to indemnify the insured party for covered losses.

What is Independent legal advice for Equity Release?

Independent legal advice for Equity Release is legal advice that any adult occupiers need to ensure they are fully aware of the risks if not part of the equity release plan.

What is an Index-Linked Annuity?

An index-linked annuity is an annuity that provides payments linked to inflation, ensuring that retirement income keeps pace with the rising cost of living.

What is an Individual Savings Account (ISA)?

An individual Savings Account is a tax-efficient savings or investment account available to UK residents.

What is an Investment Key Performance Indicator (KPI)?

KPIs are a series of metrics used to evaluate the success of an investment or a portfolio.

What is an Investment Portfolio?

An investment portfolio is a collection of investments held by an individual or institution.

What is Joint Equity Release?

Joint Equity release are plans that involve two individuals, often a couple, allowing both to release equity from their property.

What is a Joint Investment Account?

A Joint Investment Account is an account owned by two or more individuals, often used for shared investments.

What is a Joint Life Annuity?

A joint life annuity is an annuity that continues to pay out to a spouse or partner after the death of the original annuitant.

What is Joint Life Insurance?

Joint life insurance is a policy that covers two individuals, typically business partners, and pays out upon the death of the first insured person.

What is a Key Facts Illustration (KFI)?

A Key Facts Illustration is a document that outlines the key features and costs of an equity release plan, providing essential information for borrowers.

What is a Key Features Document (KFD)?

A key features document provides information about a pension product, including its key features, risks, and charges.

Keyperson is a term that is used to describe a key person within a business whose skills, knowledge, or leadership are essential to its ongoing success.

What is Keyperson Insurance?

Keyperson insurance is a policy that compensates a business for financial losses resulting from the death or disability of a key employee.

What is Legal Expenses Insurance?

Legal expenses insurance provides coverage for legal costs incurred in defending the business against certain legal actions.

A to Z glossary for Financial Planning in the UK

Introducing our A to Z Glossary for Financial Planning in the UK. The world of financial planning can be confusing, which is why we have designed a comprehensive guide to demystify key terms across pensions, business protection, and equity release. Whether you're securing your business, planning for retirement, or exploring ways to access property equity, understanding these terms is crucial. This glossary aims to provide clear, concise definitions to help you navigate the complexities of financial planning with confidence. Dive in to enhance your knowledge and make informed decisions about your financial future

