Glossary

A-Day
6th April 2006 became known as A-Day, as it was the day changes to pensions came into effect. These changes and reforms were introduced by the government as part of the 2006 Finance Act in order to make saving for retirement more straightforward.

Actuary
An expert on pension scheme assets and liabilities who ensures that enough is being paid into a pension to pay out when it is due.

Accumulation and Maintenance Trust
A trust made during the lifetime of the settler to benefit young beneficiaries, who will become entitled to the fund held in the trust no later than the age of 25. Following changes in the law in 2006, any Accumulation and Maintenance Trusts not altered before April 2008 to become 18-25 trusts will be classed as relevant property trusts and become subject to proportionate charges.

Additional Voluntary Contributions (AVCs)
It is now compulsory, since April 2006, for companies to offer employees the chance to invest AVCs into their occupational scheme, creating in effect another pension. An AVC arrangement run through your employer’s pension scheme is known as an ‘in-house’ AVC scheme, and as the administration costs are usually borne by the company, it tends to be cheaper than topping up pensions through other means.

Adverse Credit
If a borrower has a poor credit history, such as mortgage, loan or credit card arrears, lenders may well enter a default against their name with Credit Reference Agencies. The borrower is then said to have an Adverse Credit record.

Alternative Investment Market (AIM)
The London Stock Exchange’s international market for smaller growing companies.

Alternatively Secured Pension
This is a form of income drawdown, which means that instead of buying an annuity, a person can opt to continue to invest their pension savings and draw an income from their fund within a minimum and maximum percentage of the funds.

APR (Annual Percentage Rate)
The term originates from the Consumer Credit Act where the government were attempting to provide benchmarking and comparisons of different types of borrowing. A borrower must be provided with the APR when the lender is quoting the total cost of the borrowing as an interest rate.

Annual Allowance
You can make unlimited contributions to a pension scheme; however, there is a limit to the amount that attracts tax relief. This is your Annual Allowance.

Annuity
This is a type of insurance policy that converts a lump sum into a taxable regular income. With a few exceptions, by the time you reach 75, you must buy an annuity if you have a pension and have built up a lump sum with your provider.

Appointee
Someone, usually a relative or close friend, appointed by the Secretary of State for Work and Pensions (through the local social security office) who makes claims and receives benefit on behalf of a recipient of long term care.

Approved Pension Arrangements
An occupational or personal scheme that is approved by HM Revenue and Customs for tax purposes.

Arrangement Fee
In return for your lender providing you with a mortgage, you pay them a fee, which is usually paid on completion of the agreement or at the start of the application.

Asset
Any possession which is of value.

Asset Class
A grouping of investments which have similar characteristics or features. Broadly speaking, the classes would be: cash; stocks; bonds and others, which include property and commodities etc.

AST (Assured Shorthold Tenancy)
An assured shorthold tenancy is a kind of assured tenancy which offers the landlord a guaranteed right to repossess his property at the end of the term. In fact, it does not necessarily have to be ‘short’; assured shorthold tenancies set up after 28 February 1997 can be for any length of time the landlord wishes to offer. The assured shorthold has the following important features:
•    It is now the automatic or default form of tenancy for most residential tenancies
•    The landlord has a right to get his property back at the end of the tenancy (although a court can still not award possession during the first six months if a tenant refuses to leave).

Assured Tenancy
Tenancy that gives security of tenure but at open market (fluctuating) rent rate. Under this arrangement the (1) landlord cannot regain possession of the property except under certain statutory provisions, (2) may apply to raise the rent to current market level, within certain limitations, and (3) tenant cannot assign the tenancy to a third party without landlord’s approval but (upon the tenants death) his or her spouse may continue the tenancy. Also called protected tenancy or regulated tenancy.

Attendance Allowance (AA)
This is a non means tested, tax free benefit for who is over 65 and requires help to look after themselves. There are two levels: a higher level if you are in need of 24 hour care and a lower level if you are in need of either care during the day or during the night.

