Pearl - Jargon Buster

Use our Jargon Buster to cut through the complicated language financial services companies sometimes use, and find out what it really means. The list is in alphabetical order so you can scroll down to look up words and their meanings:

Capital Gains Tax
This is a tax charged on the profit made by selling assets e.g. a business, a second home or shares. Everyone is allowed to make a certain level of profit each year before capital gains tax is charged. The allowance is Ł9,200 for the 2007/08 tax year. The sale of your main home is exempt in most cases.
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Capped Drawdown (pensions)
One of the two types of drawdown pension available from 6 April 2011.

Under this type, there is a maximum amount that can be drawn each year – the amount is capped at 100% of the basis amount.

The other type of drawdown pension is flexible drawdown
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Carry Forward (pensions)
An option available from 6 April 2011 which enables an individual to have pension savings in a tax year which exceed the annual allowance, but without incurring a tax charge.

It is only available where pension savings in one or more of the preceding three tax years were below the annual allowance.

The unused allowance is carried forward into the current tax year.
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Civil Partner
The other person in a partnership which has been registered in accordance with the requirements of the Civil Partnership Act of 2004.
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Chargeable Event
The profit made on certain investments that may lead to higher rate tax. If a chargeable event occurs, we need to send a chargeable event certificate to you and a copy to HM Revenue and Customs. This certificate is used work out whether you need to pay any tax in excess of the basic rate.
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Charges
There are many different ways in which companies can charge for financial services. These include:

Allocation rate
Taking set-up charges into account before investing your payment, or the allocation rate can be a percentage of your payment that is actually invested.
Annual management fee
Charging an amount every year - usually a percentage of the sum you have invested - for running your fund.
Bid/Offer Spread
The price at which you can buy units (offer price) in a unit linked fund is usually higher than the price at which you can sell them (bid price). The charge to you is the difference between the price at which you buy and sell.

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Commission
Commission is an amount of money paid to an adviser or salesperson who advises you to buy a financial product.
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Consumer Prices Index (CPI)
One of the official measures of inflation. It is calculated each month by taking a sample of goods and services that a typical household might buy, including food, heating, household goods and travel costs, but excluding mortgage costs.

The size of the rise (or fall) in the index determines the rate of inflation (or deflation).

The other measure is the Retail Price Index (RPI).
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Contracting out of State Second Pension (S2P)
The option to exchange some S2P scheme rights for benefits under a private pension arrangement, such as a personal pension or occupational pension. A person who chooses this option is said to be ‘contracted-out’.

With effect from 6 April 2012, it ceases to be available to members of a money purchase pension scheme, such as a personal pension.
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Conventional With Profits
A with-profits product that distributes any profits on an annual basis.
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Conveyancing
The legal aspects of buying and selling title to land and property.
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Corporation Tax
Corporation Tax is a tax on a company's taxable income or profits.
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Corporate Credit Ratings
Are used to assess the probability that a company or the Government will honour the fixed interest securities or bonds (loans) that it has issued.
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Critical illness cover
A type of product that will pay you a fixed amount, usually as a lump sum, if you are diagnosed with any one of certain severe illnesses (specified in the insurance policy).
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