Financial Terms Glossary

Financial Terms Glossary -a- (provided by FSEC Ltd)
GLOSSARY
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Abbreviations
A...
A Priori. Latin phrase meaning, effectively, from cause to effect and used generally as first impressions.
A Shares. Ordinary shares that do not have voting rights.
Abatement. A proportionate reduction in payments payable or receivable.
Above the Line. The "line" is in fact a figure showing net income or net profit in income statements or profit
and loss accounts.
Absolute Title. Ownership of registered land where the State guarantees that no one has better right to
the land. Absolute leasehold title guarantees that the lessor has title to grant the lease.
Absolute Trust. A Trust where the Trustee has no obligation except to pass the trust assets to the
beneficiaries at their request e.g. upon reaching majority.
Also: bare trust, naked trust, simple trust.
Abstract of Title. Details of the legal document proving an owners right to dispose of the land.
Such detail is usually supplied prior to completion on a mortgage, and will be compared with the original
documents upon completion.
Acceptance Letter. A document issued by life assurance companies in response to an application for
cover. Deemed to be a counter offer valid for a limited period only. Details amount of cover and terms on
which insurer is willing to proceed. Proposer accepts the terms by payment of first premium.
Account. A record of monetary transactions forming part of an accounting system.
Accounting Period. The period of time from one balance sheet date to the next. See Trading Period.
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Accounting Standards. Rules and guidelines on different subjects issued by the Accounting Standards
Board under its SSAPs. See Statement of Standard Accounting Practice.
Accretion. Increase in value of an asset through natural physical changes, rather than the usual market
forces of supply and demand e.g. timber.
Accrual. A payment incurred in one period, but not paid until the next.
Accrual Accounting. The system of accounting for income and expenditure when earned or incurred,
irrespective of the actual time the money changes hands.
Compare Cash Accounting.
Accrual rate. The rate (or formula) used to calculate the pension benefit, in a defined benefit occupational
pension scheme. The most common pension accrual rate in the UK is 1/60th of final pensionable salary for
each year of pensionable service.
Accrued Rights Premium. A premium payable to the State in respect of a member (under state
retirement age) of a salary related contracted out occupational pension scheme which ceases to be
contracted out. On receipt of the ARP, the State Scheme will take over the obligation to provide a GMP for the
period contracted out. This is no longer available from 6th April 1997.
Accumulation and Maintenance Trusts. A trust in which any investment return or deposit interest
accumulates, and is used to support/educate the beneficiaries without disposal of the capital.
Entitlement to the capital must arise, however, before the age of 25.
Acid Test. See Liquidity Ratios.
ACORN. A Classification Of Residential Neighbourhoods. A market research method for targeting and
selecting buying indicators of particular neighbourhoods.
Act of God. Circumstances brought about by the forces of nature, unforeseen by reasonable foresight and
not involving human influence.
Activities of Daily Living. Generally used as a basis for assessing claims under a Long Term Care
contract.
ADLs are considered to be basic activities essential to an active adult existence e.g. eating, dressing, bathing,
using the toilet, getting in and out of bed, walking, climbing stairs.
Actuarial Certificate. A certificate issued by an actuary, normally in order to satisfy the requirements of
the Pension Schemes Office. Could relate to the solvency of a scheme or transfer of benefits.
Actuarial Valuation. A valuation carried out by an actuary on a regular basis, in particular to test future
funding or current solvency of a pension fund.
Actuary. A person who assesses risks and costs, in particular those relating to life assurance and
investment policies, using a combination of statistical and mathematical techniques.
Ad Hoc. Latin: for this particular purpose.
Ad Valorem. Latin: according to value. For example, an ad valorem tax or duty will be calculated
according to the value of whatever is being taxed, as a percentage rather than a flat rate.
Added Value. An increase in real value resulting from changes in the makeup/content of goods or services.
Added Years. Additional benefit purchased in a final salary related occupational pension scheme by way of
transfer-in, additional voluntary contribution(s) or augmentation, and which is expressed in the form of
additional years of service.
Additional Component. The amount of State Earnings Related Pension payable in addition to the state
basic pension. Only applies to employees, self employed qualify for basic State pension only.
Additional Voluntary Contribution. Extra contributions paid by an occupational pension scheme

member to provide additional benefits. Organised on a group basis, unlike FSAVCs. Must not exceed 15% of
total taxable earnings, including any existing scheme contribution. Resulting benefits can be money purchase
or in a final salary scheme extra years of service may be granted. See 'Free Standing Additional Voluntary
Contribution'.
Administrator. In pension scheme terms the person or body responsible for the management of an
occupational pension scheme. Required for all exempt approved pension schemes.
Advance Corporation Tax. When companies pay dividends to shareholders, they used to have to pay to
the Revenue Advance Corporation Tax (ACT). This was effectively a payment on account of the shareholders
tax due on the dividend, and the company's corporation tax. ACT was abolished on 5th April 1999.
Advertising File. For IFAs, a compliance requirement in which should be kept all draft and final copies of
printed advertising material. Advertising includes publications, circulars, catalogues, posters, labels, notices,
personalised circular letters and radio and television items.
Advertising Standards Authority. Independent body set up by the advertising industry which
overseas a self-regulatory code of advertising standards. All advertising must be legal, decent, honest and
truthful.
Advertorial. Hybrid copy consisting of an advertisement written in newspaper editorial form.
Advisory Conciliation and Arbitration Service. A statutory body established to improve industrial
relations.
Affidavit. A written statement, sworn or confirmed as true before an authorised person, which may be used
in support of certain applications or as evidence in court.
Age Allowance. Personal allowance against income for a person aged 65 or over. The age allowance
increases for a person of 75 or more, but is reduced if income exceeds a certain level.
Agent. A person who represents someone else.
Agricultural Property Relief. Applies to lifetime transfers of agricultural land. When certain conditions
are met, the value of the transferred property is reduced by certain factors, depending on the type of property,
for IHT calculation. Agricultural property does not qualify for relief if subject to a binding contract for sale.
AIDA. Sales/Marketing reminder mnemonic illustrating the ideal progression of the purchaser:
Attention
Interest
Desire
Action
Algorithm. A set of instructions performed in logical sequence to solve a problem.
Alimony. See Maintenance.
All Employee Share Schemes. Type of approved share ownership plan for employees introduced in
April 2000. Shares are given to employees (free share plan) or purchased by employees (partnership share
plan). Subject to certain conditions the shares receive preferential tax treatment.
Allocation.
1. The amount of premium actually used to purchase units. Under various charging structures less than
the full premium will be allocated for investment in the early years of the contract.
2. Asset allocation is the spread of fund investments between different sectors.
Allocation of Interest Election. Where husband and wife elect to have tax relief on mortgage loan
repayments allocated in a split other than 50/50, the latter being the 'norm' without an election.
Allotted Capital. See Issued Capital.
Allowance. When taken in the context of tax allowance, it is a figure which reduces income which would
otherwise be subject to tax.
See Tax Relief
Alternative Investment Market. Launched 19th June 1995 to offer new and growing companies a
less expensive alternative to a full listing. Although regulation is less stringent than a full listing, companies
registering through AIM must have a Stock Exchange approved adviser to monitor their trading and advise on
compliance matters. Replaces the USM.
Amortize. To write off a debt over a period of time by putting aside regular fixed amounts. Or, to depreciate
or write down the value of an asset over two or more accounting periods.
Annual General Meeting. The yearly meeting of the shareholders called by the board of directors of a
company. It is the shareholders chance to have a say in the way their company is run.
Annual Management Charge. General term for a charge levied on an investment fund for its
management and administration.
Annual Percentage Rate. Standard measure of true interest on a loan measured over one year,
reflecting the cost of paying on a monthly basis.
Annuity. A series of regular payments. Annuities are usually purchased by a lump sum of cash e.g. pension
schemes generally discharge their promise of pension benefit by purchasing an annuity. Individuals can
purchase using own capital. Wide range of options available e.g. level, escalating, guaranteed, single or joint
lives.
Annuity Deferral. Also called Income Drawdown or Income Withdrawal. The option to take income
directly from a pension fund at retirement instead of purchasing an annuity immediately. Purchase of annuity
can be deferred to age 75. Can be used for personal and occupational pensions.
Annuity Mortgage. More usually called a 'repayment mortgage', but sometimes referred to in these terms
because of the make up of the payments i.e. as with some annuities, a mix of capital and interest.
Appeal. A process whereby a decision by one body may be reviewed by another, usually higher, authority.
Appellant. Someone who appeals against a decision.
Appointed Representative. Term used to describe tied agents of a product provider. Although tied to
selling the products of one company, they retain their own business identity e.g. state agents and building
societies.
Appropriate Personal Pension. A personal pension plan which is used to contract out of the State
Earnings Related Pension Scheme.
Approval Categories. Pension schemes approved by the Inland Revenue fall within one of three
categories: automatic, discretionary or exempt approval.
See also: Automatic Approval, Discretionary Approval, Exempt Approval.
Approved Share Schemes. Revenue approved share incentive schemes offering certain tax advantages
to the participants.
Arbitrage. Dealing in two or more markets (e.g. currencies, commodities) at the same time to benefit from
rate differentials in situations where prices and returns are fixed.
Arbitration. Settlement of a dispute by independent third parties, rather than by a court.
Arrangement Fee. Fee charged by banks or building societies for arranging loans such as overdrafts or
mortgages.
Articles of Association. One of the establishing documents of a limited company, which sets out the
internal operation of the company, including the powers of the directors.
Assessment of Risk. Risk in the context of financial planning relates to the possibility of losing money.
For example, assessment of risk can be generalised for initial discussions with a client but must be
personalised for final decisions to take account of the clients subjective view of the options.
Assessmentism. See Pay as You Go.
Asset. Property which has value e.g. plant, machinery, shares, invoices.
Asset Backed Investments. Investments based on tangible, working capital/assets that have the
potential for growth e.g. investment in the shares of an industrial or commercial concern, rather than
investment in deposits.
Asset Conversion. An Estate Planning device to change assets which do not attract tax relief into assets
which do attract relief.
Asset Freezing. An Estate Planning device to ensure that any growth in an asset is outside the estate e.g.
an interest free loan payable on demand invested by the borrower will produce growth in the borrowers
hands, rather than the estate of the lender.
Asset Reduction. An Estate Planning device to reduce the value of a taxable estate by making use of
suitable gifting arrangements.
Asset Stripper. Someone who purchases a business with a view to selling its assets, individually, at a
profit.
Assignee. Someone to whom control over property is assigned.
Assignment. The transfer of a right (e.g. to claim on a policy) from one person (assignor) to another
(assignee).
Assignor. Someone who assigns property.
Associated Company. A company where another company owns between 20% and 50% of the ordinary
(voting) shares.
Associated Operations. Actions that are deliberately linked, one to another, to produce, by a series of
steps, a particular long-term result. When used in relation to tax planning, such operations no longer escape
the tax evasion net.
Association of Unit Trusts and Investment Funds. The trade association of unit trust
managements. Most managements are members. The Association has the aim of promoting unit trust sales,
so is not impartial.
Assurance. Often interchangeable with insurance and usually used in conjunction with life assurance.
At Best. A buy or sell order which means that it should be executed immediately at the best obtainable
price.
At or Better. An instruction to trade at a given level or better.
Attestation. The signature of a witness to the signing of a will.
Audit. Close examination of something e.g. the trading books, papers and accounts of a company, or the
relationship between plans and desired outcomes.
Audited Accounts. Company accounts which have been checked and examined to determine how the
figures have been achieved.
Auditor. Accountants employed by companies to prepare their accounts and to give a short report which is
included in the annual accounts. Companies are required by the Companies Act to appoint professionally
qualified auditors to prepare Statutory Accounts.
Augmentation. An increase. For example, provision of additional employee benefits for particular
individuals where the cost, usually, is born by the employer.
Authorisation. In the context of financial advice, the process of qualifying to be able to sell and advise on
investment products. Under current regulations, for example, IFAs need to qualify by examination and
experience.
Authorised Business. A business authorised by the FSA, an SRO or a RPB to conduct particular types of
investment business.
Authorised Capital. The total of the shares a limited company is permitted to issue to raise capital. The
permitted limit will be stated in the Memorandum of Association, along with the number of shares and their
nominal value.
Authorised Investment. Investments in which a trustee may invest trust assets.
Authorised Unit Trust. A unit trust which meets the rules governing the industry authorised by the
Department of Trade and Industry, which also vets the company launching the trust.
Automatic Accrual. A type of business agreement where the shares or business share of an individual
passes automatically to the remaining shareholders or partners.
Automatic Approval. The Inland Revenue must approve occupational pension schemes which meet the
requirements of s.590 of the Income and Corporation Taxes Act 1988 (ICTA 88). This section imposes strict
benefit requirements relating to pension entitlement and retirement cash.
See: Discretionary Approval, Exempt Approval.
Average. The mid-point of a set of data.
Average Clause. Where a person underinsures property, this clause in the policy allows the insurance
company to pay only a proportion of the insured amount, the policyholder bearing the balance of the claim.
Average Earnings Index. A government produced index of the measure of increase in average earnings
in all industries, and includes basic pay and all related fluctuating payments e.g. bonuses, commissions.
Relates to England, Wales and Scotland.
GLOSSARY
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Abbreviations
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Financial Terms Glossary -b- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
B...
Back to Back.
1. Funding of one arrangement by another e.g. annuity payments going towards regular premium
payments.
2. A leasing arrangement whereby a sub-lessor leases equipment in, so that it can be leased out again
to the final lessee.
Backwardation. The fee paid by a seller of shares for deferring the delivery of stocks and shares to the
buyers.
Bad Debt. Money owed that will not be repaid. Normally written off as a charge to the profit and loss
account.
Balance Sheet. A statement of assets and liabilities, plus owners equity and reserves at a specific date.
Balloon Rental. Large final payment at the end of the lease period.
Bancassurance. General term describing the broader financial services activities of banks and building
societies, in particular their insurance company activities.
Bank of England. The UK's central bank. Its main responsibility is to implement and police monetary
policy.
Bank Rate. The official rate of interest charged by the Bank of England acting in its role as lender of last
resort to the financial institutions. In 1972 the rate was renamed Minimum Lending Rate (MLR) and was no
longer to be determined by the government, but automatically by the current level of interest rates in the
money market. But on 14 January 1985 the government returned to prescribing the level of MLR in order to
control the volume of credit in the economy.
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Bankers Draft. A bill of exchange drawn on the bank, like a cheque, and presented by the bearer to the
seller to purchase goods. The individuals account is then debited with the amount.
Bankers Automated Clearing Services. A computerised system facilitating the transfer of funds after
clearing.
Bankrupt. Person or business incapable of paying outstanding debts and whose affairs have been ordered
by a court into the control of a receiver. Before someone can be declared bankrupt, they must commit an act
of bankruptcy, such as entering into a situation which shows that it is unlikely that ensuing debts will be paid.
Bar Chart. A pictorial comparison of results or measurements illustrated by vertical bars from the height of
which it is possible to compare figures.
Bar Council. Barristers governing body, responsible for maintaining professional standards.
Bare Trust. See 'absolute trust'.
Barrister. A qualified lawyer who represents people in court and who may provide legal opinion out of court.
Base Rate. The foundation of every banks structure of interest rates. Depositors are paid interest rates a
few percentage points below the base rate, and borrowers are charged rates above the base rate. Banks alter
their base rates when MLR changes.
Basic Rate Tax. Under the unified system of taxation introduced in April 1973 there are currently three
levels of taxation; a lower rate, currently at 10%, the basic rate of 23%, and a higher rate of 40%.
Basic State Pension. The flat rate state pension available to everyone upon reaching State Retirement
Age, provided sufficient N.I. contributions are made.
Bear. Stockmarket jargon for a pessimist. Someone who thinks that the market is going to fall and sells
shares or options in the belief that they can be bought back later at a cheaper price.
Bear Market. An investment market term meaning that the value of investments is expected to fall.
Bear Raid. High volume selling in the hope of depressing prices with a view to repurchasing at a lower
price.
Bearer Bill. A bill of exchange written so that the value will be paid out to the holder on presentation e.g.
cheque made out to cash.
Bed and Breakfast. The sale of shares one day, and their repurchase the next day, done to achieve a
disposal for Capital Gains Tax purposes. This did have the effect, until 17th March 1998 of rebasing share
value and using the annual CGT exemption so as not to produce a highly taxable gain in the future. Since that
date at least 30 days must now elapse between the sale and repurchase for the practice to be effective so the
level of risk is normally considered to be too great.
Bellwether Industry. An industry or sector which gives a lead indicator of forthcoming changes in the
economy.
Below the Line. See "Above the Line". Items below the line tend to be extraordinary items such as
dividends.
Benchmarking. Comparing activities against agreed parameters to assess degrees of comparative

performance
Beneficiary. Someone who will receive the proceeds from a trust or settlement.
Benefits Agency. The Executive agency of the DSS responsible for distribution of information concerning
various State benefits.
Benefits in Kind. Refers to non-cash forms of employee benefit, such as pension scheme membership,
car packages, and similar.
Best Advice. A generic expression referring to the regulatory requirement for a financial adviser to offer
suitable and timely advice relevant to a client's needs. Client's needs must take precedent over the adviser's
remuneration. The original "best advice" rules has been replaced by an FSA "suitability" rule. See 'Know Your
Client'.
Bid Price. Price at which market makers, life assurance companies and unit managers buy back units from
investors. Also used when unit linked policy matures or is encashed. Always less than offer price.
Bid Valuation. Valuation of a unit trust on a bid value of shares held after allowing for dealing costs.
Usually indicates that the trust has more sellers than buyers.
Bid/Offer Spread. Difference between the bid price and offer price of units. Usually between 5% and 6%
of the offer price of units. Used to recoup management expenses and initial costs.
Big Bang. A series of changes to the operating systems of the Stock Exchange leading to the introduction
of electronic trading commencing October 27 1986.
Big Ticket. Leases on high cost assets. Small ticket items would usually be items such as office
equipment.
Bill of Exchange. A paper document indicating that one party (the drawee) agrees to pay another party
(the drawer) the sum of money noted on the bill, on demand or on a specified date e.g. a bank note, or a
cheque.
Bill of Lading. Document stating that goods have been received for shipment, and which sets out the
terms of delivery and receipt.
Black Economy. Goods and services paid for by cash in-hand, and not recorded for tax and NI purpose.
Blue Chip. A phrase taken to mean first class, referring to shares of a company with a good trading and
dividend record, or to the company itself.
Board Order. Instruction to deal only when a particular price is obtainable.
Board Resolution. A decision made by the directors of a company.
Bona Fide. Good faith.
Bona Vacantia. Property not disposed of by will, and which will pass to the Crown or Duchy of Lancaster.
Bonds. A generic term for life assurance policies that contain a nominal amount of life cover and a large
investment content. Marketed as investments and subject to special tax treatment. Phrase also used to
describe Government securities.
Bonus. Added to with profit policies. The amount is determined by life company's actuary and represents a
distribution to with profit policyholders of investment return achieved by fund. Payment of bonus is not
guaranteed. Reversionary bonuses, normally declared annually, cannot be removed once added. Terminal
bonuses added on death or maturity.
Bonus Issue. Often called a "free" or scrip issue, a bonus issue is a book-keeping transaction that
transfers money from a companys reserve to its capital. Existing share prices fall to reflect the greater
number issued.
Bonus Sacrifice. A way of giving up any bonus element of earned income, and diverting the sum to
additional pension contributions. Treated as an additional employer contribution payment. Any notice of
intention to sacrifice must be made clear before any bonus payment is announced. Tax treatment depends on
specific circumstances and the local inspector.
Book Value. The value of an asset as shown in a companys account books, which may or may not be the
same as its market value.
Box. Term used to describe the way in which unit trust manager may hold units available for sale. Box may
contain new units, units repurchased from investors or both.
Breach of Contract. Failure of a party to a contract to perform the necessary obligations.
Breach of Trust. Any act or omission by a trustee, not necessarily deliberate, contrary to the terms of the
trust.
Break Even Analysis. Technique concerned with estimating the point at which income and expenditure
are at the same level. This is termed the break even point, at which point the business makes neither profit
nor loss.
Bretton Woods Agreement. 1944 agreement which established the International Monetary Fund and
the World Bank.
Bridging Loan. A short-term loan taken out to help fund the purchase of one asset before the sale of
another asset has been finalised. Commonly seen in the property market.
Bridging Pension. An additional temporary pension paid from a scheme between retirement and State
pension age. Usually replaced by State pension payable from State pension age.
British Government Stocks. See Gilts.
Broker. A broker is an agent who brings two parties together to do business, and is remunerated by a fee or
commission, the latter calculated as a percentage of the contract sum.
Broker Fund. Generic term for an investment fund managed by a specialist financial adviser. Usually
invested in the units of other investment funds/unit trusts.
Brokerage.
1. Dealing fee or commission charged by a broker.
2. May also be used as a term for a broking firm.
Budget. A budget is a financial plan that details future expected income and expenditure. Also refers to a
specific sum of money set aside for a particular project. Hence the Governments announcement each year,
regarding its tax and financing plans for the future, is called The Budget.
Building Societies Association. Trade association for UK building societies which represents societies
in discussions with government and other organisations.
Building Societies Commission. The organisation which now regulates the affairs of building societies,
having taken over from the Registrar of Friendly Societies.
Building Societies Ombudsman. Established in 1987 to investigate complaints made by customers

against societies. Funded by all building societies. To be combined with other ombudsman and complaints
handling schemes to form Financial Services Ombudsman.
Building Society. A financial institution which, traditionally, accepts cash deposits and pays out interest on
deposits at a variable rate. Money is also lent, traditionally to finance house purchase. Many are now
expanding into banking and financial services.
Bull. The opposite of a bear. the optimist who believes that the market is going to rise, and so buys shares
now to benefit from future price rises.
Bull Market. A rising investment market; the opposite of bear market.
Bulldog Bond. A sterling denominated bond issued in the UK by a non-UK institution.
Business Card. A convenient way of satisfying the compliance requirement of informing a potential client of
who you are, who you work for, your business and regulatory status, and your regulatory authority.
Business Expansion Scheme. Introduced in 1983 as a tax effective inducement to encourage

investment in companies not quoted on the stock exchange. The scheme ended 31.12.93 and was replaced
by the Enterprise Investment Scheme.
Business Investor. One of several types of investor identified in financial services legislation. Different
levels of duty of care apply to each type of investor to reflect their existing knowledge and experience of
investment business. A business investor is not a professional investor but does regularly deal with certain
investments in a business capacity. Deemed to understand the nature and risk of the type of investments they
normally transact.
Business Property Relief. An inheritance tax relief, applying to lifetime transfers of business property or
business interests. Amount of relief ranges from 50% to 100% depending on type of asset. Relief not
available if business deals in stocks and shares, land and buildings or investments.
Business Protection. Generally used to refer to such areas as share protection, key employee protection
and partnership protection i.e. arranging, by use of life assurance policies, for money to be in the right hands
in the event of death and retirement to purchase shares or business interest to help preserve a business
and/or its status quo.
Business Roll-Over Relief. Where there is a capital gain on the sale of a company fixed asset, some or
all of the gain may be offset by the purchase price of a replacement. Cannot be used for all assets but applies
to land and buildings and plant and machinery. Replacement asset must be purchased between one year
before and three years after disposal of original asset.
Buy and Sell Agreement. Both partnerships and director/shareholder controlled companies need
agreements to help ensure a satisfactory disposal of shares in certain circumstances. The 'buy and sell' route
is one such, where it is written into a wider agreement that in the event of death or retirement, one party will
sell the business share, and another buy. A fixed agreement rather than an option.
Buy at Best. Instruction to buy until the required quantity is reached.
Buy Back. Term used to describe the reinstatement of an individual's SERPS benefit relating to a period of
contracted-out employment. Payment of State Scheme Premium ensures treated as if had not contracted-out.
Buy Out Policy. Refers to the type of stand-alone policy introduced by S.32 of the Finance Act 1981,
which enabled those leaving an employment to transfer pension entitlement from a pension scheme to a
personal contract in their own name. A single premium contract, accepting only transfer payments, with no
provision for additional, regular contributions.
Buyers Guide. Information given to a client by a Financial Adviser showing the advisers status and
obligations to the client. This has now been replaced by a Regulators Statement which must appear
prominently in the Terms of Business letter.
GLOSSARY
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Abbreviations
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Financial Terms Glossary -c- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
C...
Cafeteria Benefits. A system of remuneration provision which offers core benefits e.g. minimum salary,
leaving the balance of benefits to be chosen by the individual from a suitable list within an agreed budget.
Call Option. An option to buy, e.g. shares, at a fixed price on or before a set date in the future.
Cancellation. Used in conjunction with unit linked funds, whereby units are cancelled (sold) to pay for
certain expenses of the fund or contract.
Cancellation Period. A cooling off period after the purchase of certain investment products. During the
period the purchaser can change his or her mind about going ahead, and opt to have any initial payments
repaid. Applies to certain contract variations e.g. increases to existing premium of more then 10%. Does not
apply to "off the page" purchases. See "Cooling off Period".
Cap. Used in a number of ways to indicate an upper level or ceiling e.g. Mortgage Cap - an upper limit to
mortgage rate fluctuations; Earnings Cap - an upper limit to the amount of salary which can be used to
calculate pension.
Capital. Can be used in a number of ways:

1. To differentiate certain assets from income and cash flow.
2. To refer to the value of a business owners investment i.e. the equity in the business
3. In a limited company, this equity is represented by share capital plus reserves.
4. Capital expenditure is the purchase of new fixed assets.
5. A capital asset is one likely to be held for a long period.
6. A fixed asset recorded in the accounts is said to be capitalised.
Note that the above do not constitute the full range of usage
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Capital Allowances. Tax allowances which enable the owner of an asset to take into account
depreciation on the asset against taxable income.
Capital Gain. The increase in value of an asset or investment.
Capital Gains Tax. A tax levied on the investment gains of an individual in a tax year, provided those
gains exceed the current exemption. Husband and wife pay the tax separately and have separate allowances.
Capital Taxes Office. Part of the Inland Revenue which deal with inheritance tax.
Capital Transfer Tax. Preceded Inheritance Tax as the tax on transfers from estates.
Capital Units. See Initial Units.
Carry Back Rules. Ceased to be available for use with personal pensions for contributions paid after 5
April 2001, unless combined with carry forward when available until 31 January 2002. Continues to be
available for use with retirement annuities. Carry back results in payments made to a contract being treated,
for tax purposes, as if paid in a previous year.
Carry Forward. Ceased to be available for use with personal pensions, except in limited circumstances,
from 5 April 2001. Can still be used for retirement annuity contracts. Enables higher than normally permitted
levels of contributions to be paid to pension policy by using unused relief from earlier years. Unused relief
from up to six previous years can be carried forward. Maximum contributions permitted in current year must
be made before carry forward can be used.
Cartel. A group of individuals or businesses which try to profit from a trading situation by fixing prices and/or
regulating/restricting the supply of a product.
Cash Accounting. The system of accounting for income and expenditure as and when cash is received or
paid.
Compare Accrual Accounting.
Cash Equivalent. The cash equivalent of accrued benefit under a defined benefit pension scheme which
may be applied as a transfer payment to another approved pension arrangement or to purchase a S32 buy
out policy.
Cash Flow. The pattern of cash income and cash expenditure during a period of time.
Cash Sum at Retirement. For most people with a personal or occupational pension, an option at
retirement is to forego an amount of pension for its equivalent in cash. The cash is paid, up to permissible
levels, free of tax.
Category 1 Member. Most personal and occupational pensions allow some benefits to be taken as tax
free lump sums, subject to certain restrictions. Commutation of pension for cash results in a lower residual
pension.
Category 2 Member. Registration under Category 2 enables Registered Individuals to deal as Category 1
individuals, but not as a principal. Consequently, when dealing with securities, dealings must be done through
an SFA member. Termed by PIA Moneyholders.
Category 3 Member. Individuals under this category can deal as Category 2 members, except client
money cannot be handled, client investments cannot be held, and client property cannot be held. Termed by
PIA Arrangers.
CAT Standards. Cost, Access, Terms Standards on certain types of contract which ensure that contract
changes are reasonable and that access and terms are fair meeting specific requirements. CAT standards
can apply to mortgages and ISAs.
Caveat.
1. To enter a caveat means to give legal warning of an interest in a situation.
2. Caveat Emptor. Under normal buying/selling contractual arrangements, this is taken to mean let the
buyer beware, and usually no greater duty of care is due. Because of the greater duty of care
required when dealing with investments, however, caveat emptor is not taken as a guiding principle.
The onus in financial transactions lies with the adviser, and the best advice principle.
3. Caveat venditor - let the seller beware, used in the sense that the seller has legal duty to ensure the
goods sold are in order.
Central Bank. The main government controlled/influenced bank in a country, which controls the internal
and external financial affairs of the country e.g. setting interest rates, controlling currency and foreign
exchange rate.
Centralised Scheme. A pension Scheme operated on behalf of a number of large organisations, such as
local authorities.
Cestui Que Trust. A beneficiary under a trust.
Chamber of Commerce. An organisation effectively controlled by local businesses to help promote

business and commerce for the benefit of the local business community as a whole.
Chancery Division. A division of the High Court dealing with company law, partnership, bankruptcy,
mortgages and trusts.
Charge. A creditors right over a debtors property, which may be enforced in the event of default.
Chargeable Event. Chargeable events occur when certain payments are made from packaged life and
investment products. They may or may not give rise to a tax charge. Any tax liability which might arise falls
within income tax rules.
Chargeable Gain. A chargeable gain is the taxable element of a gain arising from a chargeable event. Any
gain can be said to be the 'excess' of returns over investments into certain packaged products. There is no
income tax liability for basic rate, nor any CGT liability. The maximum rate chargeable will be 17%, being the
difference between basic rate tax and higher rate income tax, any gains being assumed to have already
attracted tax at basic rate.
Chargeable Transfer. This is a transfer or gift of value which does not attract any IHT relief, is not
covered by any IHT allowance, nor is it a transfer that qualifies as an exempt transfer, and so will be taxable.
Charging Structure. Most investments and investment products incur expenses in their development,
management and selling. To ensure that each stage of the product is properly costed, expenses are deducted
at different stages to reflect the expenses of that particular element e.g. bid/offer spread, policy fee, annual
management charge.
Charting. A way of analysing trends, using different types of chart, to forecast future movement, particularly
in respect of share movements. A chartist is a person who makes use of such a method.
Chattel. A moveable object, usually taken to be a personal possession. You can receive up to 6,000 p.a.
on the sale of personal chattels each year without affecting the CGT allowance.
Chief Medical Officer. Many large insurance companies appoint a senior medical consultant to oversee
their medical underwriting guidelines. This is intended to help with consistency of approach, maintaining up to
date knowledge, and providing expert guidance in difficult cases.
Child Benefit. State benefit paid for children under 16, and for 16/17/18 year olds in full time education, or,
in some circumstances, on an approved training scheme.
Children's Tax Credit. Tax credit issued via tax codes to individuals who have a child or children aged
under 16 living with them. Introduced from April 2001.
Chinese Walls. Taken to mean organisational barriers between different operations in the same
organisation to avoid conflicts of interest, e.g. a professional firm advising two competitors in the same market
place.
Chop. A mark made on a document (in the far east) to acknowledge the content of the document, rather like
an official seal in the UK.
Chose. Something belonging to someone.

1. Chose in action - a personal right which can be enforced by legal action e.g. recovery of a debt.
2. Chose in possession - a tangible item capable of being held and enjoyed e.g. personal belongings.
Churning. The practice of moving investments merely to attract additional commissions.
City. Refers to the City of London; the square mile that is the heart of Britains financial community.
Claim. Generally taken to mean a demand for payment under a policy, whether on surrender, maturity or
death.
Class of Potential Beneficiaries. Under certain types of trust, such as flexible trusts, it is possible to
have a general reference to a class of beneficiaries, as well as specific appointments as beneficiary.
Clawback. Money claimed back which has previously been paid out e.g. life assurance commission may be
claimed back if the policy is cancelled within a certain period.
Clearing. Taken as a banking term, the process of presenting cheques to the drawers bank for payment.
Clearing House. An organisation set up to arrange settlements of money between a number of parties,
e.g. banks or stockmarkets, so that only one balance has to be settled between any two parties at the end of
each day or trading period.
Client. Generally taken to mean someone with whom you do business; more specifically, it should be used
to refer to someone whom you know, and with whom you do business on a regular basis.
Client Account. An account held on behalf of clients which is kept separate from the business finances of
a company or partnership.
Client Agreement. A Client Agreement is an extended version of the Terms of Business letter, used as a
long-term notice where business is transacted regularly. Two copies are generally used, both client and
adviser keeping a signed (by both parties) and dated copy with their respective papers.
Close Company. Company controlled by five or fewer individuals, and not traded on the stock exchange.
Closing Years. There are special tax calculation rules governing opening and closing years of a business.
Clustering. The subdivision of what would otherwise be one large policy into a number of smaller policies.
Used for endowments, investment bonds and pension policies. Provides flexibility as allows policyholder to
encash/surrender/use part of investment rather than whole.
Code of Mortgage Practice. A voluntary code which was introduced in July 1997 to set minimum
standards of good mortgage lending practice. Introduced by the Council of Mortgage Lenders.
Co-efficient. Another name for a constant, something which is fixed for the purpose of analysis, such as
price per unit.
Codicil. A document intended as a supplement to a will, executed in the same manner as a will.
Cold Calling. A personal visit or oral communication made without invitation.
Collar. An option on some mortgages which prevents interest rate payments dropping below an agreed
minimum rate.
Collateral. Security used to guarantee a loan.
Collective Investment Schemes. Also known as pooled investments. Refers to unitised schemes
where investor's contributions are pooled and they receive units in the fund in exchange for their contribution
e.g. unit trusts.
Commission. Money payable to an agent or third party for services, usually introducing business.
Commodities. Generally taken to refer to investments involving future pricing of raw materials in foodstuffs
and metals.
Commorientes. People who died at the same time, (where order of death is uncertain).
Commutation. The option of exchanging pension for cash at retirement at a fixed rate.
Compensation Fund. Fund set up by a regulatory body to protect investors against a members fraud or
bankruptcy. See Investors Compensation Scheme.
Compensation Package. The elements of pay and other benefits that go with a particular job.
Completion. The end of a transaction, generally used in property purchase transactions to signify the point
at which the ownership of property changes hands.
Compliance. A word taken to indicate the process of following agreed procedures; e.g. compliance with
FSA 1986 and related regulations means that things are being done 'by the book'.
Composite. Made up of different elements e.g. a composite insurance company is one which may have a
general insurance arm and a life assurance arm.
Composite Rate Tax. A system of deduction of tax from bank and building society interest payments
which came to an end on 5th April 1991.
The rate of tax deducted was set at a level below basic rate to reflect the fact that tax was deducted from
those not liable to pay it, and who could not reclaim it.
Compound Interest. Interest which is added to the principal sum, and which earns interest in addition to
the principal sum.
Comptroller. Usually taken to mean a senior financial controller or manager.
Compulsory Purchase Annuity. An annuity purchased with funds from a personal pension scheme or
an occupational pension scheme to provide retirement income.
Concurrency. Term used to describe the ability to be an active member of more than one pension scheme
at the same time in respect of the same employment. Introduced from April 2001 to coincide with the
introduction of stakeholder pensions.
Confirmation Dative. Scottish equivalent of letters of representation.
Confirmation Nominate. Scottish equivalent of grant of probate.
Conglomerate. Widely differing businesses grouped together as subsidiaries of a parent company.
Consensus Ad Idem. An essential element of a valid contract, meaning a meeting of minds, of like mind
i.e. both parties to a contract must be in complete agreement.
Consideration. Something of value exchanged as part of a contract; an essential of a valid contract.

Sometimes used in the sense of payment, e.g. premium, or promise to pay a premium.
Consolidation. The combining of financial information from separate accounts e.g. companies within a
group, as though they were a single account.
Consols. Government bonds which pay interest but which do not have a maturity date.
Consortium. Independent elements (people or firms) grouped together for a particular purpose e.g. banks
to fund the channel tunnel.
Constant. See Co-efficient.
Consumer. Domestic and business purchasers of goods and services. Consumables, or consumable
goods/services, are those goods and services purchased by consumers.
Contango. The fee paid by a buyer of shares for deferring the purchase of stocks and shares. Also called
forwardation.
Contingent Life Policy. A policy where payment is made on death only if certain preconditions
(contingencies) are met e.g. death before another person.
Continuation Option. Some occupational pension schemes may offer scheme members, upon their
leaving the scheme, a chance to continue any life assurance benefit that may have been linked to the
scheme. An advantage usually lies in the fact that evidence of health will not be required.
Contra. An amount which offsets another.
Contract. An agreement between two parties, usually taken to be enforceable at law.
Contract Hire. A fixed term contract (usually) for the hire of an asset on a set rental.
Contract Note. The confirmation received when shares are bought or sold proof of the transaction for tax
purposes.
Contracted Out Money Purchase Scheme (COMPS). Type of occupational pension scheme used
to contract-out of SERPS on a money purchase basis.
Contracting Out. In relation to State pensions, opting out of the earnings related part (SERPS) of the
State pension arrangements.
Contracting Out Certificate. A certificate issued by the Department of Social Security acknowledging
that all contracting out conditions have been met.
Contracting Out Incentive. This was an additional payment over and above the Contracting Out
rebate, designed to encourage certain individuals to contract out of SERPS. Incentive payments ceased on
5th April 1997.
Contracting Out Rebate. Amount by which the employer's and employee's National Insurance
contributions are reduced by virtue of an employee's membership of a contracted out pension arrangement.
Contribution. Alternative word to premium, usually used in connection with personal payments into a
pension scheme, or investment based products.
Contribution Holiday. A period during which contributions of employer and/or employee are suspended,
generally when the pension fund is in surplus over acceptable levels.
Contribution Limits. Contributions to pension arrangements are usually limited in some way. Those into
occupational schemes are in effect limited by the maximum benefit rules. Contributions into personal pension
plans are limited by payment ceilings related to age bands. Member contributions to an occupational scheme
are fixed at a maximum of 15% of total taxable remuneration in any tax year. All contributions are limited by
the earnings cap (but not for RACs).
Contribution Rate. Payments into group pension schemes are dependent on a number of factors, such
as ages, balance of sexes in the group and certain financial projections. Rather than change the payment
level each time one of the assumptions changes, the scheme actuary will recommend a fixed rate to be paid
for, say, three years. This will be the contribution or funding rate, and will usually be expressed as a
percentage of the total payroll of all the scheme members.
Contributions Equivalent Premium (CEP). A premium payable to the State to purchase SERPS
rights, when an individual has been contracted out for less than 2 years (5 years prior to 6 April 1988), and
ceases to be contracted out under an occupational scheme. The member is reinstated into SERPS, for the
period originally contracted out, and State scheme will then provide any GMP.
Controlled Funding. A method of estimating the size of the pension fund needed to secure the benefits of
members of a group pension. It operates on the basis that the scheme is invested only to the extent that its
expected liabilities (i.e. scheme withdrawals, retirements, deaths) can be met, plus an allowance for flexibility.
Members in the scheme do not have 'earmarked' funds as with PPPs or EPPs, so being a general fund, sums
can be taken out as and when needed.
Controlling Director. A person who is a company director who owns, or who has control of, 20% or more
of the ordinary shares in a company. The definition is wider for a director joining a pension scheme on or after
1st December 1987.
Convertible i. As in 'convertible term assurance', meaning that the policy contains an option to switch or
change to another type of policy, usually an endowment or whole of life policy.
Convertible ii. A form of loan stock a hybrid between a share and a stock or bond. It pays a fixed rate of
interest and may be converted into a specified number of shares at a future date.
Convertible Preference Share. A specific kind of preference share which allows conversion of an
investment into a certain number of ordinary shares at a fixed price and within a specified period of time.
Conveyance. A document, usually a deed, which transfers an interest in property.
Cooling Off Period.

1. A period of 14 days from receipt of the statutory cancellation notice during which a policyholder may
cancel a life assurance policy. For policies not covered by the Financial Services Act cancellation
rules e.g. term assurances of less than 10 years, the relevant cooling off period is 10 days.
2. For other regulated agreements e.g. hire purchase, the consumer may serve notice of cancellation
before the end of the fifth day after receiving the required second copy of the agreement.
Core Rules. These form the second tier of a three tier approach to regulation originally established under
SIB and continued by PIA. Core rules provide a framework for SROs rule books. The FSA will replace the
three tier approach to regulation when it receives its full powers after N2 date.
Copyright. The legal ownership of intellectual property such as written, taped, filmed or computerised
material. It gives the basis of legal protection to the owner against copying by others.
Core Rules. The S.I.B. adopts a three-tiered approach to regulation, the second tier being the core rules,
which effectively act as a code of conduct and provide an outline for the SROs own rule books. The three tier
approach will be replaced when the Financial Services Authority is granted its full powers during the year
2000.
Corner. Control of the supply of a commodity or security, enabling the controller to manipulate its market
price.
Corporate. Having to do with company affairs.
Corporate Bonds. Similar to Government Stock (gilts) but with higher risk profile. They are loans to
corporate bodies, usually on fixed rate for a fixed period.
Corporation. Used in the sense of large scale in local authorities, public or private business.
Corporation Tax. Tax on companies, levied on trading profits and capital gains. Tax rates applicable for
the Financial Year, which is 1/4 to 31/3.
Cost Centre. An activity or function within a business to which specific costs may be attributed for control
purposes.
Cost of Capital. The average cost of financing business capital eg loan interest and share dividends. If the
average return on investment is less than the cost of financing, the business will be facing problems.
Council of Mortgage Lenders. (CML) Trade body representing mortgage lenders. They set up the
Code of Mortgage Practice. See Code of Mortgage Practice.
Counter Offer. An offer which replaces and supersedes a previous offer.
Coupon. A slip of paper representing a monetary value. Often used with reference to the interest payable on
gilts, because the coupon attached to the certificate represents annual interest, and can be encashed.
Covenant. A promise, contained in a deed, to do something.
Cover Note. Temporary confirmation of insurance cover, particularly in motor insurance, pending delivery
of the policy and/or certificate.
Credit.
1. A sum of money or equivalent purchasing power available for a persons or business use.
2. A positive balance in a bank account.
3. The practice of making goods or services available before payment.
4. Entries on the right hand side of an account.
Credit Reference Agency. A business which collects, collates and maintains a data base of information
containing the assumed creditworthiness of individuals. For the payment of a fee, information can be supplied
to enquirers, generally potential creditors.
Creditors. Anyone to whom a business or individual owes money (or services).
Crest. The London Stock Exchanges computerised share trading system.
Critical Illness. Also known as 'dread disease'. Such policies can stand alone or maybe written as an addon to a variety of other contracts e.g. whole of life. Critical illness policies pay out a tax-free capital sum in the
event of a qualifying illness being diagnosed e.g. certain cancers. This is an advance of the sum assured,
rather than a surrender of the policy.
Cross Option. Also called Double Option or Put and Call Option. A flexible form of buy and sell agreement
whereby e.g. in the event of the death of a partner, the estate of the deceased has the option to sell and the
surviving partners have the option to buy. When one option is exercised, the other must follow.
Crossed Cheque. A cheque with two lines across to denote that it must be paid into a bank.
Crossing. In banking, crossing a cheque with two perpendicular lines across the face of the cheque means
that it must be paid into a bank account.
Cum Div. Indicates that a share price includes the right to a company dividend declared but not paid.
Cumulation Principle. In IHT terms this refers to the build up of chargeable transfers over a seven year
period e.g. if chargeable transfers are made each year 1990 to 1996, in 1997, those made in 1990 drop out of
calculation, and so on. P.E.T.s only come into the calculations if the transferor dies within seven years of the
transfer.
Cumulative Preference Share. A type of share bearing the right to receive unpaid dividends on a
cumulative basis, taking priority over ordinary share dividend entitlement. Also available as a Redeemable
Preference Share.
Cumulative Redeemable Preference Share. A redeemable preference share which gives an extra
degree of security: if the company misses a dividend payment one year, it is carried forward to the next year
and so on until it is eventually paid.
Current Assets. Cash and other assets capable of converting to cash or being used to produce other
current assets.
Current Cost Accounting. Accounting method which is based on recording the value of assets and
liabilities at their current market value rather than the historical cost.
Current Liabilities. Debts due on demand, or within a year.
Current Ratio. A test of liquidity showing the difference between current assets and current liabilities. See
also Quick Ratio.
Current Value. The spending power, in todays terms, of a cash sum available at a future date after
allowing for projected inflation. See Future Value and Present Value.
Current Yield. The dividend or interest payment on an investment expressed as a percentage of its current
price.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -d- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
D...
Data Protection Act 1984. Established rules for storage and disclosure of personal details by computer.
Dawn Raid. In financial terms a surprise purchase of a large number of shares in a single company.
Generally taken as a forewarning of a takeover bid.
De Facto. Existing as a matter of fact, rather than a right, as in e.g. de facto government, rather than, say,
the elected government.
De Minimis Limit. The level below which a funding rate check is not required in respect of defined
contribution occupational pension schemes, excluding FSAVCs.
Dealing. Name given to transactions in stocks, shares unit trusts, commodities and other financial
instruments.
Death Duties. Tax charged on property on the death of the owner. See Inheritance Tax.
Death in Service Benefits. Generally refers to one or more of life assurance, spouses and dependants
pensions, return of personal contributions, as provided by a pension scheme, on a members death in service
before retirement.
Debenture. Long term loan to a company, usually at a fixed rate of interest and for a specific term.
Debenture holders are creditors of the company. In the event of liquidation debenture holders have a
preferential claim on the assets. Debentures are marketable securities.
Debit.
1. Entries on the left hand side of an account.
2. A charge against or deduction from an account.
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Debt. Something (money, services, favour) owed by one individual to another for services rendered by that
other person.
Debtor. Anyone who owes money or services to a company or individual.
Decision Trees. A series of guides issued by the FSA. Their aim is to assist members of the public who
are considering whether to invest in stakeholder pensions.
Declaration of Trust. Written statement to the effect that certain property is to be held in trust. No
specific form is required, provided the intention is clear.
Decreasing Term Assurance. An assurance policy where the sum assured decreases yearly. Often
used as a mortgage protection policy as the mortgage is paid off the need for assurance diminishes. See
Level Term Assurance
Decree. A court order.
Deed. A document which is signed, sealed and delivered.
Deed of Variation. A legal document which offers the terms of a will after death.
Deed of (Family) Arrangement. A formal document used to override the directions of a will after
death.
Deep Discount Bonds. An investment bond issued at a large discount. The bond does not pay interest,
but is repaid at par.
Default Investment Option. Term used to describe the investment fund into which contributions paid to
a stakeholder pension will be placed, if the contributor fails to specify an investment fund.
Default Notice. A notice served by a creditor on a debtor when the debtor has broken an agreement.
The notice must contain details of the breach, what must be done to put the matter right, any compensation
due if the matter is not resolved, and the period in which the matter must be resolved.
Defendant. Someone who is accused in a legal action.

See Plaintiff
Deferred Annuity. An annuity on which payments will be made at some point in the future often as a
pension.
Deferred Interest Loan. A type of mortgage which allows you to refer the amount of interest currently
due, and to pay it at a later date.
Deferred Period. A waiting period e.g. under PHI policies there can be waiting, or deferred, periods of
between 4 and 104 weeks before the policy begins to pay out. Usually, the longer the deferred period, the
lower the premium.
Deficit. A shortfall in income compared to what needs to be, or has been, spent.
Defined Benefit. Pension schemes which base their pension calculation on a defined formula, usually
based on salary and service. Also called final salary schemes.
Defined Contribution. Another term for 'money purchase' pensions. A pension scheme where the final
pension will be the result of an agreed contribution input, rather than an agreed formula output, as with a final
salary scheme.
Defined Contribution Regime. New Taxation regime applying to certain types of pension schemes
from April 2001. Applies to personal pensions, stakeholder pensions, new money purchase occupational
pensions and existing money purchase occupational pensions which elect to be governed by the new regime.
Definitive Deed. Name given to the trust deed which governs an occupational pension scheme. Must be
executed within two years of scheme establishment. An interim deed is often used while definitive deed is
prepared.
Demography. The statistical study of population.
Department of Trade and Industry. Government department dealing with company affairs and
operations.
Dependant. Someone who is reliant upon others.
Dependant's Pension. One of the options with a pension scheme, to provide a pension for a dependant,
on the death of the member. Usually pre-determined with a company scheme, but a separate decision with a
personal pension.
Depletion. Natural wastage or reduction.
Deposit Account. An account which pays interest, the interest being determined by reserves and long
term investment projections, rather than current investment conditions. Interest may be variable, but once
paid is not subject to fluctuations in value e.g. as with a building society account.
Deposit Administration. Type of investment used by defined benefit schemes. Contributions, net of
expense charges, are accumulated in a pool. An agreed amount of interest is added. Additional interest may
be declared and added to the fund retrospectively for the interest period concerned e.g. 6% added at
beginning of year and additional 2% declared at end of year and backdated. Pensions and other benefits are
paid from the fund as they fall due.
Deposit Protection Fund. The Banking Act 1975 established the fund to pay compensation to
depositors in the event of a bank going into liquidation.
Depreciation. The amount by which the value of an asset reduces from the beginning of one accounting
period to the beginning of the one which follows.
Derivatives. A form of investment, such as options or futures, which are based, or derive from, ordinary
shares or bonds.
Direct Costs. Costs relating directly to the production of goods or services, such as materials and
production labour.
Direct Debit. Regular payment system whereby the supplier of a service instructs their bank to collect the
requisite sum from the bank of the purchaser of the service.
See Standing Order
Direct Tax. A tax levied on capital and sources of income over which the taxpayer has no discretion. See
Indirect Tax.
Director. An officer of a company whose actions may bind the company. May be, but need not be, a
shareholder.
20% Director. A director who has actual or potential control of 20% or more of the voting shares of a
company.
Disability. In terms of critical illness and PHI policies, a condition which may give rise to a claim on a policy.
May also be termed disablement.
Disbursement. A payment of money.
Disclaimer. Legal refusal, usually written, to accept responsibility for the action of a third party or an action
attributed to the individual concerned.
Disclosure of Information.
1. Also referred to as 'utmost good faith' or 'uberrima fides'. A pre-condition of insurance contracts to
disclose all relevant facts to the insurer.
2. Disclosure at the point of sale of investment products, the amount of commission earned by the
adviser, and the extent of expenses incurred by the product provider.
Discount. A reduction of the full price of goods or services by the provider of those goods or services.
Discount House. A business which specialises in buying and selling bills of exchange.
Discretionary Approval. Section 591 of ICTA 88 allows occupational pension schemes to offer a wider
range of benefits than section 590 (see Automatic Approval) e.g. enhanced pension accrual, life assurance,
enhanced retirement cash.
See also: Exempt Approval.
Discretionary Investment Management Agreement. Detailed investment agreement specifying

the limits of discretion within which manager will manage investments. Sets out exact nature of relationship
between manager and client, degree of discretion granted and fee structure.
Discretionary Scheme. Usually used in relation to occupational pension schemes, where membership is
by employer invitation only, and where benefits and contributions may differ from member to member.
Although discretionary, equal access and discrimination rules must be adhered to.
Discretionary Service. Investment service whereby the adviser makes investment decisions without
consulting the client.
Discretionary Trusts. A trust in which the trustees may exercise their discretion, within a class of
beneficiary, as to whom should receive benefit.
Discretionary Will. A will which confers on the executors overriding powers of appointment in favour of a
specified class of beneficiary.
Disposal. Sale or distribution of goods.
Distribute. In financial terms, to share out profits as shareholders dividends.
Distributor Fund. An offshore fund which complies with the Revenues rules on distributing most of the
gains, usually up to 85%, as dividends, the dividends then being liable to income tax.
Diversification. The spread of risk by investing in a portfolio of securities each of whose performance is
affected by a different set of economic and market conditions.
Dividend. A share in company profits, usually paid annually, and related to the number of ordinary shares
held. Usually expressed as a value of the shares held e.g. 5p per share.
Dividend Waiver. Similar to 'bonus sacrifice', in that this may be a way to increase payments into a
company pension scheme i.e. the dividend is waived, and the money thus 'released' is paid into a pension
arranged by the company, as an additional employer contribution for the benefit of the individual. The
dividend must be waived before the dividend is calculated and known.
Dividend Warrant. Payment of share dividends which includes details of tax deducted at source shown
on tax credit voucher.
Dividend Yield. The dividend payment of a share divided by the current market price of the share and
expressed as a percentage.
Documents of Title. Paperwork proving ownership or possession or control of goods.
Domicile. The country that a person considers to be, and treats as, a permanent home and which forms the
closest ties. An essential element when dealing with legal and taxation matters.
Domicile of Choice. Determined by personal choice after age 16, and proven by intention to stay and
form permanent ties.
Domicile of Dependence. Determined by changes in parents domicile until age 16 (in Scotland 14 for
boys, 12 for girls).
Domicile of Origin. Determined for a child by the parents domicile at the child's birth.
Double Option Agreement. See Cross Option.
Double Taxation. This is what may happen when a person domiciled in country A works in country B. Tax
will be deducted in B, and the same income may also attract tax liability in country A. Many countries have tax
treaties (agreements), so that provided the Inland Revenue is informed of the tax already paid on income, it
will not be deducted again.
Dow Jones Industrial Average. Index of share prices traded on the New York Stock Exchange.
Dread Disease. See Critical Illness.
Duty. Tax to be paid on certain imported goods.
Dynamisation. Increasing final remuneration figures, by the increase in RPI for periods up to retirement, to
enable greater benefits to be paid at retirement from pension schemes.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -e- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
E...
Early Leavers. Generally refers to occupational pension scheme members who leave the scheme before
normal retirement age.
Earnings Cap. See 'Cap'.
Earnings Per Share. A ratio calculated as share earnings for the year divided by number of shares in
issue
Earnings Yield. A companys earnings available for shareholders dividend by the current market value of
the companys equity capital, or earnings per share dividend by the share price.
Easement. Rights of a landowner exercised over neighbouring land e.g. a right of way.
Econometrics. Mathematical methods used in analysing economic models or problems.
Economic. Whether something can be produced profitably.
Economics. The study of an economy (business, or country or trade grouping) and its related financial
structures and procedures.
Effectiveness. A measure of achievement in respect of a specific objective.
Efficiency. A measure of output compared to input.
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Eiusdem Generis Rule. One of the principle rules of interpretation of statutes, meaning of the same
kind. It is taken to mean that where general words follow specific words, those general words are interpreted
in the light of the specific words - For example, in the phrase cats, dogs and other animals, other animals
will be interpreted by the court as referring to other domestic animals.
Election. An unequivocal choice.
Electro-Cardiogram. A device to measure the activity of the heart.
Eligibility. Most occupational pension schemes have age and service qualifications that must be met before
an individual is able to join the scheme. Such qualifications may be termed eligibility conditions.
Embargo. Instruction which stops or delays something happening - usually relates to a trading situation, but
may also relate to release of information e.g. company announcement.
Embezzlement. A form of theft; the misappropriation of an employers funds by an employee.
Emoluments. Used as a term for the total earnings package when calculating the potential benefits from an
occupational pension scheme, and calculating maximum approvable benefit limits.
Employee. Someone who works under the control and direction of another in return for wages/salary.
Employee Profit Sharing Scheme. A type of share incentive scheme whereby a special trust is
established to purchase company shares which, provided certain conditions are met, will escape income tax
on profits on resale.
Employee Share Incentive Schemes. Arrangements which enable employees to purchase the shares
of their employing company, some with tax advantages, some without.
Employee Share Ownership Plans. Share incentive schemes which allow the employing company to
make tax deductible contributions into an Employee Share Ownership Trust. Trustees then use the money to
buy company shares for all participating employees, who qualify by reference to working hours and length of
time employed by the company.
Employer. Someone who controls and directs the work of another, an employee, in a master/servant sense,
and who pays that person a wage or salary for work done.
Endorse.
1. Signature on a document e.g. cheque, to show that ownership has passed, or e.g. a bill, to show that
goods have been received.
2. Add additional information to an insurance policy to amend the existing wording.
Endowment Assurance. A medium to long term life assurance/savings contract, incorporating an

investment element and a protection element. Policy proceeds normally paid on maturity or earlier death.
After early years policy acquires surrender value. See Maximum Investment Plan.
Endowment Mortgage. An interest only property purchase loan where the outstanding capital will be
repaid at the end of the term out of the fund accumulated under an endowment policy.
Engrossment. Preparation of a legal document in its final form prior to signing.
Enterprise Investment Scheme. Introduced by the November 1993 budget as a replacement for the
BES scheme which ended 31/12/93. Investors can invest up to 100,000 each year and get 20% tax relief; an
additional 20% is available if the venture fails.
Enterprise Zone Trusts. Property trusts investing in enterprise zones, or areas in which businesses
receive special government incentives for a fixed period. Investors in these trusts can write off most of their
investment against income tax liabilities.
Enterprise Zones. Designated areas throughout the country offering special tax incentives to encourage
investment in commercial property.
Equal Access. The equal access provisions of legislation relating to occupational pension scheme
membership make it obligatory to offer the same eligibility conditions to men and women doing the same type
of job.
Equalisation of Estates. When a husband and wife divide their assets so that they save the maximum
amount of tax.
Equities. Common alternative term for ordinary shares.
Equity. The value of a business (assets less liabilities, but excluding ordinary share capital) or of a property
less the amount of the mortgage.
Equity of Redemption. The rights of the mortgagor, i.e. the property owner, over the mortgaged
property. i.e. the right to redeem the property.
Equivalent Pension Benefit. A flat rate state pension benefit paid to employees who contracted out of
the graduated pension scheme that was in force before the current SERPs. (Sometimes referred to as the
Boyd - Carpenter scheme).
Escalation. A term used to describe contracted increases in pensions in payment, or in regular

contributions.
Escrow. A deed which has been delivered, but which will not become operative until a later date or until
certain conditions have been met.
Estate. More properly used in connection with ownership of land. Generally used in a wider context,
however, relating to ones personal possessions.
Estate Duty. A tax payable on an estate at death between 1894 and 1975.
Estate Planning. General phrase relating to personal financial planning, the emphasis being on passing
on intact as much of one's estate on death with as little tax as possible being paid.
Estate Protection. Generally a mix of asset reorganisation and use of packaged life products to reduce
tax liability and to pay any tax that does become due.
Ethical Investment. Making investments only in companies which are considered acceptable according
to a set of criteria concerning the type of product, environmental issues and political issues..
Eurobond. A medium/long-term bearer bond denominated in a European currency and issued by

Government or international companies.
European Currency Unit. Based on a basket of weighted currencies of EU members.
European Monetary System. Means of stabilising exchange rates among members of European Union.
See Snake and ERM..
European Monetary Union. Expressed aim of EU.
Ex gratia. A payment made without obligation
Ex Officio. Latin, by virtue of holding an office i.e. being in one job will involve taking on other jobs.
Excess Clause. A clause in an insurance policy requiring the policyholder, in the event of a claim, to bear
part of the claim.
Exchange Rate. The value of a countrys money compared with other currencies.
Exchange Rate Mechanism. (ERM) An underlying element of the European Monetary System which
enables EU countries to keep currencies within a fixed percentage of each other, prior to the introduction of
the Single Currency
Excise. A tax on certain goods produced within national boundaries, as opposed to duty, which is generally
a tax on imported goods.
Execution only. Where an adviser is instructed by a client to arrange a particular investment, without
having received advice from the adviser.
Executive Pension Plan. An occupational pension arrangement governed by occupational pension rules,
not Personal Pension rules. Open to employees only. Used by employers with few employees, and to provide
discretionary benefits.
Executor. Someone (individual or professional firm) that ensures that the terms of a will are carried out.
Exemplary Damages. Damages awarded to punish the defendant, rather than compensate the plaintiff.
Exempt Approval. The usual route to achieve Revenue approval for a group occupational pension
scheme. The main difference between this type of approval and Discretionary approval is the establishment of
a trust.
Exempt Approved Scheme. An occupational pension scheme, established by irrevocable trust or

statute, which has been approved by the Pension Schemes Office of the Inland Revenue under the Income
and Corporation Taxes Act 1988, s592.
Exempt Income. Investment income which escapes tax, such as National Savings Certificate.
Exempt Unauthorised Unit Trusts. Whilst most unit trusts are authorised, authorisation places
limitations on the types of investments permitted. Some funds do not seek authorisation, to escape these
restrictions.
Expatriate. Someone who works away from their own country.
Experienced Investor. One of the categories of investor under the Financial Services regulations; one
who regularly invests in their own right and should, therefore, have a clear understanding of the risks and
rewards involved.
Expression of Wish. Term generally used in relation to the payment of benefit from a group life
assurance scheme, whereby to maintain the tax-free status of payments from the scheme, the Trustees have
complete discretion on how to pay out the benefit. Scheme members cannot direct the Trustees, therefore, so
must limit their instructions to an informal, non-binding expression of wish. Also known as a Nomination form.
Extra Statutory Concessions. Concessions granted by Inland Revenue to permit actions not normally
allowed or to reduce or eliminate tax which would otherwise be payable e.g. Extra Statutory Concession A9
allows GPs to be in NHS Scheme and contribute to personal pension at same time.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -f- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
F...
Face Value. The figure shown on a coin, banknote, share certificate, and similar, to confirm its value.
Fact Find. An important stage in the advice cycle, one which enables the adviser to draw out all pertinent
information about a potential client, and to update information already held concerning an existing client.
Factor. An agent holding goods belonging to a principal for the purpose of eventual sale. The agent has
implied authority to sell them in his/her own name. May also be called a Mercantile Agent.
Factoring. The buying of debts at a discount.
Family Income Benefit. A type of reducing term assurance under which proceeds in event of a claim are
paid as income instalments for remainder of term. Total payments equal the reduced sum assured at time of
claim.
Fee. The charge imposed for provision of professional services.
Fee Simple. The full term is Fee Simple Absolute in Possession, meaning complete and unconditional
ownership of land.
Fiduciary. Relating to a relationship of trust, such as that between agent and principal, where the agent
owes a duty to safeguard the interests of the principal.
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Final Remuneration. The amount of remuneration which the PSO will allow to be used to calculate
maximum benefits from a pension arrangement. Can be defined as:
1. Basic salary for any twelve months out of the five years before the retirement date, plus the average
of any fluctuating earnings over a period of at least 3 consecutive years ending on the same day as
the Basic Salary.
2. The average of total earnings over any period of 3 or more consecutive years, ending in the last 10
years before the relevant date. (This method must be used for Controlling Directors and members
earning in excess of 100,000, in any year since 5 April 1987).
In addition, the Finance Act 1989 introduced an earnings cap for all post-14th March 1989 members.
Final Salary Scheme. A pension scheme providing pension benefit by reference to the scheme members
salary at or near retirement.
Finance Leasing. A lease where the lessor aims to recover capital expenditure and related costs during
the lease period.
Financial Accounting. General terms covering preparation of the ordinary business accounts i.e.
balance sheet, profit and loss account and related notes and statements.
Financial Adviser. A person offering financial advice. There are two types of adviser; those who offer
advice based on the sale of the products of a single company (tied agents or company representatives), and
those who select the most suitable product from those available in the market. See Category 1 Member.
Financial Intermediaries, Managers, Brokers Regulatory Association. An SRO in the regulatory

hierarchy, one to which Independent Financial Advisers could become registered prior to the PIA.
Financial Services Act 1986. An Act of Parliament which introduced a system of self regulation for
investment related business as it relates to the public. The Act came into full force in 1988.
Financial Services Authority. (FSA) Regulator established in 1997 to replace SIB. Will become fully
operational when it receives its full powers on N2 date. A single independent non-governmental body which
exercises wide ranging statutory powers governing the financial services and banking sectors.
Financial Underwriting. Underwriting in general is concerned with assessing the risk that a proposal
represents to the insurance company. Part of the assessment involves the health hazard. Equally important is
assessing the moral hazard attached to a proposal, part of which requires a question to be asked along the
following lines: 'Given the circumstances outlined and the information provided, is the sum assured in
question disproportionately high in the light of lifestyle/business requirements'. i.e. is there deliberate over
insurance, and why.
Financial Year. Financial years run 1/4 to 31/3 and are identified by the calendar year in which they
commence e.g. financial year 1995 is the year to 31.3.1996.
Firm. Generally used in the context of referring to a business or partnership; not a limited company. Also
used in the sense of steady, finalised e.g. firm offer.
First Death. An option under a joint life policy is to have the policy proceeds paid out on the first death of
the insured persons.
Fiscal. Relating to tax e.g. fiscal year, fiscal policy.
Fiscal Year. Period of twelve months for the purpose of tax calculation; in the UK the fiscal year runs 6th
April in one year to 5th April the following calendar year.
Five Day Trading. The settling up system for buying and selling shares on the London Stock Exchange
i.e. payment within 5 days of the trade; production of share certificates in the same time. Voluntary system,
due to become three days in 1998.
Fixed Asset. An asset (e.g. machinery, plant) used by a company on a long term basis.
Fixed Costs. Costs that do not vary as the level of business activity changes e.g. rent, some insurances.
Fixed Rate. Unchanging, not subject to movement or fluctuation, usually for a specified term. e.g. fixed rate
mortgage, where the rate reverts to the normal variable rate at the end of the fixed period.
Fixed Revaluation Rate. The rate at which a Guaranteed Minimum Pension can be revalued when
contracted out employment ceases up to State Pension Age. One of 2 (was originally 3) revaluation methods,
the other being S148 (previously S21) orders. The ability to revalue on a limited basis ceased on 6th April
1997.
Flexible Mortgage Account. Combined mortgage and current account whereby the whole of ones
salary is paid into the mortgage account using it as an ordinary current account.
Flexible Trust. One under which the settlor may change the beneficiaries to the trust property, or the way
in which the property is divided.
Float. In monetary terms, cash used for running expenses.
Floor. In business terms, the lowest acceptable level of trading and exchange.
See Cap.
Flotation. The open sale of shares in a company going public, rather than the issuing of shares in a private
company start-up.
Flow Chart. A visual explanation of an activity using diagrams. Each action is represented by a shape
which leads on to the next related action or actions, each shape attached to the next by a line to denote the
flow of the activity.
Footsie. The Financial Times Stock Exchange 100 Share Index, generally abbreviated to FT-SE 100. The
index reflects the change in the value of shares of the top 100 companies traded on the London Stock
Exchange.
Force Majeure. Events outside the control of the parties to a contract, which may have effect on the
contract. Some contracts may contain a specific clause allowing for such events, and which determine what
should happen in such circumstances.
Foreclose. To acquire the security for a loan if the loan cannot be serviced or repaid.
Forfaiting. Rather like factoring for exporters, in that a third party, the agent or forfaiter, purchases a bill of
exchange at a discount and collects payment in full from the customer.
Formula Related. See Final Salary, Defined Benefit.
Fortune 500. An annual list of the 500 largest US companies, published in Fortune magazine.
Forward Pricing. Price quoted for units where the manager arranges the underlying assets after the
investor applies for the units. The price reflects the future or rearranged asset valuation.
Forwardation. See Contango.
Four Ps. Conventional approach to marketing, namely:

Product
Price
Place
Promotion
Franchise. A licence to trade using an existing business name. The initial licence and start-up stock is
purchased for a lump sum, and an ongoing commission is paid to the licenceholder on trading turnover.
Franked Investment Income. Dividend income received by corporate investors which, because
corporation tax has already been paid on it by the distributing company, will not attract additional tax in the
hands of the investing company.
Free Cover. Usually relates to group employee benefit schemes (life assurance, PHI) where an element of
protection is offered without the need for medical evidence.
Free Standing Additional Voluntary Contribution (FSAVC). A stand alone AVC operated
outside the main pension scheme, and available to all active occupational pension scheme members, except
controlling directors.
Freehold. Complete ownership of land, held in 'fee simple absolute in possession' i.e. not likely to end on
death or after a time (fee simple); unconditional (absolute); the owners rights are immediate (in possession).
Freight Forwarder. Person or business who arranges documentation and travel facilities for companies
despatching goods to customers.
Friendly Society. A mutual benefit organisation having the main aim of providing maintenance and relief
to members during sickness and retirement. Their tax advantages enable them to offer tax effective policies,
but for limited premium levels only.
Fringe Benefits. Extra benefits, available to some or all employees, on top of salary e.g. staff restaurant,
pension scheme. Also termed Perks, which is a shortened form of perquisite.
Front End Loading. One of the reasons for heavy penalties if a life or investment policy is cancelled in its
early years, is that often the expense of selling and setting up the policy is recouped by the insurance
company in the first year or two of the policy. This method of expense allocation is called front end loading.
Fund. Money set aside and earmarked for a specific purpose e.g.
1. Pension fund - money set aside to accumulate for retirement.
2. Sinking fund - money set aside for the repayment of a loan.
Fund Links. With unit linked investment policies it is often possible to spread the premium or investment
between a number of funds linked to the policy.
Funded Unapproved Retirement Benefit Scheme. The 1989 Finance Act allowed unapproved
pension schemes to be set up to provide benefits in excess of the 'normal' benefits for approved schemes.
Both types may now run in tandem.
Funding Rate. See Contribution Rate.
Fungible.
1. A security which can be exchanged for another of a similar, or the same, type.
2. A fungible asset is one which is so similar to another as to be indistinguishable.
Futures. An agreement to buy or sell commodities, shares or currency at a future date for a price fixed
today. Futures traders do not intend to take delivery of the subject of the contract, but try to buy or sell
contracts in anticipation of their value increasing or decreasing.
Futures and Options Fund. An authorised unit trust which can invest a limited amount of its fund in
derivatives. A Geared FOF may invest a larger proportion into derivatives.
Future Value. The value at which a sum of money invested now will grow when invested at a given rate or
rates of interest during the period. See Current Value and Present Value.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -g- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
G...
Garage. To transfer assets to another company to reduce tax liability.
Garnishee Order. A court order preventing a person owing money to another person from paying it, until
that second person has satisfied other claims outstanding against him or her.
Gazumping. Accepting an offer which is later rejected in favour of a higher offer when selling a house.
Particularly prevalent in the late 1980's when house prices increased almost on a daily basis.
Gearing. The ratio of ordinary share capital and reserves to borrowings.
Gift with Reservation. A transfer of value in which the donor retains an interest. e.g. the donor gives a
house to a friend, on condition the donor continues to live in the house.
Gifts. See Transfers.
Gifts on Marriage. Gifts in consideration of marriage are, under IHT rules, exempt lifetime transfers within
certain monetary limits, and vary in amount depending on the family relationship of the donor and recipient.
Gilts. 'Gilt edged securities' are fixed rate bonds issued and guaranteed by the UK government. The bonds
pay fixed interest. Traded on the Stock Exchange, and can also be purchased at Post Offices through the
National Stock Register. Originally, the bond certificates had a gold border, hence the name
Gilt Strip. Where each interest payment and the redemption value become investments in their own right
which can be bought and sold.
Girobank. Banking system run through the Post Office which permits account holders to transfer funds from
one account to another, not necessarily in the same system, without charge and without use of cheques.
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Give as you earn. A system of donating to charity direct from ones salary, which attracts tax relief at the
highest tax rate payable.
GmbH. Gessellschafft mit beschrankter Haftung. Literally, company with limited liability; a German private
company.
Golden. Used in a number of ways e.g.

1. Golden Hello - cash inducement to encourage someone to join a new company.
2. Golden Handcuffs - a contract which makes it financially attractive to stay, but potentially financially
unattractive to leave.
3. Golden Handshake - a large cash sum, some of which will be tax free, paid to employees who leave,
usually not of their own accord, before the end of a service contract.
4. Golden Rule - a rule of statutory interpretation allowing the court to depart from strict procedures of
interpretation of words if it would lead otherwise to an absurd result.
Goodwill. The value of a business over and above its book value of assets, which may literally represent
the goodwill of customers or the skill and expertise of company employees. An intangible asset which may
appear under fixed assets.
Gower Report 1982. A government sponsored report into investor protection. The results ultimately lead
to the enactment of the Financial Services Act 1986 which established a policy of self regulation overseen by
a Government agency i.e. SIB.
Graduated State Pension Scheme. The forerunner of SERPS, which operated from 1961 to 1975. A
money purchase arrangement, where units of weekly pensions were purchased by units of contribution of
7.50 (males) and 9.00 (females). The pension units were revalued up to State Pension Age. Discontinued
in 1975, due to the minimal retirement benefits being accrued. The unit of contributions are to be equalised to
7.50, under the Pensions Act 1995.
Graph. A drawing representing the relationship between two sets of data, one set represented on a
perpendicular scale or axis, the other on a horizontal scale or axis. The relationship is plotted where the two
scales intersect, the line between meeting points generally being called the graph.
Grant of Probate. A certificate issued by an English court validating a will and authorising the executors to
administer the estate.
Gratuity. Usually taken to mean a cash gift or tip for services rendered.
Also a cash sum paid to British service personnel on leaving the service.
Green Book. London Stock Exchange publication detailing USM trading regulations.
Green Card.
1. Car insurance certificate used by British motorists driving abroad.
2. US work permit needed by foreigners working in the US.
Green Currency. EC nominal currency for dealing in agricultural payments, each member currency
having an agreed exchange rate.
Green Paper. Preliminary report on proposals for a new law to be discussed in Parliament. Precursor to a
White Paper.
Greenback. Slang for US dollar bill.
Greenmail. Almost blackmail, in that the exercise involves buying enough shares in a company to threaten
a takeover bid and all the expenses that exercise involves, but then selling the shares back to the company at
a higher price than was made.
Gross. The sum total, without deduction.
Gross Domestic Product. The total value of finished goods and services produced within an economy
over a specific period, normally one year.
Gross National Product. GDP plus net property income and profits from abroad.
Gross Profit. The difference between cost of sales and revenue before deducting general
running/overhead expenses.
Grossing Up. Converting a net amount into its corresponding gross amount e.g. calculating a rate of return;
anticipating a tax deduction on a gift or will bequest.
Group Life. A life assurance scheme operated by an employer for his employees. May be stand-alone or
running alongside an occupational pension scheme. Will pay out, tax free, a maximum of 4 times qualifying
salary, (final remuneration), plus spouses/dependants pensions.
Group Pension. Generally operated by an employer for a group of employees and may be a 'conventional'
scheme where the employer helps fund the arrangement; or may be a group personal pension scheme where
the grouping is merely for administrative convenience. Alternative name for occupational pension scheme.
Group PHI. Group PHI is usually set up by the employer. Unlike personal PHI, there may be an element of
free cover, and any claim is generally paid to the company, which continues to pay the employee via the
PAYE system.
Guaranteed Annuity Option. Some pension policies may have a safety net guarantee as a safeguard
against heavy market fluctuations.
Guaranteed Death Benefit. A minimum amount of life assurance paid out under a unit-linked policy if
the fund value is not higher.
Guaranteed Income Bond. Single premium insurance bond that guarantees the repayment of a capital
sum at a future ate.
Guaranteed Minimum Pension. When a group occupational pension scheme contracts out of SERPS,
the scheme must provide a minimum pension in respect of the amount of state pension foregone. This is the
GMP, and is approximately equal to SERPS, for the same period. A member of such a scheme is guaranteed
to receive a pension at State Pension Age not less than the SERPS equivalent. The GMP principle ceased for
benefits accrued after 6th April 1997, when the Reference Share principle was established.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -h- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
H...
Haggle. Verbal negotiations regarding the price of goods or services, during which the seller will try to keep
the price high, and the buyer will try to bring the price down.
Hancock Annuity. An immediate annuity purchased at retirement by an employer for an employee, or a

beneficiary of an employee.
Hang Seng Index. Arithmetically weighted index based on the capital value of leading shares quoted on
the Hong Kong stock exchange.
Headroom Test/Check. 'Maximum benefit' test for FSAVCs to ensure that FSAVC plus main
occupational scheme benefits together do not produce more than the maximum benefits permitted by the
PSO. Operates when contributions to FSAVC exceed 2400 p.a
Health Insurance. See Private Medical Insurance.
Hedge. Action taken against the possibility of loss caused by a change in prices e.g. by buying raw materials
in advance of having to supply the finished goods.
Hereditament. Generally, property capable of passing to an heir.

1. Corporeal hereditaments include land and buildings.
2. Incorporeal hereditaments are rights in land such as easements (e.g. a right of way) and profits a
prendre (e.g. the right to take produce from the land or to graze livestock on it).
Heuristic. Problem solving using non-analytical techniques eg de Bonos "Lateral" thinking and other
creative thinking techniques.
Higher Rate Tax. Any rate of income tax in excess of basic rate tax.
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Hire. Short term use of an asset in return for a fee.
Hire Purchase. A method of buying goods by paying regular sums over an agreed period. The sums
involved will usually cover the cost of the item and an element of interest. At the end of the hire period, the
asset will legally pass to the hirer on payment of a nominal sum.
Histogram. A bar chart where the area, rather than just the height of the bar, serves as the comparison.
Historic Pricing. Price quoted for units based on existing valuation of underlying fund assets.
Hive Off. Generally taken to mean separating a small, autonomous part of a business so that it becomes a
separate, subsidiary business in its own right.
Holding Company. Parent company with controlling interest in subsidiary company. A company which
often exists only to hold shares in a group of subsidiary companies, and which holds over 50% of the ordinary
shares of those companies.
See Parent Company.
Holdover Relief. Relates to gifts of business property where no CGT becomes payable at the time of the
gift. As a result, the value in the recipients hands is deemed to be reduced by the amount of gain, so that the
amount of gain will be high on subsequent disposal.
Holistic. When used in conjunction with financial planning, refers to the consideration of all aspects of a
persons financial involvements.
Home Banking. The use of a computer and special terminal connection to conduct basic banking
transactions such as paying bills, transferring sums from account to account.
Home Income Plan. A plan to use ones home to generate extra income. The basic idea is to borrow
money (using the home as security) to buy an annuity. Part of the annuity pays the loan repayments or loan
interest, the balance representing the extra income.
Home Responsibilities Protection. A scheme which protects entitlement to state basic pension during
periods one is at home caring for another person.
Home Reversion Scheme. Similar to a home income plan, except here the money is raised by selling
ones home, but retaining the right to live in it until death.
Home Service. In insurance terms, insurance that is transacted by collecting agents calling at
policyholders homes for premiums due. Both premium and sum assured levels are of low value.
Honorarium. Money paid out for services rendered voluntarily i.e. when a fee has not been requested.
Horse Trading. Haggling, hard bargaining.
Hospital Cash Plan. An insurance which pays out cash sums of varying amounts depending on the
reason for a hospital stay, and determined by the length of the stay.
Hospital Report. This may be requested during the underwriting of a life assurance or PHI proposal, when
relevant information relating to hospital treatment may not be available from the GP.
Hybrid Schemes.
1. Occupational pension schemes which combine money purchase and final salary benefits.
2. Also used to describe self administered schemes marketed by insurance companies where some
assets are invested in insurance company's funds.
Hyper-. Prefix meaning extremely large, as in hyperinflation, or extremely high inflation.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -i- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
I...
Illustration. Figures showing projected costs and/or returns from various packaged products in a format
determined by the regulator.
Imputation System. The system of dividend taxation, where the company pays Advance Corporation
Tax (ACT) on dividends, and the dividends are assumed to be paid net of basic rate tax. The shareholder
receives a tax credit with the dividend cheque as proof of tax paid. Ceased on 6th April 1999 as a result of the
abolition of Advanced Corporation Tax.
Imputed costs. Estimated costing of what a company gives up by not selling or leasing an asset rather
than continuing to use it in production.
In Re. Latin, in the matter of; sometimes abbreviated to re. Used to head some law reports, followed by
the name of the person or subject the case concerns.
Incapacity Benefit. A state income benefit payable in the event of sickness or disability to a qualifying
person.
Incentive. See 'Contracting Out Incentive'.
Income. Money received from employment (earned income) or investments (unearned).
Income Support. State supplementary income payable to qualifying persons if their income from other
sources falls below a state determined level.
Income Tax. Direct tax levied on income, whether earned or unearned.
Incorporation. The act of turning a business into a limited liability company.
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Increment. Regular, automatic increase.
Indemnify. To provide an indemnity.
Indemnity. Guarantee payment or compensation following a financial loss.
Independent Financial Adviser. Someone authorised by the PIA and qualified by experience and
examination to provide financial advice, who is not working for any single product provider company.
Independent Taxation. Separate taxation of husband and wife introduced in April 1990.
Index. List of items in performance or alphabetical order.
Indexation. Price adjustment which allows capital or income to take account of, or benefit from, inflation.
Indexed. Also Index-linked. Growth in income or capital which follows one of the many growth or
performance indices e.g. Retail Prices Index, Average Earnings Index.
Indirect Costs. Costs which cannot be related directly to the production of specific goods or services, such
as rent, overheads and selling costs.
Indirect Tax. A tax that is not paid directly to the government, like income tax, but through another medium
involving choice, such as buying goods which have VAT charged on them. See Direct Tax.
Individual Pension Accounts. (IPA) A form of investment medium introduced in April 2001. They
enjoy the same tax advantages as other eligible investment available to exempt approved pension schemes.
Can be transferred between pension arrangements.
Individual Savings Account (ISA). A tax free investment contract, allowing investment into cash, life
assurance and stocks and shares. It replaced PEPs and TESSAs for new contributions from April 1999.
Different investment limits apply to maxi and mini ISAs, can be funded by lump sum or regular saving.
Industrial Assurance. Low value life assurance and savings policies issued by certain life companies
and friendly societies. Premiums used to be collected by hand, door to door, but may now be paid by monthly
bank mandate.
See Home Service.
Industrywide scheme. Scheme set up by employers in the same industry, having the advantage of
offering continuous accrual of benefit if moving from one employer to another within the industry i.e. obviates
potential reduced benefit through transfers.
Inflation. In simple terms, when production costs increase for the same level of output, the result is often
an increase in the product price. This in turn results in a reduction in purchasing power, because more is
needed to buy the same goods. This leads to higher wage demands, which leads to higher production costs,
and so on. The results of this cycle is price inflation, which is what is generally meant by the term inflation.
Inflation Accounting. A system of accounting, such as current cost accounting, that seeks to
compensate for the deficiencies in conventional historic cost accounting in taking in to account the variable
cost of money during an inflationary period.
Inherit. To receive something from the estate of someone who has died.
Inheritance Tax. Tax payable on certain gifts and transfers during lifetime. Also payable on estate at
death if its value exceeds the inheritance tax threshold figure.
Initial Units. With some unit linked products, management expenses are recouped by having two types of
unit. Initial or capital units are purchased by new contributions for one or two years, then accumulation units
are purchased thereafter. The initial units have a higher charge to help offset expenses.
Injunction. Court order forbidding a particular action or inaction.
Insider Trading. The buying/selling of shares on a recognised stock exchange by someone employed
(currently or within the last six months) by the company concerned, and who is in possession of restricted
information not generally available on the market. The Criminal Justice Act 1993 contains legislation
attempting to deal with the problem.
Insolvency. The inability of a business to meet its liabilities.
Inspector. In insurance terms, an inspector of agents i.e. someone representing an insurance company
who calls upon intermediaries who hold an agency with the company. The role is generally seen as a new
business generating one.
Institutional Investor. It is estimated that over 90% of UK shares are owned by such investors, which
are generally pension funds, unit trusts and insurance companies.
Instrument. A legal document, generally relating to a financial transaction.
Insurable Interest. A basic requirement of insurance in order for the contract to be valid; there must be
present the possibility for monetary loss in the event, say, of the death of the life assured.
Insurance. In return for agreed payments, the recipient agrees to recompense the payer in the event of
certain events e.g. loss, damage, injury, death. Encapsulated in the phrase You pay the small cheques, we
pay the big ones.
Insurance Broker. Somebody who derives an income from arranging insurance policies.
Insurance Brokers Registration Council. A body established under the Insurance Brokers
Registration Act 1977 to register and regulate all those who wish to be known as 'Insurance Broker'. No
longer in existence. IBRC members are now controlled directly by the Financial Services Authority.
Insurance Ombudsman Bureau. A body established by insurance companies in 1981 to investigate

consumer complaints.
Insure. To protect something of value by means of risk transfer i.e. payment of small regular sums to a
specialist company (insurance company) so that in the event of loss or damage, the company will pay
monetary compensation.
Insurers. General term for insurance companies.
Intangible. Property or belongings which cannot be touched or seen, but which have value e.g. goodwill in
a business.
Intangible Asset. Non-physical asset, such as goodwill, trademark or patent.
Inter Spouse Transfers. A tax-free transfer under Inheritance Tax rules.
Inter Vivos. Used in the phrase gift inter vivos, or gifts between living individuals and used in conjunction
with the seven year gifting period for potential Exempt Transfers (PETs) under Inheritance Tax rules.
Interest.
1. Money received as income from investments.
2. Money paid for the use of borrowed money.
3. Part ownership of something e.g. an interest in possession, or controlling interest.
Interest in Possession. An entitlement to the income from trust property.
Interim. Occurring during a companys financial year rather than at its end. Interim results are often
accompanied by interim dividends, whereas the year end accounts may give rise to final dividends.
Interim Deed. A temporary measure whilst waiting for the full and final version to be engrossed. Often
used when establishing group pension arrangements.
Intermediaries. Generic term referring to anyone who assists two other parties to do business e.g. IFA
effectively bringing together client and insurance company.
Intestacy. The result of having died intestate i.e. without a valid will.
Intestate. Without a valid will.
Intrinsic. Inherent and essential to the object concerned e.g. intrinsic value may have no relationship to the
real value, the intrinsic value being, say, sentimental.
Introducers Agreement. An agreement used where a non-registered individual introduces a potential

client to an authorised financial adviser. Necessary where the introduction is to a tied agent, as the inference
of the introduction is that not only is the adviser being recommended, but also the advisers limited range of
products. In general use with IFAs also. In both cases, such agreements formalise the relationship to ensure
the introducer does no more than introduce.
Inventory. A list of stock or contents.
Invest. To put money into trading ventures, existing contracts or organisations (e.g. shares or building
societies) with a view to producing income and/or increases in capital value.
Investment. The use and management of money with the aim of increasing its value by means of
generating income and/or capital growth.
Investment Bond. A single premium unit linked life policy containing a nominal amount of life cover. A
non-income producing investment. Any partial or full encashment proceeds are subject to special tax rules.
Investment Business. Under the Financial Services Act 1986 this phrase has a specific meaning,
covering all life assurance, pensions, investments, but not covering most PHI, term assurance and medical
insurance contracts. The common link is the investment element.
Investment Managers Regulatory Organisation. (IMRO) Self Regulatory Organisation which

regulates investment managers, including those who advise institutional or corporate clients. Membership
includes unit trust, OEIC, investment trust and pension fund managers, banks and investment management
subsidiaries of life assurance companies.
Investment Trust. A public limited company which invests in shares of other companies. Its shares are
traded on Stockmarket. They are not true trusts and can borrow money to buy additional investments.
Investor. Person or organisation who invests money or time.
Investor Protection. The sole purpose of the Financial Services Act 1986.
Investors Compensation Scheme. A scheme established by the S.I.B. in August 1988 to help
recompense for losses within certain limits by failure on the part of the authorised business.
Investors Compensation Scheme Levy. General term for payment into the Investors Compensation
Scheme.
Invisible.
1. Invisible Assets - assets which have value but cannot be seen, such as patents.
2. Invisible Earnings - foreign currency earned by providing services, rather than goods, abroad e.g.
insurance.
Invitation to Treat. A pre- offer and acceptance stage which may lead to formulation of a contract e.g.
goods displayed in a window are deemed an invitation to treat, not an offer for sale.
Invoice. A formal request for payment for goods and/or services previously supplied.
Irredeemable. Certain government bonds are irredeemable (e.g. war loans) which means that whilst they
pay interest they have no maturity date, and so will be repaid only at the discretion of the government.
Irrevocable. Cannot be rescinded or changed. An irrevocable trust is a necessity for exempt approval of a
group pension scheme.
ISA Mortgage. An interest only mortgage where the outstanding loan at redemption will be repaid using
the proceeds of a series of ISA investments. The ISAs do not guarantee repayment of the loan at the
redemption date.
Issued Capital. The amount of the authorised capital of a limited company that has actually been allocated
i.e. not necessarily 100%.
See Authorised Capital
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -j- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
J...
Joint Life. A life policy option where life assurance is taken out by two (or more) individuals, the payout
coming with either the first or final death.
Joint Tenancy. Where a property is in the names of two owners, on the death of the first owner, the
property passes in its entirety to the survivor.
See Tenants in Common.
Jurisdiction. Strictly speaking, the legal power of a court, but often taken generally to mean within a
particular sphere of influence.
GLOSSARY
main index |
Abbreviations
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Financial Terms Glossary -k- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
K...
K. Used alone, taken as an abbreviation for a thousand.
Keogh Plan. US private pension plan.
Key Employee. An individual who makes a significant profit contribution to the business activity and
profitability of a company, and whose loss would have an effect on the continued profitability of the business.
Key Employee Insurance. Life assurance or PHI contracts, taken out by the company to help
compensate the business for the loss through death or disability of the element of profit contributed by a key
employee.
Key Features Document. A document that will contain key information, such as:
1. details of what the policy might be worth in future years.
2. details and explanation of the charges made on the policy.
3. an explanation of the purpose, type, and risk level of the policy
Know Your Client. Legal obligation on financial salespeople (such as PIA members and stockbrokers) to
record all aspects of a clients personal financial situation and to ensure that all advice takes this into account.
See Best Advice.
GLOSSARY
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Abbreviations
Financial Terms Glossary -k- (provided by FSEC Ltd)
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Financial Terms Glossary -l- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
L...
Land Registry. Established by the Land Registration Act 1925 to maintain details of land ownership e.g.
describes the land and any rights, the owner and any charges noted against the land.
Last Survivor. Term used in joint life policies where the policy proceeds are paid out only on the last
death.
Launder. To clean up dirty money earned through illegal means by easing it into the normal monetary
systems so that all traces of its origins are removed, or washed out. The Criminal Justice Act 1993 contains
legislation dealing with money laundering and insider dealing.
Lease. A lease is a contract by which a property owner grants exclusive use of property or assets for an
agreed period.
Leasehold Property. Property held under lease.
Ledger. Book in which accounts are kept.
Legacy. Property inherited on the death of someone.
Legal Tender. The form of currency in which someone has the legal right to pay a debt , and which a
creditor must accept.
In the UK, banknotes have unlimited legal tender, but, for example, 50p coins have legal tender only up to
10.
Legatee. Someone who receives a legacy.
Lending Multiple. Money borrowed to help with a house purchase is usually calculated with reference to a
ceiling multiple of income(s).
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Lending Panel. Generally used in relation to a group of lending organisations e.g. building societies, used
by a life company to provide advances for house purchase.
Lessee. Someone who uses an asset owned by someone else, its use being governed by an agreement
called a lease. The Lessor is the owner of the asset.
Let. To make available living or office accommodation in return for rent.
Letter of Credit. Document from a bank authorising payment on behalf of a client to a third party.
Letters of Administration. Authority granted by the court to an individual permitting that person to
administer the estate of someone who died intestate.
Letters of Exchange. A method of creating a trust for a one-person pension arrangement such as an
EPP. The method works simply by the employer writing to the employee setting out the scheme details; the
employee replies accepting.
Level Premiums. The incidence of mortality shows that the risk of death generally increases with age. To
match this risk increase, premiums should, in theory, increase at the same rate. As this would at some point
make the cost prohibitive and unattractive, it has become the norm to calculate a premium that will remain
level throughout the term of the contract. This effectively means 'overpaying' at the start of the contract, which
will counterbalance the 'underpayment' later.
Level Term Assurance. A form of life assurance. The sum assured remains contact throughout the term
of the policy and is paid on death during the term. Policy does not have a surrender value.
Leverage. See Gearing
Leveraged Lease. Where the lessor obtains the funds to purchase the leased asset from a third party on a
non-recourse basis.
Levy. A tax, duty or fine imposed by a government or other organisation, often on a per capita basis.
Liabilities. Items which are owed e.g. loans, debts in general.
Licence. Officially authorised paperwork, effectively a permit to do something e.g. import or export licence.
Licensed Deposit Taker. Business which is licensed to take money on deposit and pay interest on it e.g.
building society or friendly society.
Lien. A charge or claim over an asset, often for security as a loan.
Lieu. As in "In lieu of.....", meaning instead of.......
Life Assurance. A general term covering a variety of types of personal protection policy. The one thing
they all have in common is that a payout on death is the main purpose for the contract. PHI, for example,
would not be covered by this term, nor would pensions, nor some lump sum investments.
Life Assurance Premium Relief. Tax relief, still available, on policies in force and taken out pre-14th
March 1984.
The relief was abolished at that date for all new policies.
The actual rate has fluctuated, generally being half the basic rate tax.
Life Assurance and Unit Trust Regulatory Organisation. In addition to being authorised to do
long term insurance business by the DTI, insurance companies had to register with LAUTRO, prior to PIA, in
respect of the marketing of its products.
Life Assured. The person on whose life the life assurance policy is based.
Life Business. General term which can be applied specifically to life assurance, but often is applied to all
life, pensions, savings and investment business.
Life Insurance. See Life Assurance. Although life insurance is probably the more correct term, life
assurance has become generally accepted as the generic term for the market.
Life Interest Trust. A trust which controls property which may be held only as life tenant.
Life of Another. Means of writing a policy on the life of another person. Policyholder receives policy
proceeds on the death of the life assured. Insurable interest must exist when policy established. Often used
as security against death of spouse or business partners.
Life Offices. Generally taken to refer to those companies which sell life assurance, pensions and related
packaged products.
Life Tenant. Person with an interest in property for their life only e.g. income from investments. At death
the interest ceases and cannot be passed on by the life tenants will.
Limited Liability. A form of business which limits liability to the assets of the company, and does not
extend to the personal assets of the shareholders or offices of the company.
Limited Revaluation Premium. A premium payable to the State when a member of a contracted out
salary related occupational pension scheme ceases to be contracted out and the method of revaluation is
limited (one of 3 available options). The pension scheme contracts to revalue the GMP in line with the
Average Earnings Index up to 5% pa. The state provides revaluation above 5%, on receipt of the LRP. This
method of revaluation ceased on 6th April 1997.
Liquid Assets. Assets that are easily converted to cash.
Liquidation. Distribution of a company's assets to creditors prior to closing down.
Liquidator. Person appointed to wind up a company and to distribute company assets, or their value, to
creditors and shareholders.
Liquidity. Cash and readily convertible (to cash) assets. The liquidity of a business is its ability to meet
outstanding debts.
Liquidity Ratios. It should be realised that ratios are static, rather like the balance sheet, and should only
be used to discern trends.
1. Current (working capital) ratio is a guide to financial safety in that it shows how many times current
assets will cover current liabilities. It is expressed as Current assets divided by current liabilities
2. The acid test ratio reveals the capability of a business to repay current obligations immediately, and
is calculated as:
Cash and marketable securities and debtors divided by current liabilities
3. In some cash based businesses, the cash ratio may be a better guide. This is practically the same
as above, but excludes debtors.
Listed Company. A company that satisfies the listings rules of the Stock Exchange, and whose shares are
quoted and traded on the Exchange.
Listed Security. A share which is quoted on a stock exchange. Specifically in the UK, this would be a
listing in the main market (as opposed to the unlisted securities market or the third market).
Lloyds. The Corporation of Lloyds, or Lloyds of London, is effectively a large insurance market made up of
small syndicates whose members underwrite insurance risks i.e. promise to pay out in the event of loss.
Loan Stock. A security paying a fixed rate of interest which returns capital at the end of a stipulated period
of time. Secured by the companys assets.
Locum. Generally accepted short form of locum teneus, or short term substitute for an IFA in the event of
absence from work for any reason e.g. holiday, sickness. The locum must be able to provide the same level
of advice as the principal.
London Commodity Exchange. A marketplace for agricultural product derivatives.
London International Financial Futures and Options Exchange. A marketplace for financial
instrument derivatives.
London Metal Exchange. A marketplace for base metal product derivatives.
Long Term Care. A generic term given to an 'add on' contract option to, say, a whole of life contract.
Basically, cash is taken from the policy and used to purchase an income to cover additional expenses
incurred by old age.
Longs. Government stock maturing in 15 years or more.
Loophole. An admissible interpretation of law or regulation which leads to a legal way of avoiding the law.
Low Cost Endowment. A variation of the with profit endowment, but is combined with a decreasing term
assurance so that the investment build up need not be quite so steep, thus reducing the cost.
Low Start Endowment. Endowment policy designed for use with mortgages where premiums increase
at a fixed rate over a period of years.
Lower Earnings Limit. The minimum amount which must be earned in any pay period before NIC
becomes payable. Also the lower limit for SERPS accrual. Income qualifying for SERPs benefit forms a band
of earnings between the Lower Earnings Limit (LEL) and an Upper Earnings Limit (UEL), this latter being
usually between 6 and 7 the LEL.
See also Middle Band Earnings.
Lower Rate Tax. The rate of tax paid on the first band of income which exceeds the personal allowance.
GLOSSARY
Abbreviations
main index |
back page

Financial Terms Glossary -m- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
M...
Macro. Prefix meaning large, covering a wide area, often used in connection with economics.
Maintenance. Provision of basic necessities of life by one spouse to another when separated.
Also Alimony.
Managed Fund. Usually a fund choice with a unit-linked policy Managed funds are generally made up of
units from other funds e.g. equity fund, international fund, so that it represents a wide base for the investor
happy to accept a medium risk investment. In most cases the fund receives the same investment
management attention as any other fund, so perhaps a better name in those circumstances might be 'mixed
fund'.
Management Accounting. This describes the analysis of historical and current accounts of revenue and
expenses to assist managers in their decision making.
Management Buyout. When the senior management of a company, usually with institutional funding,
take control of the company by buying its shares.
Management Charge. An annual charge on investment funds to pay for their management, usually
expressed as a percentage of fund value.
Mandate. Instruction, order, permission to allow or permit something to happen. Usually written e.g. bank
mandate, as in a standing order to pay sums to another account.
Mandatory. Compulsory, something which must be done.
Margin. The difference between one thing and another. In financial terms, usually relates to percentage
differences between costs and prices. In general terms, allowable flexibility between, say, safety and danger.
Marginal. Near the limit of acceptability.
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Marginal Cost. The change in cost resulting from production of a single additional unit of production.
Marginal Costing. The assignment of variable costs only to production costs, excluding fixed/overhead
costs.
Marginal Tax Rate. The highest tax rate an individual pays, usually taken to mean less basic rate tax
(23% in 1998/99).
Market.
1. Place or area where items may be bought and sold.
2. Groups of potential purchasers who might buy an item.
Market Level Indicator. An index comparing the values of fixed interest securities and shares, used in
determining state scheme premiums.
Market Capitalisation. The value of a company on the market, computed by multiplying the number of
shares by the current market price.
Market Counterparty. A category of investor identified under financial services legislation. Person who,
in course of own profession, transacts the same type of business as he transacts on his own behalf via an
adviser. Deemed to have full understanding of nature and risks of the investment transaction e.g. stockbroker
purchasing shares.
Market Maker. A dealer in securities on the stock exchange who deals as principal rather than agent. This
used to be the role of the stock jobber.
Market Value. The value of an asset to a third party on the open market.
Matched Bargain. Where the purchase and sale of the same stock are matched, quantity for quantity, at a
price agreed by buyer and seller, rather than on the open market.
Material Fact. Information relevant to the discussion or situation e.g. information to be provided on a life
assurance proposal form.
Maturity. In financial planning terms, the date at which a financial document or insurance policy becomes
payable.
Maximum Contributions. Pension contracts, both PPP and occupational, have maximum contribution
levels. The PPP maxima are set out in a fixed table, the occupational effective maxima are generally
governed by the projected benefits to prevent overprovision.
Maxi ISA. Can contain all three investment types: cash, life assurance or stocks and shares. Must contain
an equity element. Maximum contribution limits apply to each element and total investment. A maxi ISA and
mini ISA cannot be established in the same tax year.
Maximum Benefit Regimes. Term used to describe three categories of pension scheme membership
used by the Inland Revenue when calculating maximum benefits. Regimes introduced in 1987 and 1989 give
rise to three categories: pre '87, '87 - '89 and post '89 membership.
Maximum Investment Plan. Effectively, a unit linked version of the endowment policy i.e. a regular
savings plan with life assurance cover, paying out on maturity or earlier death or surrender. The major
difference is that MIPs do not attract bonuses, their value depending on the unit price.
McDonald Report. A report produced on training and competence standards in the financial services
industry, and making recommendations on competence, training, knowledge, skills and entry level
qualifications.
Mean. Short for "arithmetic mean" meaning the average of a group of figures.
Median. A point in the middle of a set of number; a sort of mean.
Medical Attendant's Report. Evidence, provided by the proposers doctor, of a proposers medical
history which may be required during the underwriting stage of the proposal process.
Medical Evidence. Because of the risk implicit in any proposal of life assurance, an insurance company
will reserve the right to call for evidence of the proposers state of health during the proposal process.
Medical Examiner's Report. In addition to the medical history received from the proposers own doctor
in the MAR, it is sometimes necessary to seek additional information regarding current state of health. This is
done via medical examination, the result being sent to the underwriting department in the form of a MER.
Medium. A gilt which is due to be redeemed after five to 15 years.
Memorandum of Association. In conjunction with the Articles, the Memorandum forms the official
documentation of the limited company. Where the general purpose of the Articles is to govern the internal
operation of the company, the Memorandum governs the companies external operations and business
relationships.
Mercantile. Relating to business, commercial activity.
Mercantile Agent. See Factor.
Merchant Banks. A bank which deals in corporate finance rather than domestic bank accounting.
Merchantable Quality. To be fit (in respect of goods purchased) for the purpose for which they are
bought.
Merger. The union of two or more companies. Distinct from a takeover where one company purchases
another.
Mezzanine Finance. Business finance following the start-up phase of a business. Less risky, in general,
than start up finance.
Micro. Prefix meaning very small.
Middle Band Earnings. Earnings between the lower earnings limit and upper earnings limit. Used to
calculate an employee's SERPS benefits and National Insurance contributions. Only employer NI
contributions payable on earnings exceeding middle band earnings.
Mini ISA. Can contain only one of three investment types: cash, life assurance or stocks and shares. Up to
three mini ISAs can be held in each tax year. Maximum contribution limits apply. A maxi ISA and mini ISA
cannot be established in the same tax year.
Minimum Contributions. Contribution payable to an appropriate personal pension by the DSS in respect
of a member who has contracted-out. Consists of an age related rebate of NI contributions plus basic rate tax
relief on employee's element of the rebate.
Minimum Funding Requirement. (MFR) A minimum funding standard that applies to final salary
pension schemes. Regulations detail the assumptions to be used in the calculations. If a scheme fails to meet
the MFR, action must be taken to restore the funding level within a specified timescale.
Minimum Income Guarantee. (MIG) Means tested benefit to help individuals whose income in
retirement is low. Amount of guarantee varies depending upon individual circumstances
Minimum Payments. Minimum amount which an employer must contribute to a contracted-out money
purchase pension scheme. Consists of a flat rate rebate paid by the employer, topped up by DSS with age
related rebates after the end of the tax year.
Minority Interest. A minority interest arises where a company owns shares in a subsidiary company, but
not all of the shares.
Minors. Generally, someone not of voting age.
Minutes. Written record of a meeting.
Mitigate. To alleviate, make less onerous.
Modelling. Using numerical methods and relationships to represent real life situations as a basis for
business projections.
Monetarism. Economic theory that the volume of money on issue affects prices; therefore, inflation can be
controlled by controlling the money supply.
Money Market Accounts. The money market operates through the buying and selling of short-term
loans and securities e.g. Treasury bills and bills of exchange. Private investors, individuals or companies, can
invest in this market, usually with a minimum input of 50,000, and receive a higher rate of interest over a
shorter term.
Money Purchase. See 'Defined Contribution'.
Monopoly. The control of a market by one source of supply.
Moral Hazard. The potential for the attitudes, lifestyle and conduct of individuals to affect the level of risk
attaching to a proposal for life assurance.
Moratorium. A temporary halt.
Morbidity. The incidence of sickness and disability. Used as a guide in calculating PHI premiums, in a
similar way to the use of mortality statistics with life insurance.
Mortality Risk. The risk of the life assured dying during the term of the policy.
Mortality Table. A statistical table showing the likelihood of death at any particular age.
Mortgage. A legal charge on a property, giving security for a loan. The borrower (mortgagor) gives the
mortgage to the lender (mortgagee).
Mortgage Deed. Evidence of the contract between lender and borrower, secured by legal charge.
Mortgage Indemnity Guarantee. (MIG) A single premium indemnity policy paid for by the borrower
which insures the lender against losses in excess of 75% (usually) of the loan-to-value sum.
Mortgage Interest Relief At Source. (MIRAS) Abolished for the majority of new and existing loans
with effect from 6th April 2000. System of tax relief on property purchase borrowing, whereby repayments to
the lender are paid net of tax on the interest on the loan. The lender then reclaims the relevant sum from the
Revenue.
Mortgage Protection. Generally refers to a type of reducing term assurance used in conjunction with a
repayment mortgage. The idea is for the sum assured under the policy to reduce in line with the outstanding
loan.
Mortgagee. Someone who lends money on suitable security.
Mortgagor. Someone who offers security to be able to borrow money.
Mutual. Relating to two or more involved parties.
Mutual Life Office. A company without shareholders, and effectively owned by the with-profits
policyholders, who are entitled to a share of any surplus funds at valuation. These surplus distributions are
termed bonuses.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -n- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
N...
N2 Date. The date on which the Financial Services Authority will receive its full powers and become fully
operational.
Naked Trust. See Absolute Trust
Name. Member of a Lloyds syndicate who pledges security for insurance arranged by Lloyds of London
insurance underwriters.
National Insurance Contributions. An additional form of tax paid by most employers, employees, self
employed (and some unemployed) people. For the employed it is deducted from income by the employer on a
scale related to income levels. The employed pay part flat rate, part income related. The self employed and
the unemployed may pay a flat rate voluntary contribution to keep their benefits entitlement up to date.
National Savings. A 'branch' of the treasury, selling investment, savings and deposit products over the
counter at post offices with the aim of raising money for the government, and providing medium to long term
financial planning products for customers.
National Savings Stock Register. Register of gilts which may be purchased through the Post Office.
Needs Analysis. The breaking down of a situation to determine whether there are areas of risk or
weakness that should be protected.
Negative Equity. The situation where the value of the property falls below the outstanding loan(s) used to
purchase it.
Negotiable. Open to discussion and bargaining; something in which the title can easily be transferred to
another person.
Nest Egg. Supply of emergency or future use only money usually saved over a period of time.
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Net. After all deductions have been made.
Net Book Value. The written down value (after allowing for depreciation) of an asset.
Net Pay System. Refers to the situation where employee contributions to an occupational pension
scheme are deducted from gross income before tax is applied. This avoids the need to adjust the tax code.
Net Profit. Profit after all deductions except tax and dividends.
Net Relevant Earnings. A definition of 'pensionable income' for the self employed by which Personal
Pension Plan contributions are determined. Relevant earnings less business expenses (includes stock relief
deductions, losses or capital allowances). NRE for employed PPP holders is effectively gross PAYE pay.
New Code. A code of approval for new occupational pension schemes established after the Act which was
introduced by the 1970 Finance Act. Approval for schemes currently is under the Income and Corporation
Taxes Act 1988.
Nikkei Average. Index of prices of certain leading shares quoted on the Tokyo Stock Exchange.
Nil Rate Band. Refers to the ceiling on cumulative transfers for IHT purposes, under which transfers do not
attract tax.
No Claims Bonus. Reduction in premium when no claims have been made over an agreed period.
Nominal. Small payment, or value
Nominal Capital. Total face value of authorised issuable capital.
Nominal Ledger. The account book showing expenditure on nominal accounts i.e. named business
accounts such as postage, printing, etc.
Nominal Value. The par, or face, value of something e.g. a share issue.
Nomination. The naming of a person to receive an award or benefit e.g. similar to an expression of wish
under a group life assurance scheme.
Nominee. Someone who is nominated to deal with certain matters on behalf of another party.
Nominee Account. An account operated by, say, a trustee or stockbroker, which holds shares or other
property for you in the name of a trustee or nominee, not in your name e.g. shares in a PEP are held in such
an account.
Non-Medical Limits. Refers to underwriting limits, whereby sums assured up to certain levels, other
things being acceptable, will not require a medical examiners report.
See 'Free cover'.
Non-Profit. A policy where the value of the policy at maturity is guaranteed at outset.
Non-Qualifying Policy. One which does not satisfy all of the qualifying rules.
Non-Recourse. Where finance is raised to purchase a leased asset, the lender will have recourse to the
assets held by the lessee in case of default, but not to the lessor/borrower.
Normal Expenditure. An exempt lifetime transfer under IHT rules, whereby to avoid being classified as a
PET the transfer must be part of normal expenditure and not affect the standard of living of the donor.
Normal Retirement Age. The expected retirement age, usually for pension purposes, as defined in the
scheme rules.
Normal Retirement Date. Refers to the expected or usual retirement date assumed when setting up a
pension scheme. e.g. end of the month following 60th birthday.
Nostro Account. Bank account held by a UK bank with another bank abroad.
Notary Public. Lawyer with authority to witness written documents and verbal statements, thus making
them official. Someone who attests to the validity of deeds and other documents for official use.
Notional. Assumed, unquantified, not known exactly.
Novation. An agreement to replace one of the original parties to a contract with a third party.
GLOSSARY
Abbreviations
main index |
back page

Financial Terms Glossary -o- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
O...
Occupational Pension Scheme. A pension scheme established by an employer, usually on a group

basis.
Occupational Pensions Advisory Service. A voluntary organisation offering free advice and help to
members of the public, who are experiencing problems concerning their rights to benefits in pension
schemes.
Occupational Pensions Board. Established to oversee contracting out, and to examine and report on
issues of public interest related to pensions and connected subjects e.g. preservation of benefits.
Off The Page Advertisement. An advertisement which incorporates an application form to apply for an
investment directly, based on the information contained within the advertisement.
Off the Shelf Company. A company which has already been registered but which has not started to
trade, so is available for sale at nominal cost if someone wants a new company quickly.
Offer and Acceptance. Two of the necessary stages in a viable contract.
Offer Price. The price at which a security is offered for sale. See Bid Price.
Offer to Bid. Compares the original purchase cost or offer price usually of a unit trust with its bid price,
the price you receive if you sell.
Offer to Offer. Compares the original purchase cost or offer price usually of a unit trust with its current
offer price.
Office of Fair Trading. Government body charged with ensuring a 'level playing field' for competition in
all sectors of the economy.
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Officer. Someone with an official position in an organisation.
Official Receiver. Person appointed by the DTI to act in bankruptcy matters and oversee the winding up,
and possibly liquidation, of the debtor.
Offset. To balance one item with another.
Offshore. Basically, anywhere out of the country not within the authority of the Inland Revenue.
Offshore Bond. An investment bond issued by a company outside the UK and outside the authority of the
Inland Revenue. Usually established in countries with little or no tax giving gross fund growth. Popular
locations include Luxembourg, Republic of Ireland, Channel Islands and Isle of Man.
Old Code. Pre-1970 Finance Act approval for occupational pension schemes. All pre-1970 schemes had to
be re-approved under New Code by April 1980.
Old Lady of Threadneedle Street. The Bank of England.
Ombudsman. An official who investigates complaints from the public against official bodies, large
organisations or industry sector participants.
Oncosts. Costs of producing an item in addition to the direct costs.
Open Ended Investment Company. OEICS Collective investment in which investors receive shares,
different classes can be issued e.g. UK equities. Single pricing for buying/selling shares, value of shares
reflects net asset value of fund assets. Fund assets held by an independent depository.
Open Market Option. An option under pension schemes to take the cash in the pension fund and find the
best annuity rate available from other companies in the market. There may be a charge for taking the money,
or perhaps enhancement if staying.
Opening Years. Special tax rules and options apply to the opening three years of a business.
Operating Profit. The figure which remains after deducting all operating costs (except capital expenses)
from sales revenue.
Opportunity Cost. In making a decision, the foregone potential of not following an alternative course of
action.
Optimum. Most suitable, best.
Opting Out. This is where a member opts out of an employers pension scheme whilst remaining
employed, or may refer to an employee who is eligible to join an employers pension scheme, but decides not
to join.
Option. An option gives a right - not an obligation - to buy or sell a given commodity, at a set price, within an
agreed period.
1. A call option gives the right to buy a security at an agreed price, called the strike price.
2. A put option gives the right to sell before a give date.
3. A traded option is one that can be bought and sold on the traded option market run by the Stock
Exchange.
4. A traditional option can be exercised on one day only.
5. The premium is the price you pay to acquire the option.
Ordinary Residence. For the purposes of taxation an individual may be ordinarily resident in the UK
although he or she is not physically resident in a particular tax year. The term "ordinary residence" is broadly
equivalent to habitual residence. If an individual is resident in the UK year after year he or she is ordinarily
resident here and liable for UK tax.
Ordinary Shares. The voting shares of a limited company.
Organic Growth. Growth based on expanding the existing trading base, rather than buying other
businesses.
Overdraft. In banking terms, drawing out more money from an account than there are available funds.
Overfunding. It may be possible for the fund of an occupational scheme or a FSAVC to become so large
that projected benefits exceed either scheme benefits or Revenue maxima. Remedies may include increasing
benefits up to Revenue maxima, contribution holidays or refunds.
Overheads. Everyday costs of running a business.
Overtrading. Shortage of liquidity caused by not having enough working capital to support the level of
sales and production. Taking on business which cannot be funded by cashflow.
Own Life. Refers to a policy taken out on one's own life for the benefit of one's estate or other specified
beneficiaries.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -p- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
P...
P11D. Tax form returned by employer detailing benefits in kind for employees earning in excess of 8500
p.a.
P45. Certificate provided by employer on leaving service, showing PAYE code, earnings in the current tax
year to date and how much tax paid since the start of the tax year.
P60. Annual statement provided by employer to employee showing income and tax paid.
Package. Separate elements grouped together to form a product or deal. See Compensation Package.
Packaged Products. Phrase used to describe products that invest in a spread of investments which may
also include an element of life assurance e.g. endowment policies, investment bonds, unit, trusts, ISAs.
Paid Up. It is possible, with certain policies having an investment content e.g. endowment, to cease paying
premiums and retain a paid-up policy which will pay out on eventual claim. Also another name for preserved
pensions.
Paper.
1. Documents such as bills of exchange which represent money .
2. share certificates.
3. banknotes.
Par Value. The face value, or nominal value of a company share, and the minimum value at which the
shares are issued.
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Parent Company. Company which holds at least 50% of the ordinary shares of another company.
Distinguished from Holding Company because a parent company often continues to trade in its own right,
whereas a holding company usually does not.
Pareto Principle. Amongst Paretos many economic analysis laws and principles was the observation that
income, whatever the political and taxation conditions, will be distributed in the same way in all countries 20% of earners will receive 80% of the income. This has been extended generally to many situations e.g.
20% of sales calls produce 80% of the income.
Pari Passu. Latin phrase taken to mean of equal value or proportionately. Often used when new shares are
issued with the same rights as existing shares.
Parity. Equal status, equal value. Often used when comparing currency values.
Parkinsons Law. Observations by C. Northcote Parkinson that:

1. work expands to fill the time available, and
2. expenditure rises to meet income. Taken to apply to larger organisations in his initial observations,
but often applied generally.
Partner. In a legal sense, someone with whom you carry on a business.
Partnership Protection or Partnership Assurance See: Business Protection.
Patent. Official documents protecting the exclusive right to manufacture an item and exploit its use.
Pay and File. System of reporting profits and paying corporation tax, based on comprehensive
questionnaire rather than assessment. Replaced by Self Assessment for companies for accounting periods
ending on or after 1st July 1999.
Pay As You Earn. System of collection and payment of income tax operated by employers.
Pay As You Go. The State pays out benefits from revenue received from taxation and other sources, rather
than funding and investing to produce income. Also termed assessmentism.
Payback Period. The length of time taken for the net cash inflow from a new project to cover the initial
investment of the project.
Pecuniary. Relating to money; monetary.
Penny Shares. Term used to describe shares with low value, usually under 1 per share; often high risk
shares.
Pension. An annual income, usually associated with the post-retirement period of one's life, but not
necessarily so.
Pension Fund. General term used to describe an investment fund built up during working life and used at
retirement to purchase an annuity to provide a continuing income.
Pension Increases. Once in payment, pensions may remain at the same level, increase occasionally at
the discretion of the company or have contractual annual increases, up to increases in RPI.
Pension Mortgage. When there is a "promise to repay" the mortgage, using the lump sum cash payment,
payable at retirement. As a pension cannot be assigned, the pension policy cannot be used as security.
Pension Schemes Office. An office of the Inland Revenue whose task it is to approve all occupational
and Personal Pension Schemes. Replaced the Superannuation Funds Office.
Pension Transfers. Refers to a transfer of the cash value of accrued pension from an approved scheme
to another approved scheme. The cash is transferred direct from one pension provider to another.
Pensionable Earnings. Earnings on which benefits and contributions are calculated. These are not
necessarily full or P60 earnings, the actual definition depending on whether fluctuating earnings are excluded
and/or adjustments made.
Pensionable Service. Period of service with a company which is used in the calculation of pension
benefits (in defined benefit schemes) and of maximum approvable benefits.
Pensioneer Trustee. An independent trustee and mandatory requirement of a small self-administered

pension scheme.
Pensioners Rights Premium. A state scheme premium paid to the state for a member (or pensioner
over state pension age) of a contracted out defined benefit scheme which ceases to be contracted out. The
state then accepts the liability to pay the GMP.
Pensions Ombudsman. Set up by the Social Security Act 1990 to review and settle disputes between
pension scheme members and their pension scheme.
Pensions Tracing Registry. Agency which helps people trace accrued/preserved pension benefits
where, for example, a company has ceased trading
PEP Transfer. Transfer of existing PEP investment to a new PEP manager. Aim is to benefit from lower
charges and/or potentially better investment performance.
Peppercorn Rent. Nominal rent, often in goods rather than cash.
Per. Latin, meaning for each, as in

Per annum - each year
Per capita - each person
Per cent - each one hundred
Per Pro. Latin, Per Procurationem.

Having the authority, with the authority of, on behalf of.
Percentile. A one hundredth part of a set of data.
Periodic Charge. An IHT charge imposed on the capital of certain discretionary trusts, where the capital
exceeds the nil rate band.
Perks. Shortened version of perquisite.

See Fringe Benefits.
Permanent Health Insurance. A policy which will provide an income in the event of long-term absence
from employment because of illness or disability; income ceases upon return to work, retirement or death.
Permanent Interest Bearing Shares. Investment offered by building societies, giving a fixed rate of
interest, paid twice yearly net of basic rate income tax but free of CGT.
Permitted Maximum. Usually refers to Revenue benefit and earnings cap limits.
Personal Accident Insurance. Not life assurance, but will pay out income or a cash lump sum in the
event of disability, dismemberment or death, caused by an accident.
Personal Allowance. The level of income above which income tax starts to be levied.
Personal Chattels. Tangible and moveable property, personal belongings.
Personal Equity Plan. Tax free investment contract allowing limited investment into equities and unit
trusts. One only per year per person, and they have to be maintained for a full year to get full tax benefits.
Personal Financial Planning. Generic term covering financial assessment and needs analysis, with a
view to maintaining and improving the current financial situation, and securing the future.
Personal Investment Authority. (PIA) Regulatory organisation which replaced FIMBRA and
LAUTRO and some functions of IMRO. It will be replaced by the FSA when it receives its full powers at N2
date.
Personal Pension Policy. A Pension policy available to employed persons who do not qualify for, or are
not members of, an occupational scheme other than
a. a contracted in scheme (in which case the member can take out a Rebate only PP) or
b. a scheme providing death in service benefits only. Also available to the self employed with Net
Relevant Earnings.
Personal Pension Protected Rights Premium. A state scheme premium paid when a personal
pension arrangement ceases to contract out. The member is bought back into SERPS, for the amount the
value of the PPPRP will purchase. No longer applies from 6th April 1997.
Personal Representative. Person who deals with the estate of a deceased person under the terms of a
will or the rules of intestacy. Duties and responsibilities end when the estate has been dispersed and all taxes
and debts paid.
Peter Principle. Theory advanced by Lawrence J Peter that in large organisations individuals are
promoted to the level of their incompetence i.e. to jobs for which they are not suited and do not display
competence.
Petrocurrency. Foreign currency earned by exporting oil.
Pie Chart. Diagram where statistical information is displayed as proportionately sized slices of what
appears to be a circular cake or pie shape. Comparison should be by area, not width.
Plaintiff. Someone who starts a legal action against another person.

See Defendant.
Pledge. An item retained by a pawnbroker in exchange for cash, and held until the cash is repaid.
Essentially, a form of security.
Plenary. Complete. A plenary session is a meeting attended by all.
Poison Pill. Action taken by a company threatened by an unwanted takeover bid to make it appear less
attractive e.g. sale of an attractive or prized asset.
Polarisation. Concept introduced by the financial services regulations whereby it is mandatory for financial
advisers to be either independent or tied to one company; they cannot be both simultaneously.
Policy. Formal document produced by the insurance company giving all details of the contract e.g. sum
assured or insured, premium and payment frequency, term of the contract.
Policy Conditions. The 'small print' of a policy which sets out the rights and responsibilities of the parties
involved.
Policy Document. The paperwork that makes up the policy - the formal document, and any schedules or
amendments.
Policy Exclusions. The policy document may, if relevant, make a clear statement regarding any instances
or situations upon which the insurance company will not pay out; these are the exclusions. They may be
standard or specific to a particular proposer.
Policy Fee. Generally an administration fee, usually charged monthly or annually.
Policy Lapse. When the policyholder fails to maintain premium payments, the policy will eventually lapse,
or cease to operate as a 'live' policy. Depending on the type of policy, there may be residual value in the
event of a claim.
Policy Year. The period from commencement to the 'anniversary' date twelve months later.
Policyholder. Generally taken to mean the owner of the policy.
Policyholders Protection Board. Established by the Policyholders Protection Act 1975 to supervise
protection for policyholders in the event of an insurer failing to meet its liabilities.
Pooled Investments.. Investments, such as unit trusts, where a number of people put their money
together to enable them to buy a wider range of investments, thereby spreading the risk.
See also Collective Investments
Portability. Generally taken to refer to the ability to take pension arrangements from job to job without
changing the policies involved and with the minimum penalties.
Portfolio. In financial terms, taken to mean the various securities and investments held by an individual.
Portfolio Strategy. Selection strategy with a view to pulling together investments with lowest average
risks and highest returns.
Potentially Exempt Transfer. Gifts on which IHT will not be payable unless the donor dies within 7
years. If this happens, PETs become chargeable transfers and tax is calculated subject to a tapering scale,
based on the value of the transfer at the date of the transfer.
See Tapering Relief.
Pound Cost Averaging. The term used to describe the effect of paying a fixed regular amount into a
unitised investment fund where the value of units fluctuates. The amount will purchase more units when
prices are low and vice versa. Over the longer term, the average cost per unit is lower than the average unit
price over the period.
Power of Appointment. The ability under certain trusts to be able to change, or appoint new,
beneficiaries.
Power of Attorney. Appointment of an agent to act on ones behalf.
Practice Notes. Guidance issued by the Pension Schemes Office on the administration of approved
occupational and personal pension schemes and limits applied to benefits. Referred to as IR12 and IR76
Practice Notes respectively.
Precatory Trust. Similar to a discretionary will, and allows an expression of wish in a will be to exercised
as though written in the will itself.
Precedent. A decision used as the basis for future decisions in subsequent similar cases.
Preference Shares. Usually non-voting shares which pay out dividend before ordinary shareholders, and
which will pay out first if the company goes into liquidation.
Premium.
1. A regular payment of money into a policy to secure the contract; an alternative word is Contribution.
2. Also describes what is paid for a share over its par value.
Premium Bonds. Purchased in units of 10 value with minimum purchase of 100, maximum 20,000.
The bond numbers are entered in a monthly draw for tax-free cash prizes.
Premium Frequency. How often the premium is paid, e.g. monthly or annually.
Premium Rates. The actual cost of a policy depends on a number of factors, e.g. age, sex, mortality,
which, when taken together, produce the premium rate.
Present Value. The cash sum you would need to put on deposit at a compound rate of interest to grow to
a given figure at a future given date. See Future Value and Current Value.
Preservation. Granting of preserved accrued benefits in line with the minimum requirements required by
the Social Security Act 1973.
Preserved Benefits. After two years as a member of an occupational pension scheme, benefits accrued
to date must be preserved when leaving service. Less than two years service gives the option of taking a
refund of any personal contributions, less certain deductions.
Price-Earnings Ratio. Calculated as share price divided by current earnings per share.
Prima Facie. On the face of it; at first appearance.
Primary Market. The new issue market on the UK stock exchange.
Principal. The initial cash sum invested, excluding interest earned or to be earned.
Priority Rule. The rule, set out in the pension schemes documentation, which details the order of priority
of the purchase of benefits, when a scheme is wound up with insufficient funds to meet all its liabilities.
See Actuarial deficiency, Underfunded.
Private Investor. A category of investor under the financial services regulations, equating to the 'average
person on the street', and to whom the highest duty of care is owed.
Private Medical Insurance. Specialist insurance to cover the cost of in-patient medical care. May also
cover some out - patient expenses.
Privity of Contract. Legal concept whereby only those party to a contract may sue or be sued on the
contract.
Pro Rata. Latin, meaning at a proportionate rate i.e. a rate which varies depending on the size of
something.
Probate. See 'Grant of Probate'.
Products. Generic term for life assurance, pensions, savings and investment policies.
Profession. An occupation or vocation needing skills and experience learned over a period of time, the
practitioners of which are governed by an organised system of rules and ethics.
Professional Indemnity Insurance. Insurance intended to protect the insured from the legal
consequences of the actions of an individual or a third party e.g. the policy would pay the costs incurred by
any legal action and consequent award, resulting from, say, professional negligence.
Professional Investor. A category of investor under the financial services regulations, and one who
would be transacting similar types of investment to the adviser.
Profit. The difference between the cost of goods and services, and their sale price.
Profit and Loss Account. A record of income and expenditure over a period of time, balanced to show
profit or loss.
Profit Related Pay. Company remuneration scheme where, if registered, an agreed amount of income is
tax exempt, but not NIC exempt.
Profit Sharing Schemes. The distribution of company profits in cash or share form to employees.
Projected Unit Method. A method of calculation of an actuarial valuation, where an allowance is made
of projected earnings on accrued benefits. The contribution (funding) rate required is that necessary to cover
the cost of all benefits accrued up to the date used in the valuation, but based on earnings projected to the
date of retirement.
Promissory Note. A document stating that a sum of money will be paid to the bearer, or to a named
person, or to that persons order, on a particular date or on demand. It may be a negotiable instrument.
Proposal. A formal application, perhaps for insurance or business.
Proposer. The person applying to an insurance company for a policy.
Proprietory Companies. Insurance companies owned by shareholders, so that any profit is divided by
shareholders and the reserves distributed between with profits policyholders.
Prospecting. The process of seeking new business leads and contacts.
Prospectus. A document which provides information to attract customers.
Protected Rights. The benefit under an appropriate personal pension, or a money purchase occupational
pension scheme, which is attributable to the rebate in the NICs. There are certain restrictions placed upon
these benefits, e.g. pension only (no cash), payable from age 60.
Protection Policy. A policy providing cash sums as compensation for losses, rather than one with
investment content.
Proviso. A condition or qualification to a statement or action.
Proxy. A document authorising a third party to act on behalf of someone. May also be used as a term for the
authorised person.
PTM Levy. A charge made on large share transactions used to fund the Panel on Takeovers and Mergers.
Punitive Damages. As Exemplary Damages.
Purchased Life Annuity. A privately purchased annuity, part of which is taxed, part of which is
considered to be a return of capital and so escapes tax.
Pure Endowment. An endowment policy with no insurance content i.e. pays out a value only on maturity
of the policy and provides no protection cover.
Put and Call Option. See Cross Option.
Put Option. An option to sell at a fixed price on or before a given future date.
Pyramid Selling. An illegal form of hierarchical selling, whereby franchise agreements are sold to
operators, along with stocks of the goods in question. These goods are then sold on down a distribution and
sales chain. The system is viewed as illegal because the distributors tend to make the most money, leaving
the final stage of salespeople in a situation where commissions earned are unlikely to pay back the payments
made for the stock.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -q- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
Q...
Qualifying Policy. Qualifying rules vary slightly for each type of policy, but in general terms must:
a. be certified by the Revenue.
b. have a 10 year term or longer.
c. have regular premiums.
d. have a sum assured of at least 75% of premiums paid.
Qualifying Service. The length of time needed to entitle a pension scheme member to short service
benefit; currently two years. May include previous scheme service, if a transfer payment has been made into
the current scheme.
Quantify. Illustrate the effect of something in terms of figures.
Quarter Day. Traditional payment days at the end of each quarter year.
1. In England, Wales and Northern Ireland: 25th March (Lady Day), 24th June (Midsummer Day), 29th
September (Michaelmas), 25th December.
2. In Scotland: 2nd February (Candlemas), 15th May (Whitsuntide), 1st August (Lammas), 11th
November (Martinmas).
Quartile. A division of a spread of values divided into four. A statistical division, generally used in financial
services to denote performance of, say, a particular type of fund. Comparisons of similar funds are shown in a
league table which is divided into four quarters or quartiles.
Quick Ratio. Ratio of liquid assets to current liabilities, taken as a measure of liquidity.
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Financial Terms Glossary -q- (provided by FSEC Ltd)
Quick Succession Relief. A relief which reduces, on a sliding scale (100% in year one; 80% year two;
60% year three; 40% year four; 20% year five) the amount of inheritance tax payable on a gift received by
someone who dies within 5 years of receiving it.
Quorum. The minimum number of people needed at a meeting to enable business to be transacted.
GLOSSARY
main index |
Abbreviations
back page

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Financial Terms Glossary -r- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
R...
Rally. A reversal of a downward trend of, say, share prices.
Ramp. The purchase of shares to force up share prices artificially.
Ratio. The value of one thing compared to something else.
Real Estate. Property comprising land and/or buildings. Also termed realty.
Reason Why Letter. A letter from financial adviser to client explaining the reasons behind a
recommendation.
Rebasing. To ensure that capital gains tax is not paid on any inflation linked increase in the value of an
asset, the purchase price is index linked from date of purchase to date of disposal.
Where the asset was acquired before 31.02.1982, the purchase price is taken to be the market value as at
that date; this is the rebasing - rebasing for indexation purposes.
Rebate. Either a reduction in price or a return of an overpayment.
Rebate Only Personal Pension. A personal pension which is made up solely of the National Insurance
rebates, payable by the DSS, where the member has elected to contract out of SERPS, by means of a
personal pension. See Appropriate Personal Pension.
Receiver. Someone appointed by the court, or under statute, to protect and preserve property, or to receive
income from property and apply it as directed.
Recession. Fall or reduction in trading volume.
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Recognised Professional Body. In addition to the Self Regulatory Organisations, solicitors, insurance
brokers, actuaries and accountants professional organisations are recognised by SIB as being competent to
control their members conduct when providing financial advice.
Red Book. Text of the Chancellors speech published on budget day.
Redeem. Pay off a debt.
Redeemable. An investment where ones initial investment is repayable at some future date or event.
Redemption Date. The date on which a loan is to be repaid.
Redemption Penalties. When a loan under a mortgage is repaid before the agreed date, there may be
penalties and fees due to cover the lenders lost investment and administration costs.
Reduced Allocation. A method of recouping initial expenses when setting up a unit linked policy, whereby
only a proportion of the investment is allocated to the policy for the first few years.
Reduction in Yield. The amount by which an insurance companys charges can be expected to reduce
the investment return on a policy with an investment content.
Redundant. Excess to requirements.
Reflation. Stimulation of the economy by increasing the money supply and/or by reducing taxes.
Register of Members. A company document listing details of members (shareholders) including how
many and what type of shares.
Registered Individual. Out of date term for a person registered with an SRO or a RPB. PIA now uses
the terms Independent Practitioner for IFAs, Product Provider for those selling packaged products, and
Marketing Associate for company representatives.
Reinstate. In certain circumstances, it may be possible to 're-start', or reinstate a policy where premiums
have been unpaid for some time. Conditions vary amongst companies and depending on the policies.
Reinsure. An insurer will try to spread the risk of certain large risks by seeking to reinsure, or share, the risk
with other companies in exchange for part of the premium.
Reinvestment Relief. Allows CGT to be deferred when the gain is reinvested in certain qualifying
investments, for instance a Venture Capital Trust or an unquoted investment including EISs and Shares listed
on AIM.
Related Property. Related property means separate assets which, when valued together, have a higher
value than when valued separately e.g. a pair of antique candlesticks together may be worth 1000, but
separately only 300 each. For IHT purposes, when splitting related property, the value of the gift is deemed
to be the relevant portion of the joint value, not the value of the item on its own e.g. in the case of the
candlesticks, 500 each, rather than the 300.
Relevant Benefits. One of the proviso's for an occupational scheme to qualify for 'exempt approved'
status, and meaning in broad terms any financial benefits provided on death or retirement, but not a PHI-type
benefit.
Relevant Earnings. Defined in S623(2) of the Income and Corporation Taxes Act 1988. Refers generally
to earned income only, schedule D and E.
Remainderman. Someone, male or female, who benefits from an estate after the death of a life tenant.
Remortgage. Replacement of an existing mortgage loan with another, usually from a different lender.
Remuneration. In pension planning terms generally taken to mean the full and total earnings package i.e.
salary and benefits in kind.
Remuneration Limited. A figure set out in legislation, which is used to determine whether a member of
an occupational pension scheme may also contribute concurrently to a scheme governed by the new defined
contribution regime.
Renewable. Generally used in connection with a type of term assurance, which runs for an initial period of
years. At expiry the policyholder has the option to 'renew' the policy, at premium rates current at the time, but
without need for further underwriting.
Rent. Payment by a tenant to a landlord for the use of property
Repayment Mortgage. Loan repayment by means of instalments made up of capital and interest.
See 'Annuity mortgage'.
Requisite Benefits. The minimum scale of benefits that were originally required in order that a defined
benefit scheme could contract out. This requirement was removed in November 1986, but is intended to be reintroduced (Pensions Act 1995).
Residence. A place in which a person has a home. See 'Domicile'
Resident. Someone living in a country whether domiciled or not, whether a citizen of that country or not.
Residual Value. The value of property or assets remaining after e.g. repayment of a loan, or at the end of
a lease agreement.
Retail Price Index. A monthly indication of the average price changes to a particular 'basket' of consumer
goods, and used as a general indicator of price inflation.
Retained Benefits. Pension benefits earned in previous employments and self employments.
Retirement. The state of having given up full time work.
Retirement Annuity Contract. The forerunner of the Personal Pension Plan, although there are
differences between the two e.g. in terms of contributions and availability of cash sums. New RAC contracts
no longer available, but existing contracts may continue.
Return on Capital. Profit before tax and interest, expressed as a percentage of capital employed.
Revaluation. A means of increasing a figure from a base date in line with inflation e.g. pensionable salary,
accrued pension deferred, pension in payment, or capital gains.
Revenue Maxima. Revenue imposed ceilings on benefits and contributions when calculating maximum
approvable benefits.
Revenue Undertaking. A written undertaking, provided by the scheme administrator, promising to notify
the Inland Revenue in the event of certain circumstances, or before taking certain specified actions. For
example, the undertaking that benefits will not exceed Inland Revenue maximum approvable limits.
Reversionary. Generally, refers to property which passes on death.

Also : reversionary annuity - one paid on the death of someone;
: reversionary bonus - see above.
Reversionary Bonus. The general term for the annual valuation and distribution of surplus to with-profits
policyholders.
Revertor to Settlor Trust. A trust where the settlor is one of the trustees, and which contains the facility
for some or all of the trust property to revert, or return, to the settlor if the settlor is alive at a particular date.
Revolving Credit. Credit offered on the basis that as the debt is reduced, more may be borrowed up to
the agreed limit.
Rights Issue. Issue of shares to existing shareholders in order to raise extra finance.
Risk. In insurance terms, the likelihood of a claim being made on a policy during its term.
In investment terms, the balance of potential loss and potential gain as perceived by the investor; a subjective
view in general.
Risk Aversion. The degree to which a client is unwilling to take on a risk.
Roll-over Relief. A tax concession which allows investors and businesses to defer the payment of CGT.
For example, if proceeds from the sale of a fixed asset are re-invested, CGT is not payable until the new
asset is sold.
Roll-up Funds. An offshore investment fund which does not distribute its dividends.
Romalpa Clause. Often seen on purchase invoices stating that ownership of the item does not pass to the
purchaser until full payment has been made.
Rule of 115. To calculate how long it will take to treble money with interest reinvested, divide the interest
rate into the number 115.
Rule of 72. To calculate how long it will take to double money with interest reinvested, divide the interest
rate into the number 72. For example, at 8 per cent it would take nine years to double the principal 72
divided by eight is nine.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -s- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
S...
S.226. Refers to the section of the 1970 Income and Corporation Taxes Act which governed RACs, and
used as a general reference to the retirement annuity. S226a dealt with life cover.
S.32 (Finance Act 1981). The legislation which first permitted pension benefit accrued under an
occupational pension scheme to be transferred to anything other than another exempt scheme.
See Buy Out Policies.
S.A. Abbreviation for socit anonyme, denoting the equivalent of PLC in France, Belgium and Luxembourg.
Also abbreviation for public companies in Spain and Portugal.
Salary Sacrifice. A method of increasing input into a pension scheme by giving up existing salary or
proposed salary increases, so that the sum foregone can be used as additional company contribution into an
occupational pension scheme.
Sale and leaseback. An arrangement where the owner of property or assets sells and then leases back
from the new owner, thus releasing capital value in exchange for the leasing overhead.
SARL. Abbreviation equivalent to private limited company in France and Italy.
Save As You Earn. A method of saving regularly from salary, by employer deduction. There are various
schemes to accommodate this, some tax efficient, others merely savings administration.
Scam. Slang for fraud.
Schedule. A sheet attached to a document providing additional or specific information relevant to the main
purpose of the document.
Schedule D. Tax collection regime for the self employed.
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Schedule E. Tax collection system for employed people.
Scheme Administrator. The person responsible for the management and administration of an
occupational pension scheme. All exempt approved schemes must appoint an administrator in UK.
Scheme Rules. All pension schemes will have rules, as they are the practical, day to day guide for the
operation of membership and benefits.
School Fees Insurance. A generic term for packages of investment, savings and insurance put together
to ensure provision of money to meet education costs. A full package will cover not only fees but incidental
schooling costs and go on to cover graduate studies.
Scrip Issue. Shares issued to shareholders, in proportion to existing holdings, to increase the number of
shares to make them easier to sell in smaller denominations.
Second Death. An option under a joint life policy whereby the policy proceeds are paid out on the death of
the second of the insured persons.
Secondary Market. The market for existing shares on the UK stock exchange.
Section 21 Orders. Refers to Social Security Pensions Act 1975, S21. This section requires that the State
additional component and GMP are revalued in line with the increase in National Average Earnings, up to
State Pension Age. Now known as S.148 orders.
Securities and Futures Authority. The SRO governing stock market, stockbrokers, merchant banks,
discount houses and firms dealing in derivatives.
Securities and Investment Board. Organisation to which overall control of investor protection has
been delegated by the Treasury.
Securitisation. The process of making a loan into a tradeable security by issuing a negotiable document
encompassing the loan and selling it on.
Security. A bond or share certificate evidencing ownership or debt.
Segregated Fund. Pension scheme investments managed alongside, but separately from, other
investments under control of a particular manager.
Selection. In underwriting terms, this is taken to mean the potential for the less fit and healthy to propose
for life assurance and PHI contracts. This is particularly pertinent where members of group schemes may be
offered underwriting free continuation options upon leaving the scheme.
Self Administered. Simply, administering something yourself, and applied particularly in respect of certain
occupational pension schemes.
Self Administered Personal Pension. Variation of the SIPP, except with the SAPP the scheme
assets are invested by the insurance company and administered as a segregated or 'earmarked' fund within
an appropriate fund under their management.
Self Assessment. System of collecting tax from:

1. Individuals i.e. the self employed and some others with a tax obligation other than under PAYE. It
began for individuals on 6th April 1996.
2. Companies in respect of accounting periods finishing after 1st July 1999. Replaces the Pay and File
System.
Self Employed Pension. Generally refers to Retirement Annuities (S226 policies) and Personal Pension
Plans, even though both may be taken out by those employed persons not in pensionable employment.
Self Invested Personal Pensions. A PPP where the policyholders, usually in a group, organise and
manage the pension fund investments for themselves.
Self Investment.
1. Rather than hiring specialist investment oneself; used particularly in respect of some pension
arrangements.
2. Investment of the assets of a pension scheme in the business of the employer; strictly controlled and
regulated by OPB, Disclosure Regulations and PSO.
Self Regulatory Organisation. Organisations established following introduction of Financial Services

Act 1986 to regulate and oversee particular segments of the industry. Each SRO has its own rules and is
responsible for direct supervision of its members. Originally 5 SROs but now 3: PIA, IMRO and SFA.
Sequester. A court order to confiscate property.
Service. Period of employment.
Settlement. An arrangement of land or other property by deed, under which a trust is created by the settlor.
Settlor. A person who establishes a trust.
Share. Part of the capital of a company, grants part ownership of the company to shareholder. Can be
unquoted or quoted and ordinary or preference shares. Ordinary shares normally confer voting rights.
Share Capital. The money paid (subscribed) for ordinary and preference shares in a limited company.
Authorised share capital means the total amount of shares available to be issued. Issued share capital relates
to the total amount of shares actually subscribed for.
Share Exchange. Owners of unit trusts may use shares they already own to make an investment without
having to sell them first. This saves dealing charges.
Share Incentive Schemes. Schemes offering tax incentives to encourage employee participation in a
business.
Share Option. An offer by a company, usually to its employees and directors, to buy its shares at a given
price before a specified date. With a growing company this can be a valuable employee incentive.
Share Protection. Life assurance and written agreements intended to provide that on the death of a
shareholder, money is available to buy the deceased's shares and ensure that control of the company is in
the right hands.
Share Protection Agreements. Written agreements designed to ensure that the estate of a deceased
shareholder sells to the surviving shareholders and that the survivors buy the shares.
Share Warrant. Document giving the holder the right to buy shares at a fixed price at a given future date.
Shareholders Funds. Total shareholders investment in a company, covering issued share capital,
retained profit and reserves.
Short Service Benefit. The benefit provided for someone who leaves a pension scheme before Normal
Retirement Date, as controlled by Social Security Act 1973 preservation requirements.
Shorts. Short dated gilts with seven or fewer years to redemption date.
SICAV. French equivalent of a unit trust; Societ D investissement A Capital Variable.
Sight Bill. A bill of exchange payable when presented.
Simple Trust. See Absolute Trust.
Simplified Scheme. The Finance Act (No 2) 1987 introduced a simple and standard approval regime to
save time on documentation and the approval process. A Simplified Defined Contribution Scheme (SDCS).
Simultaneous Deaths.
1. Where husband and wife die 'together', say, in an accident, and there is no evidence as to which of
them died first, the elder is deemed to have died first. (Commorientes).
2. In applying IHT rules, however, both are deemed to have died at the same time so that both estates
retain full allowances.
Single Premium. A one time only, not repeatable single payment.
Single Premium Costing. A system of treating each premium separately and applying it as one off
amount for either investment or protection purposes, charges being taken from each premium. Contrasted
with Level Premium costing which results in a level premium being paid from introduction of a contract to the
date of last premium, charges being taken costed at outset, usually resulting in low premium allocation in the
first years of a contract. Contrasted with Single Premium costing.
Single Pricing. Method of pricing unitised investments. The purchasing and selling price of units is the
same. Pricing method always used for OEICs and may be used for unit trusts.
Sinking Fund. Regular or periodic instalments saved or invested to repay a loan or purchase a
replacement of an asset in the future.
Small Companies Rate. Rate of corporation tax below the standard and marginal rates.
Small Gifts Allowance. An annual IHT allowance, enabling a donor to give up to 200 per year to any
number of separate individuals, which do not have to be accounted for in calculating IHT liability.
Small Self Administered Pension Schemes. To all intents and purposes an 'ordinary' pension
scheme but without the involvement of a life company other than the provision of death in service benefits.
Small refers to schemes with less then 12 members, to which special rules apply.
Socit d'Investissement Capital Variable. (SICAV) The most common type of European
investment fund. Has variable capital and is similar to OEICs.
Soft Commodities. Foodstuffs traded as investments.
Sole Proprietor. Sole owner of a business, usually referring to a self employed person not in partnership.
Solvency. The state of being able to pay outstanding debts on their due date.
Sort Code. In banking, the three pairs of figures usually found at the top right hand corner of cheques. Each
branch has a unique identifying number to facilitate payments and receipts.
Sources & Applications of Funds Statement. Financial summary of source and uses of cash during
the trading year of a business.
SpA. Italian Plc - societa per azioni.
Split Capital Trusts. Investment trust company which splits the returns from income and capital growth
between investors.
Split Level Investment Trust. Investment trust with both investment shares and capital shares.
Spot. Price now of something for immediate delivery.
Square Mile. City of London, The City.
Stag. Someone who buys a large volume of a new issue shares in the hope of the price rising, thus giving
them the chance to sell quickly at a profit.
Staggered Vesting. Phased or staged retirement, achieved by taking cash and income from different
policies at different times.
Stakeholder Pensions. Introduced in April 2001 to promote wider pension saving. Must meet certain
minimum standard criteria. Enable individuals without earned income to make provision for their retirement for
the first time. No minimum age restriction.
Standard and Poors. American credit rating organisation, awarding ratings of AAA (triple A) to D.
Anything below BB is purportedly a doubtful proposition for investment purposes.
Standard Policy Wordings. Each insurance company will have a standard framework for each of its
policies. They will be personalised by use of endorsement or schedule.
Standing Order. Regular payment system whereby the purchaser of goods or services instructs their own
bank to pay direct to the suppliers bank.
State Earnings Related Pension Scheme. Earnings related pension based on earnings between LEL
and UEL.
State Pension Age. Fixed retirement ages for men and women, currently 65 and 60 respectively. To be
equalised to 65 for men and women, from April 2020 (with 10 years phasing in from 2010).
State Pensions Scheme. Actually two schemes:

1. Basic pension, a flat rate sum paid to all with qualifying NI contributions.
2. SERPS, based on earnings between the Lower Earnings Level (LEL) and Upper earnings Level
(UEL).
State Scheme Offset. Reduction applied to benefits arising from an occupational pension. Can be a
deduction from pension itself or a deduction used when calculating pension amount. Purpose is to take
account of some or all of State pension member will receive.
Statement of Investment Principles. Written statement which trustees of occupational pension

schemes must prepare and maintain. It details their investment objectives and principles. Must be made
available to members on request.
Statement of Long-Term Insurance Practice. A code of conduct, governing the operating practices
of insurance companies in respect of proposals, documentation, claims, procedures and complaints. Applies
to policies taken out by UK residents.
Statement of Standard Accounting Practice. Accounting standards on different subjects.

e.g. SSAP 21 deals with leasing, SSAP 24 deals with pension fund accounting.
Statute. An Act of Parliament; law enacted by Parliament.
Statutory. Relating to law contained in statute.
Statutory Discharge. The discharge provided when a member exercises the statutory right to a "cash
equivalent" or transfer from a pension scheme.
Statutory Sick Pay. Payable to employed persons by their employer after 3 days sickness for up to 28
weeks.
Stock. In the UK, refers to fixed interest securities, usually issued in denominations of 100. In the USA,
relates to ordinary shares.
Stock Exchange. A market where stocks and shares are bought and sold.
Stock Exchange Automated Quotation System. Screen based system used by Stock Exchange
market makers to advise the market of their trading prices.
Stockbrokers. Middlemen, agents, who buy and sell stocks and shares for customers.
Stop-loss i. A notional price, perhaps 20 per cent below the buying price, at which a share will be sold to
avoid further losses.
Stop-loss ii. A form of reinsurance aimed at setting a ceiling on claims for the primary insurance company
with the reinsurer picking up claims over that amount.
Straddle.
1. the simultaneous purchase of put and call options in the same underlying security in the traded
options market.
2. sometimes used in the sense of the difference between the bid and offer price.
Subordinated Loan. Often an unsecured loan, and one which would only be repaid after secured loans
had been repaid.
Subrogation. Recovery of an indemnity granted to an insured from the third party liable for the loss
incurred.
Subscribe. As in subscribe to...", taken to mean to apply for shares in a new issue.
Subsidiary. A company where more than 50% of the voting shares are owned by another company.
Succession. The passing of property on death of the property owner.
Sum Assured. The guaranteed amount paid on death under a life assurance policy.
Sunrise Industries. New, high-tech, electronics based industries which are replacing sunset industry, or
old style heavy industries, as the source of major employment and capital investment.
Superannuation Fund. Another name for an occupational pension scheme; tends to be used in
reference to 'national' schemes such as those for teachers, police, local authorities, and so on. All are
governed by the same Revenue rules and regulations.
Superannuation Funds Office. Forerunner of the Pension Schemes Office.
Surety. Can be used in the sense of either:

1. the term for a person who provides personal guarantees for someone else, or
2. a forfeitable cash sum, in the event of the non-appearance at court of a defendant.
Surrender. Cessation of premium payments and recovery of any residual value of a life policy with
investment content.
Surrender Value. The amount paid to a policyholder who stops paying premiums into a policy before the
expected date. The amount depends on the period the policy had run and expenses still to be recouped by
the insurance company.
Swap. Exchanging one thing for another, and used in the financial arena e.g.
1. currency swap, for trading purposes, or
2. interest rate swap, where borrowers swap fixed rate for variable rate investments.
Switching. Transferring sums of money from one unitised fund to another. This is done on a bid to bid
basis to avoid 'new money' charges when buying units at the offer price.
SWOT Analysis. A list and examination of the Strengths, Weaknesses, Opportunities and Threats inherent
in any situation and course of action.
GLOSSARY
Abbreviations
main index |
back page

Financial Terms Glossary -t- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
T...
Tap Stock. Gilt edged security, not issued through the stock exchange, issued at a predetermined price.
Taper(ing) Relief.
1. An IHT 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.
2. A CGT relief which for individuals has replaced indexation relief for the portion of an asset gain since
6th April 1998. The taper applies over a 10 year period and is different for business and non
business assets.
Tax Allowance. An allowance creates reduction in taxable income, unlike a tax relief, which arises when
an expense is incurred.
Tax Avoidance. Making full use of reliefs and exemptions to ensure as little tax as possible is paid.
Tax Break Investment. Used to describe an investment which offers a method of tax avoidance
legally reducing the amount of tax normally paid.
Tax Code. A code that tells your employer how much tax to deduct from your salary.
Tax Evasion. A criminal offence, generally involving fraud in escaping tax liability.
Tax Exempt Special Savings Accounts (TESSA). Effectively tax free deposit account, available to
those over age 18. No new accounts could be opened after 6th April 1999 but contributions could be added to
existing accounts, subject to constraints on timing and amount of deposits. Maximum deposit was 9,000 in
total over 5 years, with maximum contribution limits applying to each year. Proceeds from TESSAs maturing
after 6th April 1999 can be invested in cash ISAs in addition to normal ISA limits.
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Tax Free Cash. Both occupational and personal pensions permit a certain account of cash to be taken in
lieu of pension from the pension fund at retirement. This does not apply to FSAVCs, and Rebate Only pension
arrangements
Tax Haven. A country which legally enables individuals and companies from other countries to avoid or pay
lower rates of tax by allowing them to live or base their operations there.
Tax Relief. The system of exemptions and deductions on income and expenditure whereby the Tax
Inspector can identify taxable income.
See Tax Allowance.
Tax Schedules. The different categories under which different sources of income and capital accrual are
taxed.
Tax Voucher. Statement that an amount of money has been paid in tax, for example, when tax is deducted
from a share dividend. No-taxpayers use the tax voucher to reclaim the tax.
Tax Year. The 12 month period from 6th April to 5th April the following year.
Taxable Income. Total income minus any tax free allowances.
Temporary Cover. Stop gap insurance cover whilst permanent cover is organised.
See Term Assurance.
Tenancy. Agreement to occupy a property, and can refer to both the agreement and the period of
occupation.
Tenant. A person or business who is granted a lease or tenancy.
Tenants in Common. Individual shares in a property, not automatically on a 50/50 basis. On death, the
individual shares may pass under a will separately, not automatically to the other party.
See Joint Tenancy.
Tender. A proposal to carry out a particular job or project.
Term Assurance. A life assurance policy without investment content which lasts for a specified period,
provides a guaranteed sum assured in the event of death within that period, and terminates at the agreed
date.
Terminal Bonus. Additional bonus which may be paid at maturity of an endowment policy or possibly on
prior death of the policyholder.
Terms of Business Letter. Document which must be given to client by financial advisers prior to the
transaction of business. Normally signed by client and adviser. Contents vary depending on nature of services
being offered. Must include details of advisers status, polarisation, method of remuneration, adviser's
obligations and complaints procedure.
TESSA only ISA. Special type of ISA used when existing TESSA matures. The capital from the matured
TESSA, but not interest, can be invested, in additional to normal ISA limits.
Testate. Someone who dies testate is one who has died leaving a valid will.
Testator. Person who makes a will.
Third Market. A market in the shares of smaller, unlisted companies, who do not want to go to the
expense of a listing on the stock exchange, nor wanted the regulations of the AIM. Effectively replaces the
'over the counter' market.
Tied Agent. A business which deals with the policies of one insurance company only.
Title. Right of ownership over property.
Title Deeds. Documents showing evidence of ownership over land.
Top Hat Scheme (or Top Up Scheme). Outdated term for an Executive Pension Plan.
Top Slicing. A method of calculating income tax liability on a chargeable gain from certain packaged
products.
Topping Up Loans. A loan taken in addition to an existing loan.
Tort. A wrongful act or omission, other than a breach of contract, for which civil damages may be claimed.
Tracker Fund. An investment fund which invests mainly in shares which make up a particular Index with a
view to duplicating its performance.
Traded Option. The right to buy or sell certain shares at a fixed price over the life of the option. The writer
of the option receives the premium paid in return for the liability of being called upon to buy or sell shares at
the fixed price. If the option is not exercised, it expires worthless.
Trading Period. Generally a period of 12 months over which the accounts of a business are prepared.
See Accounting Period.
Trail Fees. Renewal fees under unit trusts.
Training File. For IFAs, a compliance requirement, in which should be kept a record of all training and
competence work.
Tranche. An instalment, one of a series.
Transfer. In IHT terms, taken to mean any item of value where the ownership exchanges hands without
cost. A gift.
Transfer Club. A local authority and central government facility which enables job changers to move from
job to job between participating employers without the loss of fund value which may occur in the commercial
transfer market.
Transfer Premium. A payment made from a contracted out defined benefit scheme to the state scheme,
to buy the member back into SERPS. Is used when a member transfers from a contracted out to a contracted
in scheme, which cannot accept GMP liability. The only transfer premium allowed after 6th April 1997 is the
Contributions Equivalent Premium (CEP).
Transfer Value. Generally taken to mean the cash value of accrued pension benefit in an occupational
pension scheme.
Treasury Bills. A short term bill of exchange, depending on discount to give it value, as it does not pay
interest.
Treasury Stock. Loans to the government for an initial period exceeding 90 days. See Gilts.
Trial Balance. A list of debits and credits from which the profit and loss account is prepared
Trivial Pensions. A pension from an occupational pension scheme which is deemed to be too small to
warrant being paid periodically and, therefore, can be paid in lump sum form, subject to preservation and
contracting out requirement.
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.
Turnover. Effectively, the sales record during the trading year.
GLOSSARY
main index |
Abbreviations
back page

Financial Terms Glossary -u- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
U...
Uberimae Fidei. The principle of utmost good faith, or disclosure, in completing a life insurance proposal
form.
Ultra Vires. Action outside the agreed powers of a particular body. Such an action would be void.
Umbrella Fund. An offshore fund offering a variety of sub-funds allowing an investor to switch between
them, e.g. different currencies, different stockmarkets. This formerly offered capital gains tax benefits, but
these were removed by the 1989 Budget.
Unapproved Schemes. See FURBS.
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.
Undertaking for Collective Investment in Transferable Securities. Essentially, unit trust-type

investments which may be marketed in any of the European Union member countries.
Underwriting.
1. Taking up shares not purchased by the public, for commission.
2. Review and analysis of relevant factors affecting an insurance proposal.
Unfunded Unapproved Retirement Benefit Scheme. (UURBS) A form of unapproved pension

scheme. Benefits are promised by an employer to an employee but are not pre-funded. The employer
established a "book reserve" to cover the potential liability.
Uniform Accrual. Where benefits are treated as being earned equally (uniformly) throughout the period of
pensionable service.
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Uniform Business Rate. Tax charged on business property.
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 collective investment which invests in a range of assets e.g. equities, fixed interest and cash.
Can either be general fund or more specialist investing particular type of asset e.g. property or geographical
area e.g. Far East.
Unitised. See 'Unit Linked'.
Units. When investing in a unit linked contract, the individuals contribution is used to buy units of equal
value. These units will fall or rise in line with the underlying investments.
Unlisted Securities. Securities/shares not listed on an official stock exchange list.
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 much cheaper than the main market.
Market closed June 1995.
Unsocial Hours. A financial services legislation concept, concerning times not to contact clients and
prospective clients without prior approval. Generally taken to be between the hours of 9pm to 9am, Monday to
Saturday, but will depend on the client and individual circumstances.
Unsolicited Calls Regulations. Financial services rules governing 'cold calling'.
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.
Upper Band Earnings. Total earnings between the Lower Earnings Limit and the Upper Earnings Limit
Upper Earnings Limit. See Lower Earnings Limit.
GLOSSARY
Abbreviations
main index |
back page

Financial Terms Glossary -v- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
V...
Value Added Tax. An indirect tax levied on each stage of the production of most goods and services.
Currently it stands at 17.5 per cent..
Variable Costs. Costs that vary in line with trading activity e.g. postage, stationery.
Variance. The difference between planned and actual costs (and revenue).
Venture Capital Trust. A special type of investment trust on the Stock Exchange designed to provide
start up or expansion capital for unquoted companies.
Vested Rights. Rights that have accrued to a person e.g. automatic preserved benefit on leaving an
occupational pension scheme, after minimum of 2 years qualifying service.
Void. Something which 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.
GLOSSARY
main index |
Abbreviations
back page

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Financial Terms Glossary -v- (provided by FSEC Ltd)
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Financial Terms Glossary -w- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
W...
Waiting Period. Particularly used in connection with a specified period before joining a pension scheme or
becoming eligible for some other employee benefit.
Not to be confused with Qualifying Service.
Waive. To give up a right to something.
Waiver of Premium. A policy option which provides for the insurance company to waive payment of the
policy premium in certain circumstances e.g. sickness or disability.
Warrants. Certificates giving the holder the option to buy shares at a fixed price at a future date.
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 of Life. Essentially a protection policy with investment content that remains in force until death, at
which point it pays out. As the contract is capable of acquiring value, it is possible to surrender the policy.
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.
Winding Up. The termination of a pension scheme, where assets are used to purchase the accrued
liabilities of the pension scheme, either by purchasing immediate and deferred annuities, or transfer to
another pension scheme.
With Profits. A class of policy which participates in the distribution of surplus in the form of bonuses. Such
policies are termed with profits.
http://www.financial-planning.uk.com/glossary/w.htm (1 of 2) [4/20/2002 5:50:31 PM]
Financial Terms Glossary -w- (provided by FSEC Ltd)
Withholding Tax. Tax deducted by many countries from income payments such as dividends, interest and
royalties. May be offset, reduced or negated by Double Taxation Relief.
Working Capital. The difference between current assets and current liabilities, being available to run the
day to day activities of a business.
Writ. Court order instructing someone either to do, or not to do, something.
GLOSSARY
main index |
Abbreviations
back page

http://www.financial-planning.uk.com/glossary/w.htm (2 of 2) [4/20/2002 5:50:31 PM]
Financial Terms Glossary -y- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
Y...
Yield. A measure of the income received from an investment compared to the price paid for the investment.
Normally expressed as a percentage.
GLOSSARY
main index |
Abbreviations
back page

http://www.financial-planning.uk.com/glossary/y.htm [4/20/2002 5:50:32 PM]
Financial Terms Glossary -z- (provided by FSEC Ltd)
GLOSSARY
Abbreviations
Z...
Zero Dividend Preference Shares. A share with a predetermined growth rate, but which does not pay
dividends.
Zero Rated. Goods (such as food, books and periodicals) taxed at the lowest, nil, band of VAT. A supplier
can reclaim VAT paid in the course of production. All exports are zero rated. Do not confuse with exempt
supplies.
GLOSSARY
main index |
Abbreviations
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http://www.financial-planning.uk.com/glossary/z.htm [4/20/2002 5:50:34 PM]
GLOSSARY
Abbreviations
Abbreviations...
ACAS
Advisory Conciliation and Arbitration Service
ACORN
Acronym for A Classification of Residential Neighbourhoods
ACT
Advance Corporation Tax
ADL
Activities of Daily Living
AEI
Average Earnings Index
AGM
Annual General Meeting
AIM
Alternative Investment Market
ARP
Accrued Rights Premium
AUTIF
Association of Unit Trusts and Investment Funds
AVC
Additional Voluntary Contribution
BACS
Bankers Automated Clearing Services
BES
Business Expansion Scheme
BIIBA
British Insurance and Investment Brokers Association
CEP
Contributions Equivalent Premium
CGT
Capital Gains Tax
CII
Chartered Insurance Institute
COMPS
Contracted Out Money Purchase Scheme
CPA
Compulsory Purchase Annuity
http://www.financial-planning.uk.com/glossary/abbreviations.htm (1 of 6) [4/20/2002 5:50:40 PM]
CTT
Capital Transfer Tax
DSS
Department of Social Security
DTI
Department of Trade and Industry
ECU
European Currency Unit
EIS
Enterprise Investment Scheme
EMS
European Monetary System
EMU
European Monetary Union
EPP
Executive Pension Plan
ERM
Exchange Rate Mechanism
ESC
Extra Statutory Concession
ESOP
Employee Share Option Plan
FIB
Family Income Benefit
FIMBRA
Financial Intermediaries, Managers, Brokers Regulatory Association
FOF
Futures and Options Fund
FOX
Futures and Options Exchange
FSAVC
Free Standing AVC
FURBS
Funded Unapproved Retirement Benefit Scheme
GDP
Gross Domestic Product
GNP
Gross National Product
GMP
Guaranteed Minimum Pension
IAE
Index of Average Earnings
IBRC
Insurance Brokers Registration Council
ICS
Investors Compensation Scheme
ICS Levy
Investors Compensation Scheme Levy
IFA
Independent Financial Adviser
IFAA
Independent Financial Advisers Association
IFAP
IFA Promotions
IHT
Inheritance Tax
IMRO
Investment Managers Regulatory Organisation
ISA
Individual Savings Account
LAPR
Life Assurance Premium Relief
LAUTRO
Life Assurance and Unit Trust Regulatory Organisation
LEL
Lower Earnings Limit
LIA
Life Insurance Association
LISA
Lifelong Individual Savings Account
LIFFE
London International Financial Futures Exchange
LRP
Limited Revaluation Premium
MAR
Medical Attendant's Report
MER
Medical Examiner's Report
MIP
Maximum Investment Plan
MIRAS
Mortgage Interest Relief at Source
MWPA
Married Woman's Property Act (1882)
NFIFA
National Federation of Independent Financial Advisers
NHS
National Health Service
NIC
National Insurance Contributions
NPD
Normal Pension Date
NRA
Normal Retirement Age
NRD
Normal Retirement Date
NRE
Net Relevant Earnings
OEIC
Open Ended Investment Company
OFT
Office of Fair Trading
OPAS
Occupational Pensions Advisory Service
OPB
Occupational Pensions Board
PAYE
Pay As You Earn
PAYG
Pay As You Go
PEP
Personal Equity Plan
PET
Potentially Exempt Transfer
PHI
Permanent Health Insurance
PIA
Personal Investment Authority
PIBS
Permanent Interest Bearing Shares
PMI
Private Medical Insurance
PPI
Pooled Pension Investment
PPP
Personal Pension Plan
PPPRP
Personal Pension Protected Rights Premium
PPS
Personal Pension Scheme
PRP
Pensioner's Rights Premium
PSO
Pension Schemes Office
RAC
Retirement Annuity Contract
RIE
Recognised Investment Exchange
ROC
Return on Capital
RPB
Recognised Professional Body
RPI
Retail Prices Index
SAPP
Self Administered Personal Pension
SAYE
Save As You Earn
SEAQ
Stock Exchange Automated Quotation System
SERPS
State Earnings Related Pension Scheme
SFA
Securities and Futures Authority
SFO
Superannuation Funds Office
SIB
Securities and Investment Board
SIPP
Self Invested Personal Pension
SMP
Statutory Maternity Pay
SRA
State Retirement Age
SRO
Self Regulatory Organisation
SSAPS
Small Self Administered Pension Scheme
SSAS
Small Self Administered Scheme
SSP
Statutory Sick Pay
TESSA
Tax Exempt Special Savings Account
TVAS
Transfer Value Analysis System
UCITS
Undertaking for Collective Investment in Transferrable Securities
UEL
Upper Earnings Limit
USM
Unlisted Securities Market
VAT
Value Added Tax
VCT
Venture Capital Trust
GLOSSARY
Abbreviations
GLOSSARY - Abbreviations
main index |
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Main index for Financial Planning Horizons
the site
Bookmark this site!
Print page
. . . where you can prepare yourself

to make the most of your money
Introducing financial planning horizons
What's on the site?
Site map
Search the Site
Contact us
What we aim to do in the following pages is to give you enough information to enable you to take control of your
personal financial planning.
With a sound background knowledge of the language, products, providers and regulations, you will be able to
understand your adviser's proposals, and whether they match your aims and ambitions.
main index |
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http://www.financial-planning.uk.com/index.htm [4/20/2002 5:50:44 PM]
Search Financial Planning Horizons
SEARCH - use the form below to find an item on this site
Enter your query below:
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http://www.financial-planning.uk.com/search/query.htm [4/20/2002 5:50:45 PM]
Tips for Searching
Tips for Searching

At its simplest, a query can be just a word or a phrase. But with the tips on this page, you can expand the focus
of your query to give you more complete results. These tips will get you started with basic query language and
acquaint you with the full power of Microsoft Index Server.
Look for words with the same prefix. For example, in your query form type key* to find key, keying,
keyhole, keyboard, and so on.
Search for all forms of a word. For example, in the form type sink** to find sink, sinking, sank, and
sunk.
Search with the keyword NEAR, rather than AND, for words close to each other. For example, both
of these queries, system and manager and system near manager, look for the words
system and manager on the same page. But with NEAR, the returned pages are ranked in order of
proximity: The closer together the words are, the higher the rank of that page.
Refine your queries with the AND NOT keywords to exclude certain text from your search. For
example, if you want to find all instances of surfing but not the Net, write the following query:
surfing AND NOT the Net
Add the OR keyword to find all instances of either one word or another, for example:
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This query finds all pages that mention Abbott or Costello or both.
Put quotation marks around keywords if you want Index Server to take them literally. For instance, if
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Index Server searches all documents for the words system and manager.
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http://www.financial-planning.uk.com/search/ixtiphlp.htm [4/20/2002 5:50:46 PM]
Financial Planning Horizons directory
the site
Bookmark this site!
Print page
http://www.financial-planning.uk.com/consumer/directory.htm [4/20/2002 5:50:48 PM]
Financial Planning Horizons for free financial information
. . . where you can prepare yourself

to make the most of your money
What's on the site?
Site map
Search the Site
Contact us
What we aim to do in the following pages is to give you enough information to enable you to take control of your
personal financial planning.
With a sound background knowledge of the language, products, providers and regulations, you will be able to
understand your adviser's proposals, and whether they match your aims and ambitions.
main index |
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http://www.financial-planning.uk.com/consumer/about/framecontents.htm [4/20/2002 5:50:49 PM]

Financial planning horizons is a site for anyone with an interest in, or a need to know about, personal
financial planning.
We don't offer personal advice, nor do we sell products or services. What is available on site is the
groundwork to put you on a safe footing when discussing aspects of personal finance.
If you can't find what you need, please tell us, and we'll do our best to fill the information gap.
Remember the old saying; 'money talks'?
Use the contents of the site to make sure yours doesn't say 'Goodbye!'
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http://www.financial-planning.uk.com/consumer/about/email.htm [4/20/2002 5:50:53 PM]
About Us - Financial Planning Horizons for free financial information
What financial planning horizons is all about

Can't tell your equities from your elbow? Your fungibles from your flip-flops?
It doesn't matter as much as you think.
True, the world of money can be complicated and tricky for the unaware and the unprepared - which is where
financial planning horizons comes into its own.
Financial planning horizons is here to take the pain out of planning so that your forays into finance are
neither frightening nor frustrating.
The material on the site - questions, quizzes, technical stuff and tools - is intended to educate and to inform. Like
any reference book, you can dip into it when you need to answer a specific query or to satisfy your curiosity.
More importantly, it will help you familiarise yourself with the world of personal finance.
To start the ball rolling, we would suggest the following steps:
1. Make sure you know where all your financial papers are hidden away.
2. Make sure you know where your will is located.
3. Find paper, pen, a table and a chair, and make yourself comfortable. (If you have
never done this sort of thing before, a comforting drink may be a good idea)!
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http://www.financial-planning.uk.com/consumer/about/aboutFPH.htm [4/20/2002 5:50:54 PM]
FSEC / Copyright / Disclaimer

Copyright
Copyright in all material on this website belongs to Financial Services Education for Consumers Limited (FSEC),
except where otherwise stated. Authorisation for the use of FSEC material is permitted only for personal, private
study, subject to such material not being amended and a clear statement of copyright ownership being displayed.
Authorisation outside the above is strictly prohibited without the prior written permission of FSEC. Authority to
use material not within the FSEC copyright must be made to the copyright owner.
Disclaimer Notice
The information contained on this website consists of material in the public domain and written by, and for,
FSEC. All material is provided in good faith, and is not intended as either advice or as the definitive description or
definition of any word, phrase, product or service, or providers of such products, services or regulatory activities.
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http://www.financial-planning.uk.com/consumer/about/copyright.htm [4/20/2002 5:50:55 PM]
How to Start Planning - Financial Planning Horizons for free financial information
Where do you start?

Money is the basic ingredient of many of our ambitions, so planning what happens to it is an
essential task.
And before you start your planning, you must ask yourself a number of essential
questions, namely:
1. Financially, where am I now?

2. Is this where I want to be, or can I do better? If so, where do I want to be?
3. If I want to be in a better place financially, how do I get there?
4. What can prevent me from getting there?
If you think this sounds more like planning a journey than planning finances then, in a sense, you are right. You
can't afford to look on financial planning as a once only event. You must be prepared to revisit your initial plan
regularly, as the years go by, to make sure it keeps pace with the changes in your life.
Back to these basic questions - only you can answer 1 and 2. You and your adviser together can answer 3 and
4.
index |

http://www.financial-planning.uk.com/consumer/about/startFPH.htm [4/20/2002 5:50:57 PM]
Basic Steps in financial planning - Financial Planning Horizons for free financial information
Basic Steps: a suggestion

1. Print off the forms you will find under 'Analyse your finances'.
2. Using your financial papers and records, complete as many of the sections as possible. This will give
you a factual summary of your financial assets and liabilities rather than an analysis of where you are
financially - this comes later.
3. Locate your will. Is it current? If not, you need to take a view at this point. An out of date will is almost
worse than no will at all. You must decide whether to amend immediately, or to want to see what your
planning exercise throws out. Your will is an essential part of your planning.
4. Identify all possible financial milestones in the future, such as births, anniversaries, school fees, 'big gift'
birthdays (18th or 21st ), marriages, retirement. Work out how much these things are likely to cost - and
don't forget inflation.
5. Identify these milestones from the various elements of the site, and see what information there is. Any
unknown words and phrases can be checked using the glossary and search facility.
6. Now, do you think that what you have now will give you what you want and need in the future?
If you can say for certain that, yes, it will, then well done, keep up the good work.
If you can't tell, or if you're sure it won't, then you need to start work and you probably need support.
7. Talk to your financial adviser - the preparatory work you have already done will make the planning
process much easier for both of you.
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http://www.financial-planning.uk.com/consumer/about/basic_steps.htm [4/20/2002 5:50:58 PM]
Factfind tools to clarify your financial situation free from FSEC
FACT FIND Introduction
On the following pages are a series of forms. The questions raised will help you to assess your
financial position. The answers will form the basis on which you, and your financial adviser, can draw up a
financial plan which will be suitable for you and your dependants.
Print the forms you require, and complete to help you to assess your financial position.
Financial Objectives
Estate Planning
Attitude to Risk
Income
Personal Details
Expenditure
Children & Other

Dependants
Assets
Professional Advisers
Employee
Benefits
Employment Details
Trusts
http://www.financial-planning.uk.com/consumer/factfind/factfind.htm (1 of 2) [4/20/2002 5:51:00 PM]
Factfind tools to clarify your financial situation free from FSEC
Liabilities
DO NOT complete the forms on-line.
main index |

http://www.financial-planning.uk.com/consumer/factfind/factfind.htm (2 of 2) [4/20/2002 5:51:00 PM]
Financial Objectives - FactFind form1
Financial Objectives
print this page
You should highlight areas of need and then prioritise
SELF
SPOUSE/PARTNER
Income to continue in the event of

death
Objective / Priority
Income to continue in the event of

disability
Income to continue in retirement
Repayment of debt in the event of

death
Repayment of debt in the event of

disability
Repayment of debt before retirement
Payment of taxes at death
Provision for children's/

grandchildrens' education
Increased income from investments

and savings
http://www.financial-planning.uk.com/consumer/factfind/form1.htm (1 of 3) [4/20/2002 5:51:02 PM]
A higher level of savings

Short term
Medium term
Long term
Estate Planning, including tax/wills
Retirement Planning
Investment Planning
Other eg specific requirements such

as planning for wedding
Increasing current net spendable

income
Current tax rate
Reducing current tax liabilities
Existing Budget - brief details
Existing Financial Plans - brief details
Main contents | Introduction | Financial Objectives | Attitude to Risk | Personal Details | Children & Other
Dependants | Professional Advisers | Employment Details | Estate Planning | Income | Expenditure | Assets |
Employee Benefits | Trusts | Liabilities
index |

What's on the site?
How to use the site
Lifestages
FAQs - Did you Know?
Milestones
Ask the Right Questions
News
Basic information
Noticeboard
Analyse your finances
Quiz, Competition
Essential information
Contact us
Glossary
Random link - are you feeling lucky?

main index |
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http://www.financial-planning.uk.com/consumer/about/whats_on.htm [4/20/2002 5:51:04 PM]
Did you Know...! FREE Financial Planning Information
Did you know?

Protecting my business if my partner dies?
Different sorts of life assurance?
Insuring against redundancy?
Choosing Life Assurance?
Comparing life products and providers?
Savings and investment products?
A new tax on savings
TESSAs and PEPs?
National Savings?
Annuities?
State pension schemes?
Occupational pension schemes?
Personal Pension Plans?
Borrowing money for a mortgage?
Who I should get my mortgage from?
Whether I should rent or buy my home?
Different types of mortgage currently available?
Why my financial adviser asks me so many questions?
Protecting my family's income in the event of my death?
http://www.financial-planning.uk.com/consumer/dyouk/index.htm (1 of 2) [4/20/2002 5:51:06 PM]
Did you Know...! FREE Financial Planning Information
main index |
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http://www.financial-planning.uk.com/consumer/dyouk/index.htm (2 of 2) [4/20/2002 5:51:06 PM]
Did you Know...! I am concerned about the effect on the business if my partner dies suddenly
Did YOU Know....

I have a small business which I share with a partner. I am
concerned about the effect on the business if my partner dies
suddenly. Is there any way I can protect the business against this
sudden loss?
We should stress that business protection can be a very complex subject and you
should consult a competent financial adviser to be sure of getting sound advice.
There are a variety of business protection policies available on the market, select to
find about the main types of business protection policies.
NOTE Do not take any action without first consulting your financial adviser. This information and
that of the linked pages is not intended to suggest any particular course of action.
index |
back page

http://www.financial-planning.uk.com/consumer/dyouk/q2.htm [4/20/2002 5:51:07 PM]
PROTECTION -
Protection
Protection in Financial Planning
'Dying Too Soon'
'Living Too Long'
Loss of Income
Business Needs
Determining Protection Requirements
Protection Products and Their Uses

Protection Product Providers
Product Features
Term Assurance
Whole of Life
PIncome Protection Insurance (IPI)
Critical Illness Insurance
Private Medical Insurance (PMI)
http://www.financial-planning.uk.com/info-fp2/index-a.htm (1 of 3) [4/20/2002 5:51:09 PM]
PROTECTION -
Long Term Care
Personal Accident Insurance
Redundancy Cover
The Sole Trader
Partnership Protection
Share Protection
Key Employee Insurance
Taxation of Life Policies
Comparing Products and Providers

What Must Be Compared?
Surrender Values
Premium Levels
Charging and Commission Structure
Comparing Policy Options from Different Providers
Factors to Consider for Term Assurance
Factors to Consider for Whole of Life Policies
Factors to Consider for Income Protection Insurance
PROTECTION -
Factors to Consider for Critical Illness Insurance
Factors to Consider for Private Medical Insurance
Factors to Consider for Long Term Care
Factors to Consider for Personal Accident
Factors to Consider for Redundancy Cover
Comparing Providers
Financial Strength
Asset Valuation
Liabilities
Solvency
Quality of Service
Investment Choice and Performance
main index |
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PROTECTION - 'Dying too Soon'
PROTECTION IN FINANCIAL PLANNING

1.1 'Dying too Soon'
Where the death is that of the main income provider, the greater the
reliance on that income for everyday living purposes, the greater the need
for protection for its replacement.
Loss of income in such a permanent fashion could produce a number of problems and needs such as:
1.
2.
3.
4.
5.
6.
Reduction in standard of living.

Need to keep up with increasing cost of living.
Need to repay loans.
Possible loss of possessions if unable to repay loans or keep up repayments.
The problem of adult dependants and their continuing care.
The need to pay inheritance tax.
See Protection Products
index |
back page

http://www.financial-planning.uk.com/info-fp2/unit-a/1-1.htm [4/20/2002 5:51:10 PM]
Surprising Statistics - death, critical illness, income protection, long term care
Surprising Statistics
There will be a 37% increase in the number of people over

state pension
age by the year 2030.
The number of people of working age whose taxes/NIC will
then fund state benefits will reduce by 2.3%.
Currently there are 3.4 people of working age per pensioner.
By the year 2030 there will be 2.4 people of working age per
pensioner - a fall of 29%.
By the year 2020 the state pension is expected to be worth 9% of average male earnings.
The number of pensioners aged over 80 has increased by a third over the
last decade and this trend is expected to continue.
Death
Every 5 minutes 6 people die.
On average each year in the UK 620,000 people die.
Almost 1,000 people lose a spouse through death each day.
Just under 1 in 5 of male deaths occur between age 20 and 65.

More information
Critical Illness
1 in 3 people develop cancer sometime in life.
1 in 4 males and 1 in 5 females will suffer a serious illness before retirement.
Around 120,000 people have Parkinson's Disease and 1 in 7 are under 40 when diagnosed.
Coronary Heart Disease is responsible for 12% of all working days lost through sickness.
http://www.financial-planning.uk.com/consumer/noticeboard/statisics/stats.htm (1 of 3) [4/20/2002 5:51:12 PM]
Each year, 120,000 people suffer strokes in the UK.

More information
Income Protection (PHI)
Taking a 35-year-old before reaching age 60, 1 in 5 will be off work for 6 months, 1 in 8 will have a
critical illness and 1 in 13 will die.
Over 1.65 million people will be off work at any one time through sickness and disability and will have
been off work for at least 6 months.
Around 20% of all people who consult their GP are diagnosed as having a long-standing illness. i.e.
one which limits their activities in any way. In 1995, 1.2 million people aged between 16 and 64 were
alive who had been diagnosed as having such an illness.
More information
Long Term Care
Around 40,000 homes are sold every year to pay for Long Term Care.
Men can expect to have 64 years of healthy life and women 67 years.
The average cost of nursing at home(1994) was between 7.50 and 20 per hour.
The average nursing home fee (1994) was 331 per week.
There will be a 37% increase in the number of people over state pension age by the year 2030.
The number of people of working age whose taxes/NIC will then fund state benefits will reduce by
2.3%.
Currently there are 3.4 people of working age per pensioner. By the year 2030 there will be 2.4 people
of working age per pensioner - a fall of 29%.
By the year 2020 the state pension is expected to be worth 9% of average male earnings.
The number of pensioners aged over 80 has increased by a third over the last decade and this trend is
expected to continue.
More information
noticeboard |
page back

PROTECTION - Critical Illness Insurance
2.2.4 Critical Illness Insurance
Also known as 'Dread Disease' cover.

Due to advances in medical care, many people who suffer major life
threatening illnesses such as a heart attack or stroke actually survive. However, many such individuals
may not be able to continue working and costly ongoing specialist treatment may be required.
Critical illness cover provides a useful protection, as payment is made in the event of the diagnosis of
an insured illness. Payment is usually in the form of a lump sum. Consequently, such cover would be
useful in providing cash for medical help and other expenses relating to what could be a debilitating
and even terminal illness.
Setting up procedures are similar to life assurance. A proposal form will be necessary giving full
medical details and family history. Underwriters will assess the risk and accept, rate or decline as
appropriate. Cases which are not acceptable for critical illness cover may still be accepted for life
assurance. For example, a proposal may be declined or rated because of a family history of heart
disease but if the client is currently fully fit he may be perfectly acceptable for life assurance.
Unlike life assurance, however, critical illness cover may be suitable for single people with no
dependants. A need for such cover can also be seen in the context of business protection for
shareholders and key persons.
A growing area for this cover is in relation to the mortgage market where, if the client is unable to work
following a major illness, the sum assured would provide the necessary funds to repay the mortgage.
A unit linked whole of life policy may be written so that payment of the sum insured is 'accelerated',
becoming payable on diagnosis of a dread disease specified in the policy. A total and permanent
disability benefit may also be payable. Policies are usually written on an own life basis.
There are a number of life offices who now offer these products on a 'stand alone' basis using a term
assurance contract. The feature is sometimes available as an 'add on' benefit to policies designed for
mortgage repayment purposes.
The range of diseases covered normally includes heart attacks, strokes, kidney failure and cancer.
Cover has been extended by some offices to encompass a range of impairments including paralysis,
by-pass surgery, transplantation and total permanent disability.
A major problem that has arisen in practice has been that although the diseases covered are in the
main well known, each company has tended to have its own particular definition of particular
conditions. For example, some companies with regard to coronary artery by-pass surgery require two
or more arteries to have been operated upon, whereas other offices would meet a claim on the by-pass
of a single artery.
If money is paid out on diagnosis of a listed disease, it is not repayable should the condition clear.
http://www.financial-planning.uk.com/info-fp2/unit-a/2-2-4.htm (1 of 2) [4/20/2002 5:51:13 PM]
PROTECTION - Critical Illness Insurance
index |
back page

PROTECTION - Permanent Health Insurance (PHI)
2.2.3 Income Protection Insurance (IPI)

PHI - glossary definition
Under an income protection insurance (IPI) policy, an income is paid to

the policyholder in the event of sickness or disability at the end of an
initial waiting period (usually 4,13,26 or 52 weeks). The benefit is
payable until the earlier of expiry of the policy term (usually age 60 or
65), the policyholder's return to work, or death. The main purpose of the policy, therefore, is to replace
income, potentially until retirement.
There is no standard definition of disability. Generally, the policy wording will require policyholders to
demonstrate that they are totally unable by reasons of sickness or accident to follow their own
occupation, or in some cases, any occupation to which they are suited.
Unlike life assurance, the underwriting considerations are based on morbidity (i.e. incidence of
sickness and accident) rather than mortality. Thus, occupation in particular is a much more important
feature than with life assurance from an underwriting point of view.
The main features of IPI policies are:
1. A regular income during long term disability.

2. The policy is non-cancellable by the insurance company, hence the term
'permanent'
3. Benefits may be level or increasing.
4. A proportionate benefit payable on part-time return to work.
5. A proportionate benefit applies if a lower paid job is taken due to the disability.
Cover under such policies is always limited to a proportion of the individual's income. The rationale
being that it is important for the policyholder to have an incentive to return to work and so is not better
off by claiming under the policy. At the very least, therefore, the policy income could safeguard
essential expenditure, such as mortgage payments or medical costs, if there is no other cover.
Benefits payable under individual IPI policies are tax free. Because of this, most providers limit the
maximum that can be insured to 50-60% of gross income. The rationale being that this amount
together with State incapacity benefit equates to an individual net income.
These arrangements do not apply to Group IPI where benefits are normally passed on to the employee
and taxed under the PAYE system.
An important feature of income protection insurance policies is that, as the name implies, the insurance
company does not have the option to cancel the policy, irrespective of the number of claims that are
made.
IPI policies may be written to provide level or increasing benefits. Benefit increases are available,
either at a predetermined rate, e.g. 5% per annum, or in line with the Retail Prices Index or an earnings
index.
Once the insured person is able to return to work, benefit will usually cease; sometimes individuals are
only able to return initially on a part-time basis, in which case a proportionate benefit may be paid.
Equally, it is also sometimes possible that individuals are only able to take on a lower paid occupation;
once again the IPI policy will pay a benefit proportionate to the reduction in the individual's earnings.
You should note that most underwriters charge higher premiums in relation to females; this is because
of the higher statistical incidence of claims.
Benefits are limited as noted above; calculations usually taking into account any other benefits from
similar policies so that the total income does not exceed the providers current maximum percentage of
the individual's income before disability.
This concept becomes rather more difficult to define in the case of self-employed people and checks
will be made at the point of claim by reference to the accounts of his business.
There are some exclusions from such policies, but they vary amongst life companies. The growth of
AIDS in recent years has led to this becoming an exclusion in virtually all IPI policies; and other
exclusions could include:-
1. Intentional self-inflicted injury.

2. Disability arising from alcohol or drug use other than as prescribed by a
registered medical practitioner.
3. Disability arising from an act of war or invasion whether declared or not.
4. Participation in a criminal act.
5. Pregnancy, child-birth and any complications arising.
6. Aviation other than as a fare-paying passenger.
Occupation is a key element in the pricing and underwriting of IPI. Typically, life offices categorise
occupations into classes 1 to 4; class 1 representing the lowest risk (clerical and professional
occupations), and class 4 the highest. There are major differences in the premiums charged between
class 1 and class 4 risks, and there are a number of occupations where cover will often be unavailable
for income protection insurance policies.
If an individual's occupation changes, requirements vary. Some offices continue cover regardless of
the basis that it is extremely unlikely that, for example, an individual in a professional occupation is
likely to change his job to, say, a steeple-jack. Others immediately cease cover if there is a change, or
at least require notice to reconsider the situation.
'Conventional' policies are similar to term assurance in that there is no investment element within the
policy and if the policy terminates it has no value other than claim value.
'Unit Linked' policies, however, benefit being the IPI cover which is paid for by a monthly cancellation of
units. A residual policy value is present in the event of death or early surrender, represented by the
value of units under the policy less any charge deducted by the life office.
Premiums are calculated using assumptions regarding the growth in the value of the underlying units.
Policies are normally reviewed from time to time (often every five years) to see whether those
assumptions have been borne out, and depending on the outcome of such a review there may be a
premium adjustment
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GLOSSARY
Abbreviations
U...
Uberimae Fidei. The principle of utmost good faith, or disclosure, in completing a life insurance proposal
form.
Ultra Vires. Action outside the agreed powers of a particular body. Such an action would be void.
Umbrella Fund. An offshore fund offering a variety of sub-funds allowing an investor to switch between
them, e.g. different currencies, different stockmarkets. This formerly offered capital gains tax benefits, but
these were removed by the 1989 Budget.
Unapproved Schemes. See FURBS.
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.
Undertaking for Collective Investment in Transferable Securities. Essentially, unit trust-type

investments which may be marketed in any of the European Union member countries.
Underwriting.
1. Taking up shares not purchased by the public, for commission.
2. Review and analysis of relevant factors affecting an insurance proposal.
Unfunded Unapproved Retirement Benefit Scheme. (UURBS) A form of unapproved pension

scheme. Benefits are promised by an employer to an employee but are not pre-funded. The employer
established a "book reserve" to cover the potential liability.
Uniform Accrual. Where benefits are treated as being earned equally (uniformly) throughout the period of
pensionable service.
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Uniform Business Rate. Tax charged on business property.
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 collective investment which invests in a range of assets e.g. equities, fixed interest and cash.
Can either be general fund or more specialist investing particular type of asset e.g. property or geographical
area e.g. Far East.
Unitised. See 'Unit Linked'.
Units. When investing in a unit linked contract, the individuals contribution is used to buy units of equal
value. These units will fall or rise in line with the underlying investments.
Unlisted Securities. Securities/shares not listed on an official stock exchange list.
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 much cheaper than the main market.
Market closed June 1995.
Unsocial Hours. A financial services legislation concept, concerning times not to contact clients and
prospective clients without prior approval. Generally taken to be between the hours of 9pm to 9am, Monday to
Saturday, but will depend on the client and individual circumstances.
Unsolicited Calls Regulations. Financial services rules governing 'cold calling'.
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.
Upper Band Earnings. Total earnings between the Lower Earnings Limit and the Upper Earnings Limit
Upper Earnings Limit. See Lower Earnings Limit.
GLOSSARY
Abbreviations
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PROTECTION - Long Term Care
2.2.6 Long Term Care
The purpose of this cover is to provide the funds to meet the cost of care
in later life. Care costs are expensive and such policies allow the flexibility
to provide the best facilities and nursing care for the claimant, either in a
private nursing home or at home.
Benefit will usually consist of monthly income payments which are made once the definition of disability
has been fulfilled.
The definition of disability for this type of cover is nearly always based upon Activities of Daily Living
(ADLs). Benefit becomes payable once the assured has reached a degree of disability, which means
he is unable to perform any three (for example) ADLs unaided. ADLs are considered as basic to
human existence.
A typical list of ADLs would be:-
1.
2.
3.
4.
5.
6.
7.
Each of these needs to be clearly defined; for example, 'feeding' might be defined as "cutting meat,
buttering bread, getting food and drink to the mouth using fingers or utensils".
A partial benefit may be payable if the life assured is unable to perform a lower number of ADLs.
As with income protection and critical illness policies, there will be specified circumstances in which a
claim for benefit will not be met. Such exclusions may, for example, include situations where the
disability is a consequence of or aggravated by:-
1.
2.
3.
4.
5.
6.
Eating.
Dressing.
Bathing.
Using the toilet.
Getting in and out of bed.
Walking.
Climbing stairs.
Attempted suicide.
Self inflicted injuries.
Failure to seek or to follow medical advice.
War, invasion, riot or civil commotion.
AIDS or HIV infection.
Any condition arising during the first 30 days following the commencement date
of cover.
Policies may be written as an optional extra to a Universal Whole of Life policy, or as a stand alone
contract.
PROTECTION - Long Term Care
Where the base product is a life policy providing a benefit payable on death, a surrender value may
accrue. This will depend on the specific product.
The tax treatment of the benefit under such policies remains unclear. However, if the benefit is payable
directly to the insured as income, it can be expected that it will be treated in the same way as a
disability income and taxed accordingly, with benefits being taxed as earned income. If paid as a lump
sum, part will be treated as a return of capital and, therefore, untaxed.
If, however, the benefit represents a direct payment of costs incurred, it is likely that the benefit
payments will be treated as medical costs with no tax being levied.
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Financial Planning Information noticeboard for the latest information
FPH NOTICE
BOARD
Good evening! It's Saturday April 20, 2002 at 5:51 PM
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News Release - BEST FREE FINANCIAL PLANNING INFORMATION SITE GETS BETTER! - June 2001
NEWS RELEASE
June 2001
BEST FREE FINANCIAL PLANNING INFORMATION SITE GETS BETTER!
FSEC's Financial Planning Horizon information site has already attracted a large readership and at least one
'Best financial information site' accolade from the computer press. With up to the minute information and ways
to exchange ideas it is perhaps not surprising.
However, for anyone who has not yet accessed the newly restructured site there is a feast of new features not
least of which is an excellent site navigation tool that stays alongside each page to help you move through the
information with the click of a mouse.
The content is full of surprises. There are user friendly sections based, for example, on the information we need
at different stages in our life - from starting work to dealing with the death of a partner. The noticeboard gives
you the opportunity to read about the latest financial developments and breaking news on new products It also
includes an interactive letters section where you will be surprised not only at the number of correspondents and
the topics covered - but also the geographical spread. The list ends up with concerning financial issues in
Russia.
Managing director John Hose is delighted with the success of the site and he says, " Financial Planning
Horizons grew out of our realisation that aspects of our work in helping the financial services industry keep up
with the regulatory requirements could also be of use to increasingly sophisticated financial consumers who like
information to give them confidence when contacting professional financial advisers."
He recommends anyone with an interest in financial affairs to log on to:
http://www.financial-planning.uk.com and let him have feedback on your impressions
Ends June 2001.
For further information contact:
John Hose - Professional Development Partnership Tel: 01484 452020
Or Chris Hawthorne - Forum Communications Tel: 01962 877833
Notes for editors:
For your convenience this news release can also be down loaded from the noticeboard section of
www.financial-planning.uk.com
For an Acrobat version of this news release click here
main index |
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News Release - BEST FREE FINANCIAL PLANNING INFORMATION SITE GETS BETTER! - June 2001

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What do you know about nursing care?

After the 1997 general election the new government established a Royal
Commission to investigate long term care: its findings and recommendations
were finally published in March 1999. The Commission chairman commented:
"We have found the current system to be confusing and complex, creating
real fear among those people approaching old age. It is a scandal in modern
Britain and it must be addressed."
Most of the recommendations have not materialised, mainly, we are told,
because of the cost, and the government is looking at alternative solutions
which, we must assume, were clearly ignored or overlooked by the
Commission.
Help the Aged spokesman Mervyn Kohler commented: "The costs make the
issue a political hot potato - but the government has done nothing. It needs to
address the situation as a matter of urgency. The delay and uncertainty are a
worry for thousands of people."
We hope the following notes are of some help in your investigations into the 'system' - but don't hold your breath
hoping for imminent action.
1. Who can give me information about nursing care? Help the Aged (0500 767476) and Age
Concern (0800 009966) produce information, and there are a number of local advisers and agencies
who offer free or fee-based advice, depending on whether you buy financial products.
2. What is the government doing about it? At the moment, trying to find a cheaper way of
providing the type of care proposed by the Commission. However, don't expect anything this side of
the next election, the whole issue will need some radical action - not to mention access to a large pot
of cash - to produce a solution.
3. What did the Commission recommend? For those people with assets below 10000 the
State should pay all medical and nursing home costs. Those with assets in excess of 60000 would
pay full costs, while those with assets between these levels would receive some help.
4. What care options are currently available? The choice boils down to care at home or care
in a residential home. Both types need funding, which means dipping into savings or selling assets to
meet the charges for medicine, nursing care and the 'residential' elements such as food and drink,
laundry, and so on. More often than not, the only asset available is the family home which may be sold
to purchase a care annuity or bond, the income from which will go to defray the costs.
5. What insurance policies are available? There are no 'insurance' policies designed
specifically for the purpose of providing the cash to pay for care bills. There are, however, the usual
range of insurance, investment and savings policies that can be taken out to achieve specific financial
objectives; and, as with any savings or investment strategy, the sooner you start the better. Ask a
specialist financial adviser for help.
6. How much are nursing home fees? Costs vary depending on facilities and geographical
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location, but are unlikely to be less than 200 per week.

7. What State benefits are available? There is a range of State benefits that may be available,
but all will depend on individual circumstances. Contact your local social security office for more
details.
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Financial Planning Horizons "Guest Writers" Section
Guest Writers
As a direct consequence of feedback received from readers, we are pleased to start this new "Guest Writers"
Section on our Website. We have and will ask well-known individuals within the financial services industry to
write short articles (no more than 1000 words) on topics of their choosing.
Such topics must have a bearing on consumer issues facing the industry. We will publish such articles as and
when they are received and will notify our readers of their publication in our monthly Newsletter.
17/5/99: What is the fairest way to pay for financial advice - commission or fees? The IFA Association's
Garry Heath wants to see the choice left up to the consumer
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What is the fairest way to pay for financial advice - commission or fees?
17/5/99: What is the fairest way to pay for financial advice commission or fees?
The IFA Association's Garry Heath wants to see the choice left up to the consumer
When you seek out financial advice - what exactly is it that you are looking
for? Would you rather speak to a company salesman who wants to sell you
a product - or with someone who will actively seek out the best solution to
your own individual financial situation. If you prefer the latter - as more and
more people are beginning to - than the chances are that you will be
working with an IFA.
Independent Financial Advisers - the name says it all really. Financial
advisers that provide independent advice for their clients. I believe that
independent advice is inherently superior to any other form - because it is
impartial and, as a result, strongly encourages the principle of consumer
choice.
However, there is one important area of independent advice that has been
criticised in some quarters for not being as independent as it could be. The
controversy concerns the methods of payment for advice given.
To put it simply, there are three main options for consumers when they pay
for advice. Each option has an effect - not only on the finances of the client but also on how many clients are excluded from the advice process.
Commission
So far, pure commission has been the prime method of payment for the IFA sector - with in excess of 90% of
clients using this method. For the client, the greatest advantages of this system is that commission is not paid
out of taxable income, which is therefore easier for a client's monthly budgeting. There is no need to find large
sums of money as there might be for fees. The client pays for advice by instalments as premiums are paid. The
commission route is also popular because it does not attract any VAT liability on the client.
Perhaps the biggest benefit of commission is that it brings independent advice to the widest group of people. It
is unfortunate that those who need financial advice the most are often those with the least ability to pay for it.
Commission allows the maximum number of clients to be advised and grants the adviser the ability to exercise a
subtle form of cross-subsidy, from his more wealthy clients to those less well-off. Commission is a system that
goes some way to bridging that gap.
Of course, there are several critics of commission. The most negative accusation is that commission may
influence the choice of a particular product or product provider. The worry is that an adviser will select a product
for a client primarily on the size of commission they stand to receive from it. Whilst it is impossible to claim that
this never happens, there is no empirical evidence to suggest its widespread application. Indeed there are a
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number of examples of detailed research that indicates that suggestions of such bias are little more than urban
myth.
The Fees Alternative
Because of the negative press given to commission over the past few years, there is now an increasing number
of clients interested in paying fees - with many now electing to use fees as their preferred method of payment.
One of the strongest advantages gained by paying fees is clarity. It is absolutely clear on what basis the adviser
will be paid, and suggestion of bias towards one product or another is taken out of the equation. For clients who
have the funds to remunerate their adviser in this way (and who are, perhaps, used to paying fees in other
areas of their lives) this option is crystal clear and totally straightforward.
From the public point of view, however, there is very little to recommend fees. Whilst such a market would be
totally transparent, it would also be restricted to the high net-worth clients who form only a small part of the
population. It would expose the vast majority of clients to conditional and 'tied' - rather than independent - advice
and would render the whole financial services market less competitive.
For the critics, the accusation of bias would swiftly be replaced by complaints at the lack of truly independent
advice. It is also worth mentioning that, in the legal profession, there is considerable criticism surrounding the
use of fees - particularly of the time-based variety.
The Hybrid System
In an attempt to create a compromise between these two diverse approaches, a number of IFAs are using the
'hybrid' system. This creates a fee-based account for each participating client, and then credits the account with
the commission earned. This allows for more clients to take advantage of fees - but has significant
administration issues for the adviser.
Is there a solution?
The mandatory creation of a fees-only regime for IFAs would severely restrict the provision of independent
advice, at a time when the Government has serious concerns surrounding the social exclusion of financial
advice from much of the population. It is clear that, despite criticism from those outside the process, many
clients and advisers are content with the relationship that the use of commission brings.
If there is no clear way of changing the system, of paying for advice, there might be a way of making the
advantages of both systems clearer in the mind of the client. I believe that the solution - such as it exists should be based on a regime of disclosure that allows the client to make an informed choice on their
remuneration system.
'Positive Discrimination for Fees'
I suspect that the slow take-up of the fees option has lead many advisers not to offer fees to their clients and to
only discuss it at the client's prompting. The concept of positive discrimination for fees ensures that every client
is informed of their choice to pay fees - whilst maintaining the route to commission that will - in most cases - still
be their most popular form of income.
This approach I believe, strives to find common ground in a very contentious debate. If both options are placed
before the client - and the client is made fully aware of the advantages and disadvantages of both systems then the IFA will be doing his job, keeping his client as informed as possible and in doing so face no accusations
of product bias. Positive discrimination gives the choice back to the consumer.
Part of the financial adviser's role is to ensure that clients are as knowledgeable and informed about their
financial situation as possible. I hope that this suggested solution will increase the level of awareness of the
public towards the need for independent financial advice, however they choose to pay for it.
Garry Heath, Director General, IFA Association
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UK Budgets - FSEC timeline information
Budget Timeline
Select a date
Link to Government Statistics on Budget Speeches
main index |
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Financial Planning for Small Business - Accountants' briefing
SMALL BUSINESS
Accountants' briefing
Business Newsbrief 10 Sept
1999
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FSEC Accountants briefing - Critchleys newletters on tax information
ACCOUNTANTS' BRIEFING
OCTOBER 2000
Stakeholder pension update
Ethical Investments
FPH are happy to provide the following Accountants Briefing for the
information of Small Businesses. Messrs Critchleys, Chartered
Accountants, have kindly given us permission to reproduce articles of
interest from their regular Newsletter, for which we thank them.
Carry-Back & Carry-Forward Carried Off!

Happier Workforce
The pages will be updated and added to on a regular basis. FPH

publish the material on the understanding that the information is
supplied by Messrs Critchleys as seen and is not responsible for the
accuracy of the content.
Please contact a professional adviser before taking any decision
based on information provided within our Site.
9 Things You Should Know

About ISAs
With Profits Bonds A Nice
Little Earner?
Company cars
CGT changes again
Audit latest
Free money!
Soft Landscaping
VAT and Legal Aid
Company car fuel
Share success
OCTOBER 1999
How credit worthy are you ?
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Employee records
Benefits to employees?
International tax
Professionals' accounts
Stamp Duty
VAT and EFL
Zero-in for a good return!
AUGUST 1999
Buying to let
Charity Tax review
Forestry Investment
Retirement Income of 18% per
annum?
JANUARY 1999
Pension annuities - friend or
foe?
Car Fuel
Inland Revenue Business
Travel Mileage Rates 1998/99
EU VAT System
International Tax
Late payment interest
Mortgage relief
New National Insurance System

Sell Your Business!
Tax Disharmony
Tax on dividends
Time to make plans
Trusts - Still a Good Idea?
The Working Time Regulations
1998
small business | page back

FSEC Accountants briefing - Critchleys newletter Stakeholder pension update
Posted 10/2000
Stakeholder pension update
A Stakeholder pension scheme must be set up by those employers who are not exempt, and it should be in
place before October 2001. Employers who miss this deadline are likely to face hefty penalties, of up to
50,000.
Employers who are exempt from offering Stakeholder pensions will include:
Employers with fewer than five employees
Employers who already have an Occupational Pension Scheme in place and offer it to all employees
Employers who already have a Group Personal Pension Plan in place into which the employer
contributes at least 3% of earnings, and there are no early transfer penalties
Employers with employees earning less than the National Insurance lower earnings level (a33,485 for
2000/01 tax-year)
Follow the chart below to consider whether you, as an employer, should act.
We recommend that every employer should take the following action:

1. Review your existing pension schemes to ensure that they continue to meet the needs of your
business and your employees.
2. Make sure that you understand the Stakeholder Pension rules
3. If you are not exempt from offering a Stakeholder Pension Scheme, consult us immediately. We can
guide you on the best course of action.
4. If you need to effect a Stakeholder Pension scheme, then do not wait until the last minute. Stakeholder
model Pension schemes are already available
5. Avoid at all costs, the six-month deadline between April 2001 and October 2001 . We feel that it is
likely that scheme providers will be deluged with applications, leading to potential administrative
delays.
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FSEC Accountants briefing - Critchleys newletter Stakeholder pension update
index | next page | page back

FSEC Accountants briefing - Critchleys newletter Ethical Investments
Posted 10/2000
Ethical Investments
Ethical Investments
The idea of investing ethically can mean different things to different people. Some investors like to feel as
though they are doing their bit whilst others take a keener interest in investing in specific issues, such as the
environment or health.
Examples of positive screening criteria
Healthcare
Education
Safety & Security
Environmental protection
Good working practices
Waste recycling
Energy efficiency
Equal opportunities
Ethical funds have historically been tagged as green funds, but in fact there is a lot more to ethical investments
these days than might at first appear. Ethical funds are now becoming more commonly known as Socially
Responsible Investments which is perhaps a better description of what these funds are trying to achieve.
Most ethical investment funds work on a positive and negative screening approach to the companies in which
they invest. For example, a company may be avoided because it manufactures armaments, and the negative
screen would not allow it to be considered. A company that has a policy of conservation of natural resources
may be specifically selected under a positive screen. However, there are still some difficulties that exist.
Consider a company that manufactures cigarettes. This would be an unethical investment and would generally
be avoided, but should the shops and supermarkets that sell tobacco products be avoided? It is not always
black or white.
Examples of negative screening
criteria
Armaments
Alcohol production
Pollution
Animal testing
Nuclear Power
Pornography
Development of genetically modified (GM) foods
Some fund managers rely on analytical research carried out by the Ethical Investment Research Service, a
leading ethical research organisation, in determining the companies to be included in (or excluded from) their
funds. Other fund managers have their own dedicated teams of researchers who will analyse companies in
house. These fund managers then monitor the practices of companies and in many cases, due to the vast sums
involved, are able to influence the future ethical policy a company may adopt.
An interesting development is about to take place in the area of multi-million-pound company pension schemes.
With effect from July 2000, a new law will force trustees of company pension schemes to disclose the extent (if
at all) to which they address social, environmental and ethical issues in their investment decisions. Raising
awareness of ethical issues amongst pension scheme members has to be a good thing, and is likely to lead to
further demand for investment in ethical funds.
Historically, investors have paid a price for investing ethically, as it is common to find that investment
performance is considered a secondary issue. The more profitable companies may be the ones with the worst
ethical policies, and, if they are excluded from a fund, then performance will suffer. However, many ethical
operations, such as waste recycling, are highly profitable these days, and profits lead to good returns for
investors. There is no reason why investment performance of an ethical fund should be poor, just because is
takes a socially responsible stance.
Demand from the public for socially responsible investments is increasing fast, If this demand continues to grow,
such investments will not just be good for the conscience, but also will make sound commercial sense.

FSEC Accountants briefing - Critchleys newletter Carry-Back & Carry-Forward -Carried Off!
Posted 10/2000
Carry-Back & Carry-Forward - Carried Off!
Carry-Back & Carry-Forward - Carried Off!

The Government is proposing to make major changes to the rules regarding the carry-back and carry-forward of
pension contributions from 6 April 2001.
Carry-back involves making a contribution to a personal pension plan or retirement annuity policy and
electing to treat it as having been paid in the previous tax year. This can be of benefit in two main ways:
Tax relief can be obtained sooner.
If an individual paid tax at the higher rate last year, but not this, the tax relief is worth more.
The principle of carry back is likely to remain, but from 2001/02 the contribution will have to be made before 31
January, rather than 5 April as it is now, and the election will have to be made at the same time.
Carry-forward enables individuals to make a single pension contribution in excess of the normal maximum,
in order to mop up the unused tax relief from the previous six tax years. Tax relief is given at the highest rate in
the year the contribution is made, so this can be useful where an individual was previously a basic rate taxpayer
but now pays tax at the higher rate.
It is proposed that the facility to carry forward unused relief be abolished altogether. If this occurs, then the
current tax year could be the last opportunity to obtain the unused relief.
An example
Jane Smith now earns 65,000. Her previous income was much lower, and she felt unable to make large
pension contributions previously. As a higher rate taxpayer, she feels that tax planning is important, and wishes
to make some extra savings for retirement. She has been contributing 200 per month into a personal pension
plan since 1991, and listed below is a schedule showing her income for the last seven years, together with the
maximum pension contributions permissible.
Jane Smith
FSEC Accountants briefing - Critchleys newletter Carry-Back & Carry-Forward -Carried Off!
Tax Year
Age at
6Apr
Relevant
Earnings
Max
PPP
%
Max,PPP %
Contribution
Actual,PPP
made
Unused
Relief
1999/2000
42
65,000
20%
13,000
2,400
10,600
1998/1999
41
48,000
20%
9,600
2,400
7,200
1997/1998
40
35,000
20%
7,000
2,400
4,600
1996/1997
39
25,000
20%
5,000
2,400
2,600
1995/1996
38
22,000
20%
4,400
2,400
2,000
1994/1995
37
20,000
20%
4,000
2,400
1,600
1993/1994
36
15,000
20%
3,000
2,400
600
29,200
As Jane is now a higher rate taxpayer, she would receive tax relief at 40% on all her pension contribution, even
though she was originally a basic rate taxpayer in the earlier years that the relief accrued (1993/94 to 1996/97).
She contributes 29,200 as a single contribution into a personal pension plan in 2000/01 tax-year.
She elects to carry it back into the previous tax-year (1999/00)
She elects to carry forward the relief available from the earliest year (1993/94) until all the relief is used
up.
She will receive the tax relief in her balancing payment for tax in January 2001, which will be 40% of
the contribution or 11,680.
The net cost to Jane is therefore 17,520, but 29,200 is invested. A no-risk return of 66% before charges.
Our message to clients with unused relief is to take action this year, or face losing the facility forever.

FSEC Accountants briefing - Critchleys newletter Happier Workforce
Posted 10/2000
Happier Workforce
Providing extra benefits is the way to retain, reward and attract staff.
If you are an employer, providing your staff with benefits such as a pension or income protection is obviously of
value to them. But it can also boost your business. A workforce that feels well looked
after is more motivated. This will be reflected in increased productivity. Offering a good
package of benefits will help to attract and retain people of the calibre required to help
your business grow.
Rewarding staff through benefits is also highly cost-effective. Employer contributions are
clearly an expense for a business but they are fully tax deductible. With advice and help
from Critchleys Financial Planning Division, setting up and administering an employee
benefit package can be simple and straightforward.
Benefits that you can offer can include:
Retirement planning/pensions
Income protection/covering accident, sickness and disability
Life assurance using a Group Death in Service Scheme
If you wish, you too can also be included within the scheme that you provide for your employees. Alternatively,
you can set up your own arrangements.
For advice on employee benefits planning then please contact either Jason McGuigan or Brian Foster at our
Financial Planning Division on 0800 483 2933.
FSEC Accountants briefing - Critchleys newletter Happier Workforce

FSEC Accountants briefing - Critchleys newletter 9 Things You Should Know About ISAs
Posted 10/2000
9 Things You Should Know About ISAs
9 Things You Should Know About ISAs

1. Any existing arrangements made for the current tax year will effect your entitlement to further ISA
contributions within the same tax year.
2. Contributions to both a mini ISA and a maxi ISA during the same tax year are not permitted, regardless
of the contribution limit.
3. Only one maxi ISA product provider can be utilised in any one tax year, with the exception of transfers.
4. Should you subscribe to more ISAs than permitted in the same tax year, the additional ISAs will
become void and the tax relief unwound.
5. To maximise the annual allowance in a mini ISA, all three components must be utilised.
6. Mini ISAs cannot be transferred to a maxi ISA or vice versa.
7. Switches and transfers between ISA components are not permitted.
8. Regular contributions may automatically continue for the subsequent tax years without the need for
further application forms.
9. CAT standards do not necessarily mean that the investment is appropriate, or that there is any
government guarantee of performance.
FSEC Accountants briefing - Critchleys newletter 9 Things You Should Know About ISAs

FSEC Accountants briefing - Critchleys newletter With Profits Bonds A Nice Little Earner?
Posted 10/2000
With Profits Bonds A Nice Little Earner?
With Profits Bonds A Nice Little Earner?

Do you need something steady to balance your more adventurous investments? Maybe you just want to enjoy
the benefits of the stockmarket but without having to live with its unpredictability? Or perhaps youre looking for
a more secure method of saving that offers potentially higher returns than a bank or building society. In each
and every case, a With Profits bond could be the answer.
When you open a With Profits bond, your capital is invested in a combination of stocks and shares, fixed
interest savings, low risk property investments and gilts. This spread of investments helps minimise the risk to
your money. And to further ensure security, the insurance company running your bond will in effect establish a
rainy day fund that protects your returns from market downturns.
By creating this buffer between you and the ups and downs of the stockmarket, you can look forward to the
possibility of enjoying returns in the form of smooth, steady and regular bonuses.
However, it is worth noting that in the event of a major fall or occurrence that puts a strain on the insurance
companys reserves, a Market Value Adjuster could be levied. This means that anyone encashing their bond
during such a low could be penalised. Thats why its important to deal with only the most secure companies.
What it all boils down to is this: if you can save for five years and want the potential for better returns than a
bank or building society could offer, a With Profits bond could be for you. Perhaps thats why, last year alone,
12 billion was invested into With Profits bonds.

http://www.financial-planning.uk.com/consumer/smallbusiness/critchleys/00_08/0008-6.htm [4/20/2002 5:52:20 PM]
FSEC Accountants briefing - Critchleys newletter Company cars
Posted 10/2000
Company cars
THE CURRENT Government is anxious to stress its green credentials, and wants to discourage the use of fossil
fuels. Taxing cars, and company cars especially, has a suitable green appearance with the added benefit of
raising extra cash.
Get rid of the company car?

There is no simple way to work out whether
you would be better off without a company car.
You need to do a detailed calculation of how
much the company car is really worth to you,
and compare it with supplying your own car
(and recharging business mileage).
The Governments new enemy?
How it works at the moment

The method of calculating the taxable benefit is to start with the cars list price (which is often more than the car
will really cost, after allowing for discounts), and treat 35% as the basic taxable amount, with reductions if the
employee drives more than 2,500 or 18,000 business miles a year. These discounts encourage employees to
take unnecessary business journeys, just to reduce their tax bills.
How the new rules will work
From 6 th April 2002, the benefit of a car (ie the figure on which tax is charged, not the tax itself) will be based
on the CO2 (carbon dioxide) emissions. This benefit will increase over the following two years. CO2 is one of
the greenhouse gases accused of contributing to global warming. An engine produces CO2 as the by-product
of burning fuel. To establish the tax charge, you need to know how many grams of CO2 the engine produces for
each kilometre you drive, and new cars will have this information provided from the end of this year.
FSEC Accountants briefing - Critchleys newletter Company cars
The tax charge on the benefit of the car is a percentage of the list price, ranging from 15% to 35%, but the
actual figure depends on the CO2 emissions. There is an extra penalty for diesel engines. Apparently, while
they produce less CO2 , they produce other unpleasant emissions that need to be punished so add 3% of
the list price to the taxable value, except that the total cannot exceed 35%.
What does this mean in real terms? Unfortunately, it is impossible to generalise about cars, but a few examples
might help.
The good
Some vehicles beat the minimum threshold.
A 1.2 petrol Fiat Punto, and a number of diesel variants of mid-sized cars (Peugeot 306, Citroen Xsara, Ford
Focus) passed the test. Remember the extra penalties for diesel engines, however. The Punto would be
charged at 15% of its list price, the others (diesels) at 18%.
Most reasonably sized family cars, including some MPV style cars, will probably be taxed at around 25% of list
price to start with, but by 2004 the charge will be over 30%.
The bad
The BMW 728i petrol saloon and Jaguar S type both emit so much CO2 that they are subject to the full 35%
benefit charge. A Lamborghini puts out double the upper limit. Still, minimising CO2 emissions is not the sort of
thing an aspiring Lamborghini driver worries about. And the benefit is still no more than 35% of its list price.
... and the new
Electric cars produce no emissions at all, and are taxed on a figure of 15% of their list price. Other new
technologies are taxed favourably. However, all these cars are still expensive. So the conventional car may be
with us for some time.

FSEC Accountants briefing - Critchleys newletter CGT changes again
Posted 10/2000
CGT changes again
CGT changes again

CAPITAL Gains Tax collects only a modest amount of the total tax take. It is generally only those with
investments in property or in large share portfolios, as well as those selling on their businesses, who are
affected by it.
In 1998, the Government reformed CGT. In-dexation
was frozen and retirement relief, a valuable tax break
for the over-50s, is being phased out. The
replacement for these reliefs is known as taper relief,
and it came in for a great deal of criticism, if only
because it was far less generous than retirement relief
had been.
Effective tax
rate*
Years
owned
% of gain
charged
100%
40%
87.5%
35%
The 2000 Budget proposed changes to taper relief that

2
75%
30%
mean that for business assets it is far more valuable.
3
50%
20%
There is a reduction in capital gains on business
assets of 12% for each of the first two complete
4+
25%
10%
years the assets are held, with 25% a year for each of
the next two years, so that a reduction in the gain of
Table 1: Gains on business assets
75% is possible when an asset has been owned for
four years or more. For a 40% taxpayer, this is
equivalent to having tax charged at only 10% on the full gain, and many see that as a rate that is sufficiently low
that they are happy not to worry about tax planning to reduce it further. (Remember that the clock only starts
running from 6th April 1998, so that ownership before that date is irrelevant.)
What is more, business asset taper relief applies to
more assets than it did before. From April 2000, it now
applies to:
All shareholdings that employees own in their

employer company (even quoted companies)
as long as it is a trading company or group;
All holdings in unquotedtrading companies,
whether the shareholder works for the
company or not;
Certain share option rights, so that if the
employee exercises the options, his
Effective tax
rate*
Years
owned
% of gain
charged
100%
40%
100%
40%
100%
40%
95%
38%
FSEC Accountants briefing - Critchleys newletter CGT changes again
ownership period for taper relief starts when

he first received the options, not when he
buys the shares.
(Watch out for that word trading: shares in companies
with large investment portfolios may not qualify, even if
they trade as well.)
See Table 1 for the full effect of business asset taper
relief.
90%
36%
85%
34%
80%
32%
75%
30%
70%
28%
65%
26%
10+
60%
24%
Table 2: Gains on non-business assets

For non-business assets, the old, rather less generous,
rules still apply: no discount for the first two years held,
then 5% reduction in the gain for each of the next eight years. Only whole years count. See Table 2.
There is one extra complication. Taper relief started running from 6 th April 1998, and for business assets that is
now all there is to it years of ownership only count from that date. For other assets, qualifying for the reduced
relief, owners can qualify for an extra free year, if they owned an asset on 17 th March 1998 that they still held
on 6 th April 1998.
(*Effective tax rates in the tables above assume a 40% taxpayer.)

FSEC Accountants briefing - Critchleys newletter Audit latest
Posted 10/2000
Audit latest
Audit latest
THE GOVERNMENT has now announced that companies with a turnover of under 1m will generally not need
an audit. In addition, it will consider whether some sort of limited audit is appropriate for companies with
turnovers between 1m and 4.8m.
This is not to say that companies cannot have audits if they want them! The whole point of an audit is to give
added reassurance to shareholders and lenders of a companys financial position, and many of these will still
want to see audited accounts.
We shall keep you in-formed of future developments in this area.

FSEC Accountants briefing - Critchleys newletter Free money!
Posted 10/2000
Free money!
Free money!
ENTERPRISE Grants are a form of cash assistance from Government bodies. They provide small and medium
sized businesses with money to help finance projects that would not go ahead otherwise. Up to 15% of the
capital cost of a project may be covered by a grant.
The City of Oxford has been designated an area qualifying for such grants. Unfortunately, anything outside the
City will not qualify.
If you want to know more, or if you need assistance in preparing an application for a grant, please contact
Critchleys.

FSEC Accountants briefing - Critchleys newletter Soft Landscaping
Posted 10/2000
Soft Landscaping
Soft Landscaping
FOLLOWING a recent Tribunal decision, Customs and Excise have changed their
policy on soft landscaping (i.e. the planting of trees, shrubs, grass etc).
Previously, where input VAT had been incurred in new housing developments on
soft landscaping it was not seen as building materials ordinarily incorporated into a
building. Builders were therefore not able to recover input VAT on this type of
expenditure.
Customs and Excise now accept that developers building new dwellings will be
able to recover input VAT on soft landscaping. The following conditions must be
met:
1. The work must be carried out at the same time as or immediately after the
construction of the building.
2. The landscaping work must be connected with the construction of the building. To this end, it must be
detailed on a landscaping scheme approved by a planning authority under the terms of a planning
consent.
The following do not fall within the above criteria:
1. Screening planted along roadside verges.
2. Work within a specific plot that is not on an approved landscaping scheme.
3. Work carried out after completion of construction eg replacement of dead trees and shrubs.
The above principles will also apply to planting made within the sites of buildings which are intended for use
solely for a relevant residential or relevant charitable purpose.
If you have previously been charged VAT which you have been unable to recover you can make a backdated
claim (for up to three years) for repayment.
FSEC Accountants briefing - Critchleys newletter Soft Landscaping
If you wish to discuss the above, please do not hesitate to contact JULIE TOWERS at Critchleys.

FSEC Accountants briefing - Critchleys newletter VAT and Legal Aid
Posted 10/2000
VAT and Legal Aid
VAT and Legal Aid

AS SOLICITORS will be aware, from 1 January 2000 the Legal Aid Board introduced new payment
arrangements for them. The new arrangements affect solicitors undertaking certain types of legal aid work and
mainly cover initial legal advice.
Under the new arrangements, solicitors will receive regular monthly payments based on the anticipated level of
work over the coming year. These payments will often be received in advance of the work being carried out.
Normal practice is that the work carried out is summarised on the monthly returns to the Legal Aid Board.
Customs and Excise have recently confirmed that the date payment is received will create a tax point. Thus
VAT will be due when the payment is received irrespective of whether or not any work has been performed. This
treatment is effective from 1 January 2000. VAT will not be due on any element of the payment that relates to
non-taxable disbursements.
Please do not hesitate to contact JULIE TOWERS if you wish to discuss the above changes, in particular if you
have been accounting for VAT incorrectly since 1 January 2000.

FSEC Accountants briefing - Critchleys newletter Company car fuel
Posted 10/2000
Company car fuel
Company car fuel

IF YOU have a company car, and your employer pays for any amount of fuel for private use (regardless of how
small or large the amount is), you suffer a flat-rate benefit figure on which tax is charged. The 2000 Budget puts
this figure up by 40% for 2000/01.
If a driver of a mid-range (1401 2000cc) car has any free fuel, the taxable benefit will be 2,170. If the
employee is a 40% axpayer, this means that the tax will be nearly 870. If the employee only drives around
7,000 private miles each year in the car, and the cost of petrol is (say) 10p per mile, the tax will exceed the
actual value of the petrol! It will generally suit all concerned if the employer increases the employees
remuneration slightly (to compensate for the lost free petrol), and then insists that the employee pays for all
petrol himself and can only claim back business mile-age.
But make sure that you keep good mileage records. If the employee claims back one private mile that he
thought was a business mile, we are back to the beginning with the same problem: a flat-rate benefit charge
again.

FSEC Accountants briefing - Critchleys newletter, Share success
Posted 10/2000
Share success
Share success
MORE and more companies are starting to reward employees with share incentives. This is at least partly
because the tax rules are changing to make it easier. If your company needs help with setting up some sort of
share scheme for employees, contact GERRY JACKSON in our Oxford Office.
index | page back

FSEC Accountants briefing - Critchleys newletter selling businesses
Posted 10/99
How credit worthy are you ?
NO DOUBT you will be aware that credit reference agencies exist who maintain files on most businesses and,
for a fee, will provide a report which can be helpful in assessing whether a potential contact is a good credit risk.
If you are thinking of taking on a new customer, such reports are useful in helping decide what level of credit line
you should issue.
But what if you are the customer and your new supplier is seeking a reference about you? Do you know what
the agencies say about you and is it correct? If it seems that there may be adverse reports about you, it can
be helpful to find out exactly what they contain.
A very well known name in this field is Dun & Bradstreet. They will provide, free of charge, a copy of the report
that they are currently issuing concerning your business. Naturally, since their business is to sell such reports,
they do require that you keep such a report confidential and do not show it to anyone other than your own
professional advisers.
To obtain this report you should request it on your own printed letterhead with a director or equivalent signing
the request. Then fax it to Dun & Bradstreet at 0161 455 5193. If you believe that their report is inaccurate or,
perhaps, is otherwise misleading because it does not contain relevant information, they are prepared to listen to
your comments and make any necessary corrections.

Posted 10/99
Employee records
The new Data Protection Act 1998 was supposed to come into force in June this year, although it appears that it
will be next year before all the necessary supporting regulations are in place.
Under the Act, employees have the right (on written request, and on payment of a fee of no more than 10) to
be told whether you are holding personal data on them, given a description of the data (and what it is used for)
and, in effect given a copy.
Employees will also be able to force employers to remove inaccuracies, taking the matter to the Courts if the
employer does not agree willingly.
Files set up before 24th October 1998 do not have to made available until 24th October 2001, although any
newer files (and any additions since October 1998 to older files) are caught as soon as the new rules are in
place.
So, if you are an employer, you will need to ensure that all your personnel records are well-maintained and
accurate, or you could end up being taken to court by your employees.

Posted 10/99
Benefits to employees?
The 1999 Budget proposed a number of changes to the benefits-in-kind system, so that certain benefits to
employees can now be tax-free. These changes are not all as generous as they first sounded.
On yer bike?
In order to strengthen its "green" credentials, the Government
has decided to make it possible for employers to provide their
employees with bicycles tax-free.
The catch is that the employee must use the bicycle mainly for
commuting to work or in connection with work duties. In other
words, the tax exemption is only likely to benefit those
employees who are not interested in cycling, in which case it
is unlikely that they will want to be provided with a free bike!
The Government has also said that providing employees with
bicycle parking at work will now be tax-free. We are not aware
of anyone who has paid tax on free bike parking anyway!
Get connected
Employers can now also lend employees with computers for
use at home tax-free. Again there are limits, but the
equipment is not just limited to the computers: peripherals
(printers and scanners) are included, as well as software.
All software (not just business) counts as computer
equipment. So, employers can provide employees with a computer plus games, tax-free.
Mobile phones
The real good news is that the 200 fixed benefit charge for the provision of mobile telephones has gone. Apart
from a few complicated provisions defining exactly what is meant by the term "mobile telephone" (so, for
example, cordless telephones do not qualify for exemption), the abolition of the benefit charge is that simple.
Previously, mobile phones were only tax-free if the employee reimbursed all private calls.

Posted 10/99
International tax
THE INLAND REVENUE has now been given formal powers to come to Advance Pricing Agreements in the
field of international tax.
Briefly, the idea is to obtain Revenue acceptance of the prices charged or paid by UK businesses to connected
overseas enterprises. Complicated legislation can attack "transfer pricing" schemes, where UK businesses shift
profits overseas in order to pay less UK tax. These new agreements mean that, by telling the UK authorities the
full story up front, the Revenue will agree not to attack international pricing structures.

Posted 10/99
Professionals' accounts
MANY PROFESSIONALS have, until now, prepared their annual accounts without taking full account of debtors
or work-in-progress. Most of them will be aware that the first accounts prepared for a period beginning after 5th
April 1999 need to take account of these, and as a result there will be a "catch-up" charge to tax the switch from
one basis to another.
It means that firms who are affected need to ensure that their accounting records are able to cope with the
added burden put on them. It also presents an interesting opportunity because the catch-up charge can be
spread over ten years. In some circumstances it may make sense to try to maximise the adjustment rather than
to keep it down to a minimum.
If this switch affects you, and you need to know more, speak to your usual Critchleys contact.

Posted 10/99
Stamp Duty
STAMP DUTY is an irritating tax. It is charged at only a low rate (from 1/2% for share purchases to 31/2% on
certain large transactions), but it is usually charged on the whole of the proceeds of a sale, so that it collects the
Government more money than either Inheritance Tax or Capital Gains Tax.
It is also a strange tax, and it is often possible to find ways to mitigate it. These include:
Holding valuable properties inside their own companies, so that you sell the company rather than the
property. This means the buyer pays Stamp Duty at 1/2% rather than 31/2%.
Restructuring the "consideration" given for an asset. The duty is calculated on the value of the
consideration, not the value of the asset passing.
Finding some way to transfer ownership without an "instrument". The tax is charged on the document
that transfers ownership, and, without such a document, no Stamp Duty may be due.
If you have any queries about Stamp Duty, contact GERRY JACKSON in our Oxford office.

Posted 10/99
VAT and EFL
A recent Court of Appeal judgement held that certain supplies of catering and accommodation made in
connection with teaching English as a Foreign Language (EFL) are exempt from VAT. Customs and Excise
have decided not to appeal against the judgement.
All supplies which are "closely related" to the teaching of EFL are now accepted to be exempt for VAT
purposes, in the same way that the provision of the tuition itself is exempt from VAT. The supplies must either
be integral to the teaching or separate supplies which are both for the direct use of the student and necessary
for delivering the education.
In theory, the ruling has retrospective effect and it is possible that in certain circumstances refunds of VAT may
be available. However, there could also be a negative effect on the recovery of input VAT incurred on
overheads and expenses. Because of this, it is important to consider all aspects of making a retrospective claim
before actually making one.
If you would like to discuss the impact of the changes on your business, or would like help in assessing a
possible claim, please do not hesitate to contact JULIE TOWERS, our Director of VAT Services, on 01367
240226.

Posted 10/99
Zero-in for a good return!
Bank and Building Society rates are at a low point, and many of our clients ask us how to achieve better returns,
without investing in higher risk investments.
The interest generated by deposit savings is treated as income, and taxed accordingly. Based upon a gross
interest rate of 6%, this produces the following net returns:
Non-taxpayers
6%
Basic rate taxpayers 4.8%

Higher rate taxpayers 3.6%
You can avoid income tax by investing in a vehicle that produces no income.
One way of achieving this is through Zero Dividend Preference Shares (Zeros). These are offered by Split
Capital Investment Trusts, and are probably not familiar to many. A Split Capital Investment Trust has a fixed
life, with a start date and a wind up date. As the name suggests, these "shares" produce no dividend income, so
there is no income tax liability. When the trust is set up, the zeros have a predetermined redemption price.
Assuming there are sufficient assets at maturity to pay the redemption value, the capital plus the growth is
returned. The gains are then subject to capital gains tax, but investors can use their Capital Gains Tax
allowance. Therefore, any gains made up to 7,100 (1999/2000 tax year) may escape tax liability.
As preference shares, Zeros are first in line to be paid from the trust when it winds up on maturity. This makes
them low risk. In fact, many trusts accumulate sufficient assets to repay the Zeros well before the maturity date.
The risk of not getting your money back is measured by the 'hurdle rate'. This is the level of annual growth
required from the trust to repay the zeros. A negative hurdle rate indicates that there is already sufficient capital
within the trust to repay the zeros, and the trust could actually afford to make an annual loss. Since zeros were
first issued, none has failed to repay the capital promised.
Clearly, while risk is reduced, it is not eliminated. In addition, there is a chance that interest rates could rise,
making the returns on zeros less competitive, although this is not expected to be a problem in the foreseeable
future.
It is now possible to put money into a professionally-managed fund, which invests in a range of zeros. This
reduces risk further, and provides access to an investment that could continue for many years, rather than just
to the redemption date. It is also possible to construct an "income" (tax-free if inside the CGT allowance) by
making withdrawals of capital on, say, a quarterly basis.
With interest rates likely to stay low for some time, and yields from shares at 2-4% per annum, zeros can offer a
good way of producing an efficient capital return, or income without the risks associated with ordinary shares.
Zeros are particularly useful for higher rate taxpayers not utilising their annual capital gains tax allowance, and
can be used to cover future liabilities such as school fees.
Speak to BRIAN FOSTER or JASON MCGUIGAN at our Abingdon office if you would like more information.
index | page back

FSEC Accountants briefing - Critchleys newletter Buying to let
Posted 8/99
Buying to let
When it comes to retirement planning, most of us rely on a good pension scheme. Some investors feel that they
can do better if they supplement their pension schemes with property investment.
The secret, as far as many investors are concerned, is to use borrowed money to buy the properties for
investment. Why? Interest rates are as low now as they have been for a long time. The interest itself is tax
deductible against the rental income. The overall effect is to make the cost of borrowing very low.
Until recently, it was relatively difficult to obtain loans for the purposes of buying rental property. In the last two
or three years, however, this has changed: many lenders are prepared to consider letting borrowers take out
loans to buy investment properties (sometimes secured on their homes, rather than the investment property).
While the rate of interest charged on such loans may be slightly higher than on normal mortgages, this excess is
not enough to make such a project unprofitable.
Suppose you have the cash to make a purchase, and you also have a mortgage on your house. What should
you do? Should you pay off your mortgage first, and then borrow the money back to buy the investment
property? Or should you simply buy the property for cash?
Now that mortgage interest relief is worth so little, it often makes more sense to pay off your mortgage, even it
means borrowing extra cash to buy the investment property. The fact that you get tax relief on a loan to buy an
investment property at what is probably your top rate of tax more than compensates for the increased rate of
interest you may have to pay.
Once you have acquired an investment property, the next problem is finding tenants. You can, of course, deal
with all of the administration yourself. However, many investors, especially those overseas, find it far more
convenient to appoint an agent to look after their properties for them. This agent will charge a commission,
normally based on rent levels. Just like interest, this commission can be set against rental income in working out
the taxable profit.
You would hope that rental levels would gradually rise over the years. If the value of the property also rises, you
should eventually be able to dispose of the property for a significant capital gain. If you bought the property with
borrowed money, you may find that the gain is far more than the amount of your own money you invested in the
first place.
What sort of property is best: domestic property, commercial property, or holiday lettings? There are no hard
and fast rules. If you can live in it for some time, domestic property can benefit from the principal private
residence exemption from capital gains tax. There can be other tax breaks for some commercial property,
especially industrial buildings, while holiday lettings can qualify as business property for certain tax reliefs. In
other words, each investment needs to be looked at on its own merits.
You must also remember that there are risks. Property values and rental levels may not rise. On the other hand,
interest rates could rocket. And, of course, you could find your tenants fail to pay rent. Property investment can
often be very illiquid, and you may be unable to get your cash out if you need it quickly.
FSEC Accountants briefing - Critchleys newletter Buying to let
While we are not able to advise investors on whether a particular property is a good investment or not, we can
advise on all of the tax consequences. We can also provide guidance in finding the ideal commercial mortgage.

FSEC Accountants briefing - Critchleys newletter Charity Tax review
Posted 1/99
Charity Tax review
MANY PEOPLE assume that charities do not pay tax. The truth is that, while there are many provisions giving
charities reliefs from certain taxes, these reliefs can be complicated and they do not give full exemption. A
review is going on, with the intention of modernising the tax system as far as charities are concerned. Our first
view is that it will be only of limited help.
Business tax
Many sources of income for charities are exempted from tax. These include most forms of investment income,
but profits from trades carried on by charities can sometimes be taxable.
Most charities that carry on trades (such as, for example, through their charity shops) get round this problem by
putting the trade into a separate company. The company makes the profits, but gives them all to the charity by
means of a deed of covenant or gift aid. The company obtains tax relief for the donation, and the charity
receives the income as investment income. It gets round the problem of tax on business profits, but it is an
administrative burden.
So far, the Government's proposed improvements to the system are fairly minor. Small charity businesses (and
what "small" means has still to be decided) may be exempted, but the larger charities will still need to use
separate trading companies.
VAT
Charities are subject to VAT in the same way as any other trader on their activities which are classified as
businesses. The Government is anxious to ensure that charities continue to have to charge customers of their
shops, because they feel that charities would be able to compete unfairly with other traders otherwise. No
changes are proposed in this area, therefore.
Charities cannot always recover input VAT on supplies they buy in order to carry out non-business activities.
Unfortunately, again the Government is unable to extend the scope for VAT recovery, because EU VAT
legislation prevents the UK from extending VAT reliefs
Is there any good news regarding VAT and charities? There may be some concessions regarding deregistration
and fund-raising events, but little more than this.
Individuals who give support
Many individuals make gifts to charities using deeds of covenant, so that the gift qualifies for tax relief.
Nevertheless, many more find the whole process too complicated. Gift Aid gives relief to one-off gifts, and
should be simpler, but requires a minimum gift of 250 - often more than many donors can afford. The
Government thinks it can do little to simplify covenants. The answer therefore is to make Gift Aid more flexible,
reducing the minimum gift and simplifying the paperwork involved. Of course, huge amounts are collected
through collections. There is no suggestion that anything will be done to give tax relief for donations made in this
way.
Any benefit?
FSEC Accountants briefing - Critchleys newletter Charity Tax review
The review suggests that much needs to be done to reform the taxation of charities. While some of its proposals
will no doubt help, nevertheless many of the fundamental obstructions will still be left in place. We shall keep
you informed of any further developments. In the meantime, if you need further guidance please speak to
GERRY JACKSON regarding business and personal tax or JULIE TOWERS regarding VAT.

FSEC Accountants briefing - Critchleys newletter Forestry Investment
Posted 8/99
Forestry Investment
In order to make a forestry investment it is often necessary to have up to 100,000 available. However smaller
sums can be invested through a trust where groups of investors get together to spread their risks. The tax
breaks for investing in the trust are the same as for owning forests outright: income and capital growth are tax
free, and the investor obtains inheritance tax exemptions. The minimum investment is typically 10,000.
The actual return on an investment will depend on the price of timber which, in turn, reflects the supply and
demand for wood products. Prices may also fluctuate as a result of sterling's exchange rate movements. A tax
free return of 6% is realistic in current market conditions. However, such returns cannot be guaranteed and
timber prices can and do go down as well as up.
If you want to know more, Critchleys is planning walks in a local commercially managed forest so that you can
have the opportunity to talk to the woodland managers and assess the benefits of such an investment.
For more information, contact FRANK COLLINGWOOD in our Oxford office.

FSEC Accountants briefing - Critchleys newletter Retirement Income of 18% per annum?
Posted 8/99
Retirement Income of 18% per annum?
It is possible if you know how! Few individuals maximise their personal pension plan contributions to the Inland
Revenue limits, and many people reach retirement age, finding that they have not made sufficient contributions
to generate a meaningful income. With annuity rates at such low levels, the problem is compounded.
Possible solution: Make a single contribution to mop up unused relief, and increase the level of pension income.
Consider the following example.
It is 5th January 2000, and Mr Smith intends to retire on February 20th when he reaches 65. He has unused
personal pension plan tax relief of 20,000 and has earnings for the 1998/1999 tax year of 60,000. He already
has a personal pension plan with a fund value of 150,000. Mr Smith decides to contribute 20,000 to mop up
the unused relief.
Mr Smith elects to carry this back into the 1998/99 tax year, where (in his case) it will achieve 40% tax relief.
The tax relief is provided against the balancing payment due on 31st January 2000 (25 days later) and amounts
to a tax saving of 8,000. In addition, Mr Smith still has access to 25% of the contribution (5,000) which he can
take as tax-free cash from the pension fund. So, of the original 20,000, Mr Smith could retain 13,000, leaving
a net cost of 7,000. The pension fund has been increased by 15,000, and, at current rates, could produce an
income of, say, 1,250 per annum: a gross return of almost 18% on the 7,000 cost!
This is a good way to boost the retirement income at the last minute, but what if you have no cash available to
make the contribution? Why not use an existing pension fund?
It is possible to draw the benefits from a personal pension plan, taking up to 25% of the fund as tax-free cash.
You can reinvest some of the tax-free cash sum into a personal pension plan, perhaps obtaining 40% tax relief
on the way. (Remember too that 25% of the amount reinvested can again be taken out as a further tax-free
lump sum.) So, if you were unsure whether or not to take a lump sum, you can see that if you take it and put it
back into the pension plan, you may be able to generate a tax saving at no cost to yourself.
This process would be an advantage for those people who do not need the use of all of the tax-free cash at
retirement. For additional control and flexibility of future income, consider an income drawdown arrangement,
rather than an annuity purchase. The above strategy would be particularly beneficial for people who are higher
rate taxpayers in employment, but will pay only basic rate tax in retirement.
This is an example only, and we provided it to demonstrate the potential for savings. It does not take account of
the cost of advice. Each case should be considered separately, and specific guidance can be obtained from our
Financial Planning Division, by contacting BRIAN FOSTER or JASON MCGUIGAN on 0800 783 2933.
FSEC Accountants briefing - Critchleys newletter Retirement Income of 18% per annum?
index | page back

FSEC Accountants briefing - Critchleys newletter on pension annuities
Posted 1/99
Pension annuities - friend or foe?
Since 1990, annuity rates have fallen by about 30% following the reduction in interest rates.
We are commonly asked "Is this a bad time to purchase an annuity?"
For the majority of investors coming up to retirement, the annuity route still offers significant
benefits.
Annuities offer income which can easily be guaranteed.
Any reduction in future annuity rates does not affect existing annuity income.
If the annuitant lives for a significant period of time, the total level of income received
could be much higher than the capital invested.
Various options can be built into annuities to cater for individual situations such as
spouse's pensions, indexation, guarantees and investment opportunities.
We feel that if Britain joins the EMU, our interest rates will need to be comparable with our
other European counterparts. Also, current Government policy appears to be clear in its
intent to control inflation. If we are to see lower inflation and lower interest rates, then we are
likely also to see lower annuity rates. Additionally, we are now living longer. If insurers are to
pay retirement incomes for longer, we can expect annuity rates to fall further to compensate.
Perhaps now is in fact the best time to buy an annuity.
So what annual income can currently be expected for a pension fund of say, 100,000? The
graph below shows examples of current annuity payments, from a typical provider, and how
they might vary over 15 years.
We cannot predict the direction of future annuity rates, but if they do fall, we suggest the
following to help reduce the impact, and increase retirement income.
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Prior to retirement:
Ensure that you have made adequate contributions to pension funds to provide the
income required and the desired annuity options.
Consider making single contributions to Personal Pension Plans to pick up previously
unused tax relief and to boost pension funds.
Consider investing further in other more flexible savings vehicles such as
PEP's/ISA's/TESSA's.
At retirement, consider purchasing an annuity on the open market rather than with the
same provider.
Take the maximum tax-free cash sum from the fund. It can be used to buy a
Purchased Life Annuity, giving more after-tax income than taking no lump sum and a
larger pension.
Consider purchasing an investment-linked annuity (such as a with profits annuity)
which offers potential for greater inflation protection.
Individuals who have substantial funds, and other sources of retirement income, may wish to
consider the benefits of an income drawdown arrangement. Rather than using the pension
fund to purchase an annuity, an income can be drawn directly from the fund, within specified
limits set by the Government Actuary Department.
Whilst income drawdown is not without investment risk, investors may see the value of their
funds increase with good investment returns and thus could lead to a higher eventual
pension. In addition, the income drawdown arrangement allows considerable flexibility in
terms of the timing of annuity purchase and the spouse's/dependants' benefits payable in the
event of the members death. An annuity will still need to be bought by age seventy-five.
Clearly, investors have differing attitudes and objectives, and therefore each situation will
need individually tailored, independent advice. Critchleys' Financial Planning Division is well
placed to offer such advice and clients can obtain this by contacting Jason McGuigan or
Brian Foster on 0800 7832933 for an initial no obligation discussion.
Illustration: The annuity 100,000 might buy you
Male aged 65 with a wife aged 60
A = Level annuity, no guarantee period, no spouse's pension on death.

B = as A but 50% spouse's pension on death.
C = Escalating @ 3% per annum, no guarantee period, 50% spouse's pension on death.
D = With profit annuity, no guarantee period, 50% spouse's pension on death. Illustrated
figures assume growth achieved @ 9% per annum.

FSEC Accountants briefing - Critchleys newletter on car fuel
Posted 1/99
Car Fuel
In the Spring 1998 Budget, there was an enormous increase in the taxation raised on car fuel
provided by employers for private mileage. For most diesel cars, the tax more than doubled.
Table 1 compares the benefit in kind for private fuel between 1997/98 and 1998/99.
Not only was there an immediate increase, but the Chancellor has promised to increase the
benefits by 20% over and above inflation for each of the next five years. Table 2 shows the
projected increased scale benefit excluding inflation.
Not only will the employee be paying income tax based on these figures, but also the
employer will be paying Class 1A national insurance contributions. The rate of these
contributions will rise from 10% to 12.2% from April 1999 - a 22% increase before the
increases in the actual benefit level!
The obvious advice is that it is less tax efficient for employers to provide car fuel for
employees' private mileage. We recommend that employers should consider changing
employee remuneration packages with effect from 6 April 1999.
Where the real cost of providing fuel is less than the benefit, it will make more sense to get rid
of free private fuel, although employees will expect some compensation for the loss of the
benefit.
Table 1
1998/99
1998/99
1997/98
Diesel Cars
2000cc or less
1280
740
Over 2000cc
1890
940
Non-Diesel Cars
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FSEC Accountants briefing - Critchleys newletter on car fuel
1400cc or less
1010
800
1400cc - 2000cc
1280
1010
Over 2000cc
1890
1490
Table 2
Benefit
1998/99
1890
1999/00
2270
2000/01
2725
2001/02
3275
2002/03
3930

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FSEC Accountants briefing - Critchleys newletter travel mileage rates 1999
Posted 1/99
Inland Revenue Business Travel Mileage Rates
1998/99
The Inland Revenue accepts that no taxable benefit arises on an employee if he reclaims a
mileage allowance for business travel at no more than an approved rate. The rates for
1998/99 are set out in the table below.
Employees may make a claim on their tax return if the employer reimburses less than the
maximum rate.
Where employers reimburse the same rate to all their employees irrespective of engine size,
employees who drive larger cars may be able to claim back some tax.
In addition, employees can claim tax refunds for interest paid on a loan to buy their cars or for
hire purchase charges.
You can find more detailed advice on the tax and National Insurance treatment of employees'
travel and subsistence in the Autumn 1998 edition of Critchleys Newsbrief. Please contact
Critchleys for a copy.
Engine Capacity
First 4000 miles
Miles over 4000
Less than 1000 cc
28p
17p
1001 cc to 1500 cc
35p
20p
1501 cc to 2000 cc
45p
25p
Over 2000 cc
63p
36p
Only one rate
40p
22.5p
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FSEC Accountants briefing - Critchleys newletter travel mileage rates 1999

http://www.financial-planning.uk.com/consumer/smallbusiness/critchleys/c3travrate.htm (2 of 2) [4/20/2002 5:52:53 PM]
FSEC Accountants briefing - Critchleys newletter on EU VAT information
Posted 1/99
EU VAT System
The European Commission has recently issued proposals to modernise and simplify the present EUVAT
system. The proposal has two elements:
The first is a reform of the current procedures for recovery of VAT incurred by businesses in other member
states. Rather than having to make a separate claim to each EU country where VAT has been incurred (known
as Eighth Directive refunds), the VAT will be recovered through the normal VAT return in the country where the
business is registered. The advantages of this would be more speedy recovery of VAT and less paperwork.
Secondly there are proposals to change the rules on VAT on expenditure which cannot be fully recovered, so
that they are the same throughout the EU.
The EU is already considering these proposals, but no date has been set for their implementation.

http://www.financial-planning.uk.com/consumer/smallbusiness/critchleys/c4euvat.htm [4/20/2002 5:52:54 PM]
FSEC Accountants briefing - Critchleys newletter on international tax
Posted 1/99
International Tax
IF A UK company does business with an overseas company that is connected with it (perhaps it is under the
same ownership as the UK company), both the UK and the foreign tax authorities will be anxious to ensure that
neither is fixing the price to dodge tax.
Some countries have procedures that allow companies to clear their price structure in advance with their tax
authority. The UK is introducing such procedures, which will probably feature in next year's Finance Act.
This is no help for companies that are already doing business overseas. Their new Self Assessment returns
may need them to put "fair" prices into their tax computations, even though it may not be clear what those prices
should be.
The Inland Revenue understand this difficulty. We are therefore pleased to report that we have started to
negotiate informal understandings with our local Inspectors, prior to the arrival of more formal procedures. As
long as the Inspectors are happy that the international prices set-up is "arm's length", they may be prepared to
give the reassurance that companies need to be able to determine what their taxable profits will be.
Your own business may deal with overseas businesses, and you may be worried about "transfer pricing". If so,
contact your usual Critchleys partner, so that, where possible, advance clearances can be put in place.

http://www.financial-planning.uk.com/consumer/smallbusiness/critchleys/c5intntltax.htm [4/20/2002 5:52:56 PM]
FSEC Accountants briefing - Critchleys newletter late payment information
Posted 1/99
Late payment interest
ON 1ST NOVEMBER 1998, a new law, The Late Payment of debts (Interest) Act 1998, came into force,
allowing small businesses (50 or fewer employees) to claim interest when larger businesses or public sector
organisations pay debts late. The intention is to try to help smaller businesses, many of whom claim that they
suffer more than big companies from the cash-flow problems caused by late payment.
The interest runs at a rate of base rate plus 8% and, if the debtor disagrees with the figure, Court proceedings
may be necessary to enforce it.

http://www.financial-planning.uk.com/consumer/smallbusiness/critchleys/c6latepay.htm [4/20/2002 5:52:57 PM]
FSEC Accountants briefing - Critchleys newletter on mortgage relief
Posted 1/99
Mortgage relief
It used to be accepted wisdom that having a mortgage was tax-effective. As the interest relief has reduced,
however, this is less true. From 6th April, the tax-relief on interest on the first 30,000 of your mortgage is now
limited to a rate of 10%. It is now often more tax-efficient for individuals to pay off their mortgages sooner.

http://www.financial-planning.uk.com/consumer/smallbusiness/critchleys/c7mortgage.htm [4/20/2002 5:52:58 PM]
FSEC Accountants briefing - Critchleys newletter on national insurance information
Posted 1/99
New National Insurance System
From 6th April 1999 the structure of National Insurance Contributions changes. Employers will in future pay
12.2% on the earnings of employees in excess of 83 a week (4,335 a year). The old rates of 3%, 5%, 7% and
10% disappear.
The effect of the changes is to increase the employers' National Insurance contributions for higher paid
employees but to reduce the contributions for lower paid. The break-even point is 450 a week or 23,400 a
year.
Employers will also have to pay the new 12.2% rate on car benefits and the fuel scale charge where they
provide company cars/private fuel to employees. This is an increase of nearly a quarter on the 10% rate of
earlier years.
In due course we expect that the employees' threshold for National Insurance contributions will also increase to
the level of the personal allowance. However there are major complications in making this change because
social security benefits, such as unemployment benefit and basic state pension, depend on the individual's
National Insurance contributions for the previous year. By increasing the threshold from 64 to 83 per week a
large number of employees would cease to qualify for benefit.

http://www.financial-planning.uk.com/consumer/smallbusiness/critchleys/c8natinsurance.htm [4/20/2002 5:53:00 PM]
Posted 1/99
Sell Your Business!
Changes in the tax regime following on from the March Budget, along with a strong economy, mean that more
business owners are deciding that now is the ideal time to sell their businesses - sometimes to themselves! Of
course, planning the sale properly is essential to make sure that you get the best price possible and you pay no
more tax than necessary.
Good Times
Forget about tax for the moment! Now is a good time for many businesses to sell. Those businesses that have
grown steadily since the last recession in the early 1990's have often reached a point where the founder needs
outside investors. Perhaps the only way forward is to sell the whole enterprise on to a much larger company.
We are finding a number of our clients are receiving offers for their businesses far in excess of what they could
have expected even only a year ago. Sometimes, business owners only discover that their enterprise is very
marketable after receiving an unsolicited offer.
Simply selling your business to an outside purchaser means that you will probably have a huge Capital Gains
Tax bill as a result. Waiting until after you have received the cheque is leaving it too long to think about the tax
considerations. Tax planning is necessarily part of the process of negotiating the best deal. Remember that the
purchaser also has tax considerations to take into account, and they often clash with the vendor's interests.
Structuring a deal to make both seller and purchaser happy is all part of the negotiation process.
Of course, you may be thinking of selling your business but you are not sure quite how to go about putting it up
for sale. If you need advice, contact Keith White in our Oxford office.
Retirement Relief
One of the most important changes in the March Budget is the phasing out of Retirement Relief to be replaced
by the new Taper Relief. While Retirement Relief appears to be disappearing over the next five years, Taper
Relief will take ten years to achieve its full potential. However, Retirement Relief generally only applies to sellers
aged over 50, while Taper Relief is available to everyone.
Working out the best time to sell the business to get the most of Retirement Relief and Taper Relief is
complicated. If you are thinking of disposing of your business, and you need advice concerning the timing of a
potential sale, please contact your usual Critchleys contact.
"But I don't want to sell yet!"
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Are you old enough for Retirement Relief, but you want to keep your business? Then sell your business to
yourself! This might sound odd, but makes a great deal of sense.
Restructuring your business may help you to get the benefit of the relief now while keeping ownership of the
business. It might involve, for example, transferring the business to a new company or a trust. It could mean taxfree cash out of the business or an increased base cost to the business assets, reducing future capital gains.
Inevitably, it is not always so easy! Nevertheless, if you are in a position to benefit from retirement relief and you
would like to take advantage of this window of opportunity, contact Gerry Jackson in our Oxford office for
advice.

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Posted 1/99
Tax Disharmony
From the first of January 1999, the Euro began to exist as a real currency. The consequences of this are likely
to be far-reaching. Whether it will lead to greater European integration still remains to be seen. The current
presidency of the EU is in the hands of the Germans, who seem to want to encourage integration and, more
specifically, bring about greater harmonisation of EU tax rates.
The UK appear to have some of the lowest rates of taxation within the European Union. Some observers say
that the lower UK tax rates are responsible for lower levels of unemployment in the UK than in the rest of
Europe. Others suggest that the UK is simply undercutting other EU countries, and is attracting business to the
UK unfairly.
The Government has indicated that it will resist any attempt to force tax harmonisation on the UK.
Company tax rates in the UK are at their lowest for as long as many can remember, and are set to fall again
from 1st April. Other European rates vary, but are generally much higher. UK companies are therefore being
presented with a possibility of huge tax rate increases, adding perhaps half as much again to the amounts
currently payable. This is especially worrying for those who consider that higher tax rates actually reduce growth
rates in the economy at a time when a possible recession is on the horizon.
The truth may be more complicated. The apparently lower UK rates possibly cover up the fact that some
European countries give different tax breaks and reliefs that may mean the total tax burden in these countries
may often be no more than in the UK.
An early step in harmonisation is a possible introduction of a withholding tax of 20% on interest paid from one
EU member state to a resident of another. This is causing some concern within the City of London, which fears
that it might harm the UK's bond market, driving investors outside the EU to countries where no withholding tax
is charged. It is also unclear whether the UK has the power to veto such a withholding tax.
Tax harmonisation will not happen overnight. Nevertheless, the gap between UK rates and those in the rest of
Europe is so large that any movement towards harmonisation is likely to be felt keenly in the UK. No-one
believes that harmonisation means bringing the rest of Europe's tax rates down to levels like those in the UK,
but will result in bringing UK rates up.
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FSEC Accountants briefing - Critchleys newletter on tax dividends
Posted 1/99
Tax on dividends
With effect from 6th April 1999, the way dividends are taxed will change. For individuals who pay tax (whether
they are basic or higher rate taxpayers), the changes make very little practical difference.
However, for individuals who currently reclaim tax credits, including some overseas shareholders, as well as for
some trusts, the changes mean an effective tax increase. Such investors may want to consider changing their
holdings to investments where the tax can still be reclaimed.

http://www.financial-planning.uk.com/consumer/smallbusiness/critchleys/c11taxdiv.htm [4/20/2002 5:53:04 PM]
FSEC Accountants briefing - Critchleys newletter on tax information
Posted 1/99
Time to make plans
The tax year ends on 5th April, and as that date approaches it is worth looking at year-end tax planning
measures you should consider. These include:
Do you need to top up your personal pension contributions? Payments made before the end of
1998/99 can qualify for tax relief in the year, or can be carried back to 1997/98, whichever gives you
the best tax relief. If you are in a company pension scheme you might want to top up your company
pension with Additional Voluntary Contributions.
The first 3,000 of gifts you make in any tax year are exempted from inheritance tax, regardless of
whether or not you survive seven years. To minimise the inheritance tax on your estate, make sure you
make gifts to use up this exemption.
You can make capital gains this year of 6,800 without having any tax to pay. "Bed-and-breakfasting"
of shares, where they were sold and bought back again the following day, is no longer allowed as a
way of using up your annual exemption, although there are ways round this (speak to your usual
contact partner if you need more details).
You can still take out a personal equity plan in the current tax year.
Your company car tax charge depends on the business mileage you do in the tax year. If you are close
to a threshold that would reduce your tax bill, you might think about making long business journeys
before the end of the tax year rather than after it.
If you are aged over 50 and own your own business (or part of it) you may be entitled to retirement
relief on any disposal, sheltering capital gains. Remember that the relief is being phased out, and from
6th April it will be worth less than in the current tax year. Consider making a disposal of all or part of
the business before the end of the tax year to make the most of the relief.
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FSEC Accountants briefing - Critchleys newletter on tax information

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FSEC Accountants briefing - Critchleys newletter on trusts information
Posted 1/99
Trusts - Still a Good Idea?
Despite a lot of press comment and changes by the Chancellor to the tax law for trusts, there are still
advantages to setting up UK trusts with UK trustees. The person who creates the trust can usually be one of the
trustees so that he can still control the trust assets even if he cannot be a beneficiary.
A UK trust may still be appropriate:
To protect young members of the family - particularly minors;
To protect family members who are unable to look after their own financial affairs;
For benefiting children where the parent is unsure about the stability of the child's marriage;
For family company shares so that the settlor retains an element of control over the votes;
For inheritance tax planning for married couples - can savings can be up to 89,000;
Where an individual wishes to pass assets to members of the family but has yet to decide which
members to benefit.

http://www.financial-planning.uk.com/consumer/smallbusiness/critchleys/c13trusts.htm [4/20/2002 5:53:07 PM]
FSEC Accountants briefing - Critchleys newletter on working time regulations
Posted 1/99
The Working Time Regulations 1998
To promote the harmonisation of employment law throughout the EU, the UK has now adopted The Working
Time Regulations.
In essence these regulations ensure that no one should work longer than 48 hours a week and that everyone
receives three weeks' paid holiday this year and four weeks' next year.
An individual may choose to work more than 48 hours but must sign a written agreement to this effect. Even in
these circumstances the employer must maintain records showing the hours worked.
These regulations apply to "workers" rather than employees. In other words those people who work for
employers on a quasi self-employed basis are protected by these regulations.
Breaches of these regulations are a criminal offence. For employers to be able to demonstrate adherence to the
regulations will involve detailed record keeping.
If you would like Critchleys to help set up recording systems for you or indeed if you would like Critchleys to
carry out the recording itself (particularly for those clients for whom we operate the payroll function), please
speak with your contact partner.
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Small business newsbriefs - 10 August 1999
Business Newsbrief 10 August 1999
Limited liability for the self employed

One of the proposals of a recent DTI review of company law and status is the creation of a new category of
business called a limited liability partnership. This would provide the protection of limited liability to certain
partnerships, whilst enabling them to retain self employed status; the measures would not apply to sole
proprietors. In addition to individuals being able to join as new partners, it would be possible for a limited
company to join the partnership.
There would be no minimum capital requirement, nor would accounts need to be filed, but a copy of the
partnership agreