6th April 2006 is the date when many of the existing pension rules were simplified or abolished.
This can be included as part of your home contents insurance if you pay an additional premium. It will pay out if you accidentally damage your furniture or possessions.
If you’re a member of a final salary pension scheme (otherwise called a ‘defined benefit’ scheme), the accrual rate is the rate at which you build up your pension. An accrual rate of 1/60th means you build up a pension equivalent to 1/60th of your final salary for each year that you’re a member of the scheme. An accrual rate of 1/80th is less generous.
A term used by medical insurance companies to describe short-term illnesses that they will cover the treatment of. Most insurers describe it as an illness, disease or injury that’s likely to respond quickly to treatment and where you’re able to be returned to the state of health you were in before you became ill. Unfortunately, it leaves room for lots of grey areas.
If you take out a credit or store card you can ask for an extra card for a second person (such as your husband or partner). He or she will be an ‘additional cardholder’, but they won’t be responsible – in law – for paying off any of the debts they run up. That remains your responsibility as the person who signed the credit agreement.
ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVCs)
If you’re a member of an occupational pension scheme, your employer will normally let you pay extra money into your pension through an AVC. Some employers will match any payments you make into an AVC (although not all do) and others will negotiate lower charges.
AER (ANNUAL EQUIVALENT RATE)
The rate of interest you would receive on an account if interest was paid annually. Some savings accounts pay interest monthly (or more frequently than once a year) and the AER helps you compare accounts that add interest at different frequencies.
Credit cards that support a charity or organisation (such as a football team or trades union). A donation is normally made when you take out the card and the charity receives a small ongoing donation linked to the amount you spend.
Mortgage lenders take into account how much you earn and how much you have to pay each month to cover debt payments and/or commitments such as maintenance or child support, regular bills etc. when calculating how much to lend you.
An additional personal tax allowance for people aged 65 and over. There are two bands; one if you’re aged 65-74 and another for those aged 75 and above. This is the amount of income you can earn every year without paying tax.
AGREEMENT IN PRINCIPLE
A document that tells you how much a particular mortgage lender would be prepared to lend you based on information about your income etc. Neither you nor the lender is committed to the mortgage at this stage as a mortgage lender would want information about the property you are planning to buy (and to carry out additional checks on you) before agreeing the mortgage.
An annual limit set by HM Revenue & Customs each year on how much you can pay into your pension. It is well over £200,000 and rising every year.
ANNUAL MANAGEMENT CHARGE (AMC)
If you buy an investment product, such as a pooled investment fund or pension, you will normally have to pay an annual management charge. This can vary widely from 0.2% to 2.5% and above. A low annual management charge doesn’t always mean you’re getting the best value, but there are plenty of funds with high annual management charges that are also badly managed.
ANNUAL TRAVEL INSURANCE
This covers you for holidays you take throughout the year. It’s often better value than insurance for a single trip if you go on holiday twice a year or more.
The easiest way to think about this is as a policy that converts your pension lump sum into an income. Most annuities are designed to pay you an income for the rest of your life, although you can take out one that only pays for a specified period (called a ‘short-term annuity’).
If you’re converting your pension fund into a regular monthly income, the amount you get each year will depend on the annuity rate. The higher the rate, the more you will receive. Its level is based on the return generated by specific government bonds.
Some income protection insurers will only pay your claim if your illness means you cannot carry out any work at all (i.e. you cannot perform ‘any occupation’, no matter what it is). This sets the hurdle high if you want to make a successful claim. It means you have to fail a task-based test before the policy will pay out. Avoid this type of policy at all costs.
ANY SUITED FOR/SUITABLE OCCUPATION
Some income protection insurers will pay your claim if you’re injured or ill and cannot do your own job or any related job for which your experience and training make you suitable. These policies are better than those that only pay out if you cannot perform any occupation.
APR (ANNUAL PERCENTAGE RATE)
The rate of interest you will be charged on a loan or debt. It takes into account extra charges that you have to pay, such as set-up costs. Lenders have to tell you the APR before you sign a credit or loan agreeement.
Many mortgage lenders impose an arrangement fee when you take out a mortgage. It can range from a flat fee of a few hundred pounds to over a thousand pounds or it can be calculated as a percentage of the mortgage.
This can either mean things you own (such as your home, car, money you have in the bank, jewellery etc.) or a type of investment. If it’s used in connection with investments, it normally means shares, bonds, cash, property etc.
The way your investments are spread across different types of investment – or asset classes – to reduce your risk. You may decide to split your investments so that a third goes into shares or share-based funds, a third into bonds and a third is held in savings accounts or cash-based funds.
Shares, bonds, property and cash make up different asset classes and if you invest in different asset classes, you are spreading your money around (normally to reduce risk).
Another word for insurance when used to in connection with life insurance policies.
A tax-free benefit that is not means tested and which is payable to those aged 65 and over who need help with personal care because they are physically or mentally disabled.
A new type of work-based pension planned for 2012 onwards, will automatically enrol anyone who qualifies for the scheme. You can always opt out afterwards, but the idea of auto-enrolment is that it stops those who don’t join a pension scheme purely because they don’t get round to filling in their pension forms from losing out.