What are Adhoc Equity Release payments?: Some equity release products allow borrowers to make monthly interest payments, helping to control the growth of the overall debt.
What is the Annual Pension Allowance?: The annual pension allowance is the maximum amount of money that can be contributed to a pension scheme in a tax year without incurring tax penalties.
What is an Annuity?: An annuity is a financial product that provides a series of payments made at equal intervals. Annuities are often used as a way to provide a steady income stream during retirement.
What is Asset Allocation?: Asset allocation is the distribution of investments among different asset classes, such as stocks, bonds, and cash, to optimise risk and return.
What is an Assignment?: An assignment is the transfer of rights or benefits from one party to another. In business protection insurance, a policy may be assigned to a lender as collateral for a loan.
What is a Beneficiary?: A beneficiary is the person or entity that you legally designate to receive the benefits from your financial products. In relation to a pension, beneficiary is a person or entity designated to receive the benefits of a pension plan in the event of the pension holder's death. In relation to business or personal protection, it is the person/peopl designated to receive the benefit from your policy if you pass away.
What are Bonds?: Bonds are debt securities that investors buy from companies or governments in exchange for periodic interest payments and the return of the bond's face value at maturity.
What is Business Continuity Insurance?: Business continuity insurance is coverage that helps a business recover and continue operations after a covered loss, such as property damage or a key person's death.
What are Capital Gains?: Capital gains are the profits earned from the sale of investments, such as stocks or real estate.
What is a Commercial Property SIPP?: A commercial property SIPP is a pension designed to hold commercial property e.g. shops, restaurants offices or industrial units. The property is sometimes leased back to the pension holders own business.
What is Compound Interest?: Compound Interest is interest that is calculated not only on the initial amount borrowed but also on the accumulated interest from previous periods.
What is Critical Illness Cover?: Critical Illness cover is a type of insurance that provides a tax-free lump-sum payment if the insured person is diagnosed with a critical illness specified in the policy.
What is a Defined Benefit (DB) Pension Scheme?: A defined benefit pension scheme is a pension plan where the benefits are based on a formula, usually involving the employee's salary and years of service.
What is a Defined Contribution (DC) Pension Scheme?: A Defined Contribution (DC) Pension Scheme is a pension plan where the pension size depends on the contributions made and the investment performance of those contributions.
What is diversification?: Diversification refers to spreading investments across different assets or asset classes to reduce risk.
What is Equity Release Downsize Protection?: Downsize protection is a feature that allows individuals to move to a smaller property without incurring early repayment charges on their equity release plan. If the new property is not suitable based on the lenders criteria.
What is an Employee Pension Scheme (EPS)?: An employee Pension scheme is a pension scheme in the UK that provides retirement benefits for employees.
What is an Equity Release Age Band?: Age band refers to the specific age group that qualifies for equity release products. Eligibility normally starts around age 55.
Who are the Equity Release Council?: The Equity Release Council are a trade body in the UK that represents providers of equity release products and aims to protect the interests of consumers. Financial Planning by TaxAssist is a member of the Equity Release Council.
What is Equity Release Drawdown?: Drawdown is a method of receiving equity release funds in instalments rather than as a single lump sum.
What is an Excess?: An excess is the amount that the insured must pay before the insurance coverage takes effect.
What are Exchange-Traded Fund (ETF)?: An exchange traded fund is an investment fund that is traded on stock exchanges, similar to stocks. ETFs often track an index, commodity, or a group of assets.
What are Exclusions?: Exclusions are specific events or circumstances that are not covered by the insurance policy. It's crucial for businesses to understand the exclusions in their policies.
What are Exit Fees / Early repayment charges?: Exit Fees / Early repayment charges are charges incurred when the equity release plan is terminated, either due to repayment or death. In addition Early repayment charges may be payable during a defined period if you pay off the amount in full.
What is a Final Salary Pension Scheme?: What is a Final Salary Pension Scheme? A final salary pension scheme is another term for a Defined Benefit Pension Scheme where the pension is based on the employee’s final salary.
What is Financial Underwriting?: Financial underwriting is the process of evaluating the financial status of a business to determine the appropriate level of insurance coverage.
What is a Fixed Interest Rate in Equity Release?: A fixed interest rate is an interest rate that remains constant throughout the equity release period, providing predictability for borrowers.
What is Fixed Protection?: Fixed protection is a way of fixing your lifetime pension allowance when the lifetime pension allowance was reduced.
What are Futures?: Futures are financial contracts that obligate the buyer to purchase, or the seller to sell, an asset at a predetermined future date and price.
What is a Gilt?: What is a Gilt? A gilt is a British government bond.
What is Group Life Insurance?: Group life insurance is coverage that provides a lump sum or ongoing payments to employees' beneficiaries in the event of their death while employed by the business.
What is a Guaranteed Inheritance?: Some equity release plans allow for a guaranteed portion of the property value to be passed on as an inheritance.
What is a Guaranteed Minimum Pension (GMP)?: A guaranteed minimum pension is the minimum pension benefit that a Defined Benefit Pension Scheme must provide for individuals who were contracted out of the State Earnings-Related Pension Scheme (SERPS).
What is a Hedge Fund?: A hedge fund is a pooled investment fund that employs various strategies to earn returns for its investors.
What is a Home Reversion Plan?: A home reversion plan is a type of equity release where the homeowner sells part or all of their property in exchange for a lump sum or regular payments and the right to live in the property until death.