Bridging Loan / Finance
A short term loan that can enable the purchase of one property before the sale of another, to release funds for the purchase. It is recommended that you consult a professional before taking out this kind of loan or finance.

Brokers’ Fee
A fee charged by an intermediary or adviser to arrange the most suitable mortgage for a buyer.

Buildings Insurance
Non compulsory, but nevertheless advisable, insurance that can be taken out to insure both the structure and / or contents of a building. All lenders will insist on the buildings being covered for at least the value of the loan.

Buy To Let
As the name suggests, a mortgage for those buying property to let. The decision on whether or not a borrower is able to repay this mortgage is based on the projected rental income from the property rather than personal income.

Capital Gains Tax
A tax on any gain you make on your capital, over a certain amount, and on certain assets. If, when you sell or give away an asset it has increased in value, you may be taxable on the gain, or the profit. This doesn’t apply when you sell personal belongings worth £10,100 or less or, in most cases, your main residence.

Carer’s Allowance
This is a taxable benefit which may be awarded to you if you are over 16 and caring for a person for at least 35 hours a week who is in receipt of certain benefits such as Attendance Allowance and Disability Living Allowance.

Care assessment
An assessment carried out by the local authority to determine what your care needs are. This is not based on your financial position in any way. It does, however, play a major role in the funding process.

Care Plan
This is a written statement of your individual needs that have been identified during your Care Assessment It details what support you should get, why, when, and details of who should provide it. You are entitled to be given a copy of your care plan. You should not sign and date it until you are happy with it. If you are self-funding your care, you may not be given a copy of your care plan, but you can still request a copy of the statement of your needs from social services.

CCJ (County Court Judgement)
A judgement reached in the county court related to non payment of debts. If the debt is paid, a note can be put into the debtor’s credit records to state that the CCJ has been satisfied.

Chain
The ‘link’ of buyers and sellers involved in the purchase and sale of a number of properties. The seller of one property becomes the buyer of the next in the chain and so on.

Chargeable Lifetime Transfer
A transfer of assets made during a settlor’s lifetime that is liable to an Inheritance Tax charge.

Charge
Usual term for a Legal Charge or Mortgage that a lender has on the property for which they have lent money to purchase.

Charging for Residential care Guidelines (CRAG)
These guidelines were issued in 2005 under section 7 of the Local Authority Social Services Act, 1970. They are government produced, update each April and available on the Department of Health website: www.dh.gov.uk

Collective Investment Vehicle
Allows investors to pool funds to buy assets collectively. They are usually managed by a fund management company and so have charges relating to this. This fee may be a percentage of funds or linked to performance. There may also be other charges.

Completion
This is the stage in a property transaction when the purchase and sale has been completed. The buyer has paid over the money and the seller hands over the keys to the property.

Contracted Out
A person is said to have done this when they choose not to take part in the State Second Pension scheme.

Conveyance
Generally undertaken by a solicitor or licensed conveyancer, this is the legal process through which ownership of the property is transferred from seller to buyer.

Corporate Bonds
Corporate bonds are similar to gilt, a corporate bond is a loan to a company. Like gilts, they can be traded on the stock market and their value can rise and fall.

Court of Protection
This is a Superior Court of Record that was created in 2005 as part of the Mental Capacity Act. It has jurisdiction over people who lack the mental capacity to manage their own affairs, and is responsible for registering Enduring and Lasting Powers of Attorney amongst other things. It used to be part of the Office of the Public Guardian but is now a separate institution.

Death Benefits
Paid to a pension scheme member’s dependents when the member dies. It may be a regular pension income or a one off lump sum payment. You will usually be required to complete an Expression of Will form when setting up a SIPP so it is clear who your fund will be paid to in the event of your death.

Debenture
A document either creating or acknowledging a debt.
Deferred Payments Agreement – An agreement by which your local authority effectively gives you an interest free loan to pay for your care fees. They are not obliged to do this, however, and this may involve a legal charge against your property.

Department for Work and Pensions (DWP)
This is the government department responsible for welfare and employment issues, formerly known as the Department for Social Security until 2001, and prior to that as the Department for Health and Social Security.

Derivatives
A financial contract with a value linked to the expected future price movement of an asset it is linked to, for example, currency. Common derivatives, such as futures and options, are traded on the open market. They can be traded over the counter or through specialist exchanges.

Direct Payments
These are payments made directly to individuals who have been assessed as needing social support. They are paid instead of services provided by social services and are designed to give individuals more control over their lives and how their care is delivered.

Disability Living Allowance (DLA)
This is a tax free benefit, and may be paid to you if you are under 65, have a physical or mental disability which means you have difficulty caring for yourself and / or walking. If you are over 65 you may be able to claim Attendance Allowance.

Disregarded Capital

When you are financially assessed for your contribution towards care costs, certain forms of capital will be ignored. These include funds administered by a court, such as compensation payments. The value of certain types of investment bond will also be ignored. CRAG lists these.

Early Redemption Fee
If you decide to sell or remortgage your property, you will be redeeming your mortgage early. Most lenders charge a fee for this, especially during a fixed, discounted or capped rate term.

Equity
A term generally used to describe the value in a property that is due to the owner. To calculate the equity simply subtract the amount of the outstanding mortgage from the value of the property. The remainder is the equity.

Equity Release Schemes
These take the form of either a lifetime mortgage, which can come in different versions, or a home reversion.

Enduring Power of Attorney (EPA)
Before October 2007 when the Mental Capacity Act of 2005 came into effect, people could appoint someone to act on their behalf to manage their finances if they were no longer able to do so.

Exchange of Contracts
The stage in a property transaction when the purchaser and the seller legally agree to the purchase and sale of the property. This is usually evidenced by a written agreement setting out the terms between the buyer and seller. Usually a 10% deposit is paid when contracts are exchanged.

Exchange Traded Funds
Like Index Tracker Funds, they can mirror the market indices, but via a share rather than a fund. They are shares that are traded on the stock exchange and the underlying assets mirror the price movements of the underlying share portfolio of an index, such as the FTSE100. To buy them you pay a stockbroker’s commission but no stamp duty.

Fair Access to Care Services
2003 Government publication giving guidance on the eligibility criteria for adult social care services.

Financial Assessment
Following on from a care assessment, if it is determined that you require care, the local authority will assess your finances and decide how your fees will be paid and by whom.

Financial Services Authority (FSA)
The government body that regulates the financial services industry in the UK.

Financial Services Compensation Scheme (FSCS)
If an authorised financial firm, such as a bank or building society, becomes insolvent or ceases trading, then the FSCS may be able to provide compensation. At present the limits set are £50,000 per person per institution.

Financial Times Stock Exchange (FTSE)
The FTSE 100 or ‘Footsie’ as it is colloquially known is a share index of the 100 most highly capitalised UK companies listed on the London Stock Exchange. It began as a joint venture between the Financial Times and the London Stock Exchange.

Fixed Rate
A type of interest rate used commonly with property mortgages. Purchasers may sometimes be more comfortable with a Fixed Interest rate for their mortgage rather than an interest rate that is subject to movement from time to time. Typically a Fixed rate can be negotiated for between 1 and 10 years although some lenders do offer longer periods.

Freehold
Typically refers to the title for property where the title is held for an indefinite period under absolute rights of ownership. In contrast, a leasehold is held for a stated period only and under specified terms and conditions.

Fund Supermarket
A company that allows you to buy and sell from a wide range of investment funds from different fund management companies in one place. They usually offer favourable terms.

Future
A contract between two parties to buy or sell a specified asset at a specified future date, at the price on the day the contract is agreed. It is a form of security, although it is not a direct security like a bond. Like options, they are derivatives.

Gazumping
If you are in the process of buying a property and have made an offer, and the sellers then accept a different, usually higher, offer, you have been gazumped.

Gift with Reservation of Benefit
If you give away an asset, such as a house, but continue to receive benefit from it, i.e. you continue to live in it, then it is likely to be considered as a Gift with Reservation of Benefit, meaning that it is not considered as a Potentially Exempt Transfer and will be liable for Inheritance Tax, even if the gift was given more than seven years prior to death. Other charges may also apply.

Gilts
The name given to bonds issued by the UK government as well as the governments of Ireland and South Africa. In effect, they are a government debt as you are lending money to the government. The holder of a gilt (called this because of the historically gilded edge of the certificates) receives a payment every six months until maturity when the final payment is received and the original capital is returned. Since 2006 all newly issued gilts are called treasury gilts. The payment, or ‘coupon’, reflects the market rate of interest at the time the gilt was issued.

Government Actuary’s Department (GAD)
The department providing actuarial advice to the UK government and other relevant UK public bodies on policy related to pensions and other actuarial matters.

Guaranteed Equity Bonds
Bonds invested in a number of stocks that run for a set period and usually promise to return the amount invested plus a set amount of growth of capital.

Guaranteed Minimum Pension (GMP)
The minimum amount of pension an occupational pension scheme has to provide to members who contracted out of SERPS between 1978 and 1997.

Hedge Funds
Originally designed to protect against risk, these are investment funds that aim to make money, whatever the financial climate. They can be billions of pounds in size. The name is really an umbrella term to cover a number of investment strategies and risk levels. They are not regulated by the FSA.

Her Majesty’s Revenue and Customs (HMRC)
Created from the merging of the Inland Revenue and Her Majesty’s Customs and Excise in 2005.

Home Reversion Schemes
A form of Equity Release. This is where a company purchases your property, or arranges for someone else to do so. From the proceeds of the sale, you receive a cash lump sum, an income, or both. You can choose to either invest the lump sum yourself or some schemes may do this for you. Typically you will receive between 20 and 60% of the full market value of your house.

Income Drawdown
This is also known as an unsecured pension. It is only available to pension scheme members who are under 75 and allows them to invest in a fund while drawing a limited income.

Index Tracker Fund
A collective investment vehicle that ‘tracks’ the movement of a particular index, such as the FTSE100.

Inheritance Tax (IHT)
This is tax paid at a flat rate of 40% on estates valued over a certain amount; currently £325,000. Assets passed between spouses are exempt, however.

Interest In Possession Trust
Sometimes known as ‘life interest trusts’, these give one or more beneficiaries the right to receive income from the trust, and sometimes the right to receive capital at the discretion of the Trustees.

Interest Only Mortgage
Where the borrower is only required to pay the interest on the mortgage for the term of it, and is then expected to pay the full mortgage at the end of the term through funds gained either from the sale of the property or other assets, an investment policy or other means.

Intermediary
A mortgage broker or adviser who finds and arranges a mortgage on behalf of a borrower.

Intestate
If someone dies without making a Will, they are described as having died intestate.

Investment Bonds
Sold by life insurance companies, these are ‘wrappers’, allowing you to invest in a variety of funds managed by a professional investment manager. They can be measured by charges, tax and investment performance.

Investment Company with Variable Capital (ICVC)
Another name for an Open Ended Investment Company.

Investment Trusts
A form of collective investment. It has closed end funds so there is a limit to the number of shares it can sell and they are constituted as public limited companies. If demand for shares exceeds supply, the response may be a rise in the share price.
Lasting Power of Attorney (LPA) – Lasting Powers of Attorney were created in October 2007 and replaced Enduring Powers of Attorney. It is a legal document, appointing someone you trust to make decisions on your behalf. It does not cost anything to create, but there is a fee to register with the Office of the Public Guardian to give the document legal standing. There are two types that can be created: for property and affairs and for personal welfare.

Leasehold
Typically refers to the title for property where the title is held for a stated period only and under specified terms and conditions.

Liability
This relates particularly to commercial mortgages when liability for the repayment of the loan depends on the legal structure of the business. If a business is owned by one person, they are personally liable for the mortgage debt, and if the business defaults, personal assets may be seized. Business partners are both liable for debts and the personal assets of both may be at risk. With a limited liability partnership and a limited company, liability falls on the business rather than the individuals. However, a lender may still insist on personal guarantees as a condition of granting the loan.

Liable Relatives Rule
In England, Wales and Scotland, this rule was abolished in 2007. In Northern Ireland, however, your local council can still approach your spouse and ask for contributions to your care costs. No other relatives will be asked. The local council does not though have a legal right to assess your spouse’s income and assets. If they want to make a contribution, the local council must ask him or her to agree to an amount they can afford to pay.

Life Insurance
A type of insurance policy usually taken out to cover loans in the case of death of the borrower.

Lifetime Allowance
If your pension funds exceed the Lifetime Allowance amount, any amount above the allowance limit will be subject to a recovery charge when pension benefits are taken.

Lifetime Gifts
Gifts made during your lifetime, as opposed to being bestowed via a Will after your death.

Lifetime Mortgage
A loan secured against a property; given as a cash lump sum or as an income. This arrangement means you do not have to vacate your property and is one type of equity release scheme. The main types of lifetime mortgage are: roll-up mortgage, where the loan you get is either a lump sum or a regular income, with fixed or variable interest added monthly or yearly, interest is not paid until your home is sold; interest only mortgage, you get a lump sum loan and pay interest either at a fixed or variable rate, and the amount you originally borrowed is paid back when your home is sold; fixed repayment mortgage which is a cash lump sum loan, no interest is charged but you agree to pay the lender a higher sum than you borrowed when your home is sold; home income plan which is a cash lump sum loan, used to buy an annuity to give you a regular income, the amount you borrowed is repaid when your home is sold; shared appreciation mortgage (SAM) which is when you agree with the lender that they will take a share in any increase in the value of your home when you sell it, in return for no or very little interest on the loan.

LTV (Loan To Value)
A ratio used to calculate the amount of the mortgage as a percentage of the value of the property. For example, a house valued at £100,000 with a mortgage of £80,000 would mean an LTV of 80%.

Local Government Ombudsman (LGO)
The LGO investigates complaints made about local authorities. It is a free service and aims to investigate complaints fairly and independently.

Long Term Care Bonds
These are investment bonds designed to cover the costs of long term care in old age such as residential home fees or other care fees.

Marginal Tax Rate
The rate of tax paid on your last unit of income which is equal to or higher than the rate of tax paid on your entire income.

Married Couple’s Allowance (MCA)
This is available to couples if one partner was born before 6th April 1935. It is an amount taken off your tax bill, so only of benefit if you pay tax.

Means test
A system of calculating how much you can afford to contribute towards the cost of your care.

Medium Term Investment Product (MTIP)
A type of stakeholder product, such as a Unit Trust that must meet certain standards with regard to charges, flexibility and information provided.

MIG (Mortgage Indemnity Guarantee)
This acts as an insurance policy for the lender and is a one-off payment made when the mortgage is set up. This is usually charged to borrowers with a deposit of less than 10%, but not exclusively.

Mortgage
A loan used to buy a property, when the property itself is used as security against you paying back the loan.

Mortgagee
The company or organisation that lends the money to purchase a property.

Mortgagor
The person taking out the mortgage.

NHS Continuing Health Care
Any resident in a care home whose primary need for care is health based will have the costs of their care met by the NHS. This is described as ‘NHS Continuing Health Care’, and sometimes called ‘fully funded care’.

National Service Framework for Older People
This was created in 2001 with the aim of setting national standards for services to older people in all areas.

Negative Equity
A term generally used to describe the value in a property that is due to the owner. If the value of the property is less than the borrowing outstanding against that property you are said to be in Negative Equity. You owe more than the asset is worth.

Nil Rate Band
The term for the amount you are allowed to inherit, or to pass on to a beneficiary without it incurring any Inheritance Tax charges. Also referred to as the Inheritance Tax Allowance. Anything beyond the Nil Rate Band or threshold, in most circumstances, is liable for Inheritance Tax.

Nil Value
This refers to the value of a property when it is jointly owned, and takes into account the interest of the resident who is being financially assessed for payment of care fees. The value of that person’s interest depends on whether the other owner would be prepared to sell their share in the property or whether anyone would be willing to buy their share. In the case of a jointly owned property, if the other owner is remaining in the property if they are entitled to, this is unlikely. Thus the value of the property is effectively nil.

Non Status
Where a lender may not require income details, or may accept a borrower with some previous history of poor credit.

Notional Capital
As with notional income, if it is decided that you have deliberately deprived yourself of assets in order to avoid paying care home fees, you will be assessed as if you still owned these assets and their value will be taken into consideration.

Notional Income
This is income that the local authority when assessing your means will assume you have, such as income from unclaimed benefits. Also, if you are considered to have deprived yourself of assets and income in order to avoid being liable to pay fees, you will still be assessed as if you have this income.

Nursing Care
If, during your care assessment, you are assessed as needing nursing care, you will get help with your nursing care costs in a home, regardless of your finances. Nursing care is defined as care provided by a registered nurse or doctor.

Occupational Pension
This is a pension scheme run by a company or organisation for the benefit of its employees. In contributory schemes both the employer and the employee contribute to a fund which grows, free of tax, during the savings period. In non-contributory schemes, only the employer contributes. They are only available through employers and are run by pension scheme trustees. There are two types – salary-related (defined benefit) and money purchase (defined contribution). With a defined benefit plan, the amount paid depends on the number of years service and the final salary of the employee. With a defined contribution plan, the amount paid is calculated according to the contributions the member has made.

Office of the Public Guardian
An agency of the Ministry of Justice, whose role is to support the Public Guardian in protecting vulnerable people who lack the capacity to act for themselves from abuse.

Open Ended Investment Companies (OEICs)
These are collective investment vehicles in the form of a company. They have some features of an investment trust and some features of a unit trust. They are able to issue shares on the London Stock Exchange.

Option
A contract between a buyer and a seller giving the buyer the right to buy or sell an asset before the option expires. The underlying asset can be something like property or a security, such as a bond.

Payment Holiday
A pre-arranged period when a borrower makes no repayments.

Pension Benefits
Whatever a member of a pension scheme receives from their pension, which includes any lump sum payments, income and death benefits.

Pension Credit
There are two parts to this; guarantee credit and savings credit. It is means tested and based on your income and capital. Pension credit is to -top up- the incomes of those on a low pension to a guaranteed minimum. Savings credit is available to those over 65.

Personal Expenses Allowance (PEA)
The minimum amount of income you must be left with after paying your care home fees. At present this is set at £21.90 per week in England and £22.00 in Wales.

Personal Loans
Loans approved for an individual rather than a business and that can be used for a variety of purposes subject to lender approval.

Personal Pension Plans
These are available to any UK resident under the age of 75 and can be bought from investment organisations, banks, insurance companies and some retailers. The amount of money that is paid out is dependent upon how much has been paid in, how investments have performed and the annuity rate.

Potentially Exempt Transfer (PET)
This is a gift of either an item or an amount of cash which is made that does not come within your annual gift allowance, and could be potentially liable for Inheritance Tax, if you die within seven years of making it. If, however, you survive for more than seven years, then the value of the gift falls outside your estate.

Primary Care Trust (PCT)
Primary Care Trusts cover all the health services that are your first pot of call when requiring health care, such as your GP, optician or the NHS Direct phone service. All these services are managed by Primary Care Trusts. There are approximately 150 PCTs in England, each covering a different area.

Probate
The process whereby an estate is wound up after death and permission is gained for the deceased’s assets to be distributed to the beneficiaries.

Property Disregard
If your savings are less than (currently) £23,000 but you own your own home, your local authority will disregard the value of your property for 12 weeks from the date you first enter residential care and pay your fees. They will take your income, however, excluding the amount you are entitled to keep for your Personal Expenses Allowance.

Protected Rights
This is a type of pension fund built up by money coming in from the government for anyone who opted out of the State Second Pension. This means that instead of National Insurance contributions coming out of your earnings, an equivalent sum can be redirected to your own private pension.

Purchase Life Annuity
A type of annuity that can be purchased to provide an income for either a set period, or for the rest of a lifetime. They are purchased with a lump sum.

‘Put’ Option
A financial contract between two parties. The buyer of the option, in exchange for a fee, can sell the underlying asset to the seller of the option, at a specified price. They can act as insurance against loss.

Real Estate Investment Trust (REIT)
A company listed on a registered stock exchange that owns and manages property on behalf of shareholders. Once a company is registered as a REIT, they are able to enjoy certain tax breaks and advantages which are passed onto investors. REITs were created in 2007.

Registered Nursing Care Contribution
This is a way of determining whether you require care from a registered nurse, which determines if the NHS will pay the cost of the nursing care that you receive in a home.

Regulated Tenancy
The legal right to live in your accommodation for a period of time. If this is for a fixed period it is known as a fixed term tenancy. If it rolls on a week to week or a month to month basis, it is known as a periodic tenancy. If you moved into the accommodation before 15th January 1989 and you pay rent to a private landlord who does not live in the same building, you are a regulated tenant.

Remortgage
The raising of a mortgage to replace an existing mortgage. This may be because you wish to renegotiate the interest rate you are paying. Alternatively you may be looking to raise more funds.

Residential Care
This is care that is provided by a residential care home, separate from your own home, but does not include nursing care.

Right to Buy
A tenant in a council owned property, for example, may have the right to buy their property at a discount depending on how long they have lived there.

Royal Commission on Long Term Care
This was set up to examine funding options for long term care and made 24 recommendations about this. Guidance following this was published in 2000.

Savings Disregard
When your finances are assessed, up to £5.65 of any savings credit you receive will be ignored if you are single and up to &8.45 will be ignored if you are part of a couple.

Security
An instrument representing financial value, which may have a certificate to ascertain ownership. A bond is a type of debt security. Securities underlie derivatives contracts. They can be traded and have a face value.

Self Certified
When a borrower applies for a mortgage they are usually required to provide proof of income in the form of payslips. For some people, this may be inconvenient or not possible, in which case they can self-certify – a process that involves signing a declaration stating income sources and amounts. However, lenders will charge higher rates on average and less choice of mortgages if a borrower chooses to do this, so it is recommended to avoid this if possible.

Self Invested Personal Pension (SIPP)
A type of private pension that allows the holder more choice and flexibility in terms of investments and drawing of benefits. As with other pensions, tax relief can be claimed on contributions and other allowable assets and investments within the SIPP.

Settlor
A person who makes a settlement, by placing money or assets into a trust for the benefit of beneficiaries.

Share
A share represents a fraction of ownership of a business.

Sharpe Ratio
A ratio measuring how well the return of an asset compensates the investor for the risk taken. It was devised in 1966 by economist William Sharpe.

Sheltered Housing
This is sometimes known as retirement housing and usually comprises a group of flats or bungalows for older people (usually over 55). Most of these developments provide independent, self-contained homes with individual access. There are usually some shared facilities such as a residents’ lounge, a garden and often a laundry. Many also have their own manager or warden who lives on-site or nearby, who will help arrange any services residents need. Properties are usually also linked to a care line or alarm service so that residents can call help if needed.

Small Self-Administered Scheme (SSAS)
This is an occupational pension scheme set up under trust which has fewer than 12 members. Prior to A-Day 2006, they required a professional trustee, known as a pensioneer trustee. This is no longer compulsory, but is usually practised.

Spot price
The market price of an underlying asset.

Stakeholder Pension
This can be taken out by individuals or may be available through an employer. It is different to an occupational pension and has to meet certain government set standards such as low minimum contributions and a cap on charges. Stakeholder Pensions were introduced in 2001 as a way to encourage more long term saving.

Stakeholder Products
Financial products, such as pensions, that have to meet certain government standards in the form of reasonable charges, flexibility and information provided. This does not mean, however, that any product that is a stakeholder product is government recommended.

Stamp Duty
A tax paid by the buyer of a property which is set at different percentages depending on the value of the property. For properties up to £125,000 the rate is 0%, for properties £125,001 to £250,000 it is 1%; for properties worth £250,001 to £500,000 it is 3%; for properties worth £500,001 and more it is 4%.

Standard rate
This refers to the usual rate paid by the local authority to provide a place in a care home.

State Earnings Related Pension Scheme (SERPS)
Between 1978 and 1988 all employees had to contribute to this scheme; after this time it became possible to opt out, and in 2002 it was replaced by the State Second Pension, which is essentially the same, but provides more generous benefits to lower earners.

State Second Pension
This replaced SERPS in 2002. This is an additional state pension that can give you extra income alongside your basic state pension. If you are self-employed, you are not able to set one of these up.

Strike Price
With regard to options, this is an important variable in a derivatives contract. This is the price at which the owner of an option can purchase or sell the underlying security, the price at which the stock will be bought or sold when the option is exercised.

Structural Survey
This is an in-depth survey of the structure of a property and is undertaken by a professional surveyor to detect any defects or faults in the building.

Tariff Income
This is also known as ‘deemed income’. When you have between £14,000 and £23,000 of capital, it is assessed to show an assumed or tariff income, which means that for every £250 or part £250 of capital you have over the £14,000 lower limit, you will be assessed as though you have an extra £1 per week of income.

Tenancy
A legal written document between a landlord and tenant that sets out the terms of the rental agreement.

Term
The number of years over which the mortgage is repaid.

Term Assurance
An insurance policy designed to repay the mortgage if the insured person dies before the term is over. Level Term Assurance covers a sum during the policy term and pays out the full amount on death. Reducing Term Assurance is designed to repay the outstanding balance on a repayment type mortgage if the mortgagor dies. Term Assurance may also pay out early if a terminal illness is diagnosed.

Top Up Funding / Third Party Contribution
If your local authority are meeting your fees, but your preferred home costs more than they would usually expect to pay for someone with your needs, they will still make arrangements for your if the fees can be topped up by a third party. However, top-up payment from a third party should only be sought when you have chosen to enter a home costing more than the local authority’s usual amount.

Transitional Serial Interest
Where a beneficiary of an Interest in Possession trust passes this benefit on to a subsequent beneficiary. After changes in the laws regarding Inheritance Tax, which came into effect on 5th October 2008, a TSI cannot be made.

Trust
A legal arrangement where assets are owned and controlled by a trustee or trustees on behalf of somebody else.

Trusteeship
If you have a SIPP, the SIPP provider acts as the trustee of your SIPP, with you as the beneficiary. As long as you have fulfilled the regulations, the provider will eventually pay out your pension from your assets.

Underwriting
The process of evaluating a loan application to determine the risk involved for the lender. This involves an analysis of the borrower’s creditworthiness and the quality of the property itself.

Unencumbered
A property is said to be unencumbered when it is owned outright and there is no mortgage or other debt outstanding.

Unit Trust
A unit trust is a form of collective investment constituted under a trust deed. Each fund has a specified investment objective to determine the management aims and limitations. They can be traded on the stock exchange, but at only one point in the day.

Valuation
The determination of the market value of a property, carried out by professional valuers usually at the request of the lender to determine it is suitable to hold a mortgage against.

Valuation Fee
The fee charged by the valuer to carry out the valuation of a property.

Variable Rate
A type of interest rate a lender can charge. It is usually linked to a benchmark such as the Bank of England Base Rate and as its name suggests can vary from one month to the next.

Vendor
The person selling the property.

Very Sheltered Housing
Sometimes called ‘Extra Care Housing’ or ‘Assisted Living Schemes’. These are more recent housing schemes and are designed to help people who need more support with their living. Some meals and personal care may be provided in these schemes.

Will
A legal document setting out your wishes for the distribution of your estate after your death.