What is Income Drawdown?: Income drawdown is a method of using a pension fund to provide retirement income by leaving the money invested and drawing an income from it.
What is an Indemnity?: An indemnity is the principle of compensation for a loss or damage. Business protection insurance aims to indemnify the insured party for covered losses.
What is Independent legal advice for Equity Release?: Independent legal advice for Equity Release is legal advice that any adult occupiers need to ensure they are fully aware of the risks if not part of the equity release plan.
What is an Index-Linked Annuity?: An index-linked annuity is an annuity that provides payments linked to inflation, ensuring that retirement income keeps pace with the rising cost of living.
What is an Individual Savings Account (ISA)?: An individual Savings Account is a tax-efficient savings or investment account available to UK residents.
What is an Investment Key Performance Indicator (KPI)?: KPIs are a series of metrics used to evaluate the success of an investment or a portfolio.
What is an Investment Portfolio?: An investment portfolio is a collection of investments held by an individual or institution.
What is Joint Equity Release?: Joint Equity release are plans that involve two individuals, often a couple, allowing both to release equity from their property.
What is a Joint Investment Account?: A Joint Investment Account is an account owned by two or more individuals, often used for shared investments.
What is a Joint Life Annuity?: A joint life annuity is an annuity that continues to pay out to a spouse or partner after the death of the original annuitant.
What is Joint Life Insurance?: Joint life insurance is a policy that covers two individuals, typically business partners, and pays out upon the death of the first insured person.
What is a Key Facts Illustration (KFI)?: A Key Facts Illustration is a document that outlines the key features and costs of an equity release plan, providing essential information for borrowers.
What is a Key Features Document (KFD)?: A key features document provides information about a pension product, including its key features, risks, and charges.
What is a Keyperson?: Keyperson is a term that is used to describe a key person within a business whose skills, knowledge, or leadership are essential to its ongoing success.
What is Keyperson Insurance?: Keyperson insurance is a policy that compensates a business for financial losses resulting from the death or disability of a key employee.
What is Legal Expenses Insurance?: Legal expenses insurance provides coverage for legal costs incurred in defending the business against certain legal actions.
What is a Lifetime Mortgage?: A lifetime mortgage is a type of equity release scheme where homeowners, typically retirees, can borrow against the value of their property while retaining the right to live in it until death or the need to move into long-term care.
What is the Lifetime Allowance?: The lifetime allowance is the maximum amount of pension savings an individual can build up without incurring additional tax when benefits are taken.
What is Liquidity?: Liquidity is the ease with which an investment can be bought or sold in the market.
What is Loan to Value (LTV)?: Loan to value is the ratio of the loan amount to the appraised value of the property. It is a crucial factor in determining the amount of equity that can be released.
What is a Maturity Date?: A maturity date is the date when a life insurance policy matures, and the death benefit is paid out.
What is a Minimum Income Requirement (MIR)?: The minimum income requirement is the minimum level of secure pension income required to access flexible drawdown.
What is the Money Purchase Annual Allowance (MPAA)?: The money purchase annual allowance is the lower level of annual pension allowance for people who have already accessed their pension in certain ways.
What is a Mutual Fund?: A mutual fund is an investment vehicle that pools money from many investors to invest in a diversified portfolio of stocks, bonds, or other securities.
What is a Negative Equity Guarantee?: A negative equity guarantee is a feature that ensures the borrower will not owe more than the value of their home, even if property values decrease.
What is Nest (National Employment Savings Trust)?: Nest is a government-backed workplace pension scheme designed to facilitate automatic enrolment.
What is Net Asset Value (NAV)?: NAV is the total value of a fund's assets minus its liabilities, divided by the number of shares outstanding.
What is a Non-Disclosure Agreement (NDA)?: An Non-Disclosure Agreement (NDA) is a legal contract that ensures confidentiality between parties, often used when discussing sensitive business information during the underwriting process. This is where if clients do not disclose relevant information their policy could be invalid so they must answer honestly and accurately.
What is an Occupational Pension Scheme?: An occupational pension scheme is established by an employer for the benefit of its employees.
What is an Open Market Option?: An open market option allows homeowners to shop around for the best annuity or equity release product rather than being tied to their provider.
What are Options?: Options are financial derivatives that give the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price before or at the option's expiration date.
What is Own Occupation Definition?: Own Occupation definition is a provision in disability insurance that considers the insured unable to work if they cannot perform the duties of their specific occupation. Also applies for income protection so for instance if the person claiming could not perform their role they would qualify or the cover to pay out.
What is a Pension Commencement Lump Sum (PCLS)?: A Pension Commencement Lump Sum is a tax-free lump sum (usually but not always 25%) that can be taken from a pension fund when it comes into payment.
What are (pension) Contributions?: Pension contributions are regular or ‘one-off’ payments made by individuals or employers into a pension fund to build up savings for retirement.
What is Pension Credit?: Pension credit is a means-tested benefit for retirees on low income.
What are Premiums?: Premiums are regular payments made by the insured to the insurance company in exchange for coverage.
What is a Property Valuation in Equity Release?: A property valuation is the process of determining the current market value of the property, which is essential in calculating the amount of equity that can be released.
What is a Purchased Life Annuity?: A purchased life annuity is an annuity (income stream) purchased from an insurer that will pay out a periodic income stream (monthly, quarterly or yearly) until the death of the holder. Part of the ‘income’ is deemed to be capital so is not subject to income tax.
What is a Qualifying Event?: A qualifying event is an event or circumstance that triggers coverage or benefits under an insurance policy.
What is a Qualifying Property for Equity Release?: Specifies the types of properties that are eligible for equity release, typically including standard houses and flats.
What is a Qualifying Recognised Overseas Pension Scheme (QROPS)?: A Qualifying Recognised Overseas Pension Scheme is an overseas pension scheme that meets specific requirements set by HM Revenue and Customs.
What is Reinstatement?: Reinstatement is the restoration of an insurance policy that has lapsed due to non-payment of premiums.
What is Relevant Life?: Relevant life insurance is a policy designed for small businesses to provide tax-efficient life cover for employees, typically key personnel, offering death-in-service benefits without incurring inheritance tax.
What is a Repayment Charge in relation to Equity Release?: A repayment charge is a fee charged if the equity release plan is repaid early, usually within a specified period.
What is a Retirement Annuity Contract (RAC)?: A Retirement Annuity Contract is a type of personal pension plan that existed before the introduction of personal pensions.
What is a Retirement Interest-Only Mortgage?: A retirement interest-only mortgage is a type of equity release where the homeowner pays the interest on the loan, preventing the debt from increasing over time.
What is Risk Tolerance?: Risk tolerance is an investor's ability to handle the potential losses associated with their investments.
What is Shareholder Protection Insurance?: Shareholder Protection Insurance is a policy that provides funds for the remaining shareholders to buy the shares of a deceased or critically ill shareholder.
What is a SIPP (Self-Invested Personal Pension)?: A SIPP is a type of personal pension in the UK that allows individuals to make investment decisions on their pension funds, offering greater flexibility and control over investment choices.
What is a SSAS?: A small self-administered scheme often used by business owners to hold specific assets in the pension that would not normally be allowed. This can include commercial property or other business assets.
What is the State Pension?: The state pension is a regular payment from the government that most people can claim when they reach State Pension age.
What are Stocks?: Stocks are ownership shares in a company, representing a claim on part of the company’s assets and earnings.
What is a Tapered Annual Allowance?: A Tapered Annual Allowance is a reduced annual pension allowance for high earners (typically £200,000 per annum plus but amount has varied over the years).
What is Tax-Efficient Investing?: Tax-Efficient Investing aims to minimise taxes on investment gains.
What is Tenure in relation to Equity Release?: Tenure refers to the type of equity release product chosen, such as a lifetime mortgage or home reversion plan. Tenure usually relates to a property being either Freehold, Leasehold, or Feudal in Scotland.
What is Terminal Illness Benefit?: Terminal illness benefit is a feature that allows the insured to receive a portion of the death benefit if diagnosed with a terminal illness which is usually under provider definitions where the client is given less than 12 months to live.
What is a Transfer Value?: Transfer value is the cash value assigned to a pension when it is transferred from one scheme to another.
What is Underwriting?: Underwriting is the process of evaluating and assessing risks to determine the insurability and premium rates for a policy.
What is Equity Release Underwriting?: Underwriting is the process by which an equity release provider assesses the risk and determines the terms of the loan.
What is a Unit Trust?: A unit trust is a type of investment fund where investors pool their money to invest in a diversified portfolio of stocks and bonds.
What is an Unsecured Pension (USP)?: An Unsecured Pension is the term used for income drawdown before the introduction of flexi-access drawdown.
What is a Valuation Clause?: A valuation clause specifies the method used to determine the value of a business for insurance purposes.
What is Venture Capital?: Venture capital is funding provided by investors to startup companies and small businesses that have high growth potential.
What are Voluntary Contributions?: Voluntary contributions are the additional payments made by individuals into their pension scheme above the normal contribution level.
What is a Voluntary Repayment in relation to Equity Release?: Some equity release plans allow borrowers to make voluntary repayments to reduce the overall debt.
What is a Waiting Period?: A waiting period is the time between the occurrence of an insured event and the commencement of benefit payments.
What are Warrants?: Warrants are financial instruments that give the holder the right, but not the obligation, to buy or sell an underlying security at a specific price before expiration.
What is a With-Profits Pension?: A With-Profits Pension is a type of pension plan where the returns are linked to the performance of a with-profits fund.
What is a Yield?: Yield is the income generated by an investment, usually expressed as a percentage of its market price.
What is a Zero-Coupon Bond?: A Zero-Coupon Bond pays no interest but is issued at a discount to its face value, with the interest earned being the difference between the purchase price and the face value at maturity.
What is a Zone of Flexibility?: Some equity release plans offer flexibility in features like repayments, enabling borrowers to adapt the plan to their changing needs.
What is a Zone Pension?: A zone pension is a type of pension plan that allows individuals to manage their own investments within a specific "zone."

Insurance policies have no cash in value at any time. Cover will cease if premiums lapse. Please note that the Financial Conduct Authority does not regulate will writing.

Equity Release - this form of lending is most suitable for those over 65, however, it’s possible to do this if you are over 55. It is important to understand that these are lifetime mortgages and to understand their features and risks, you will need to have a personalised illustration. HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. Please note that the Financial Conduct Authority does not regulate tax planning.

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A to Z glossary for Financial Planning in the UK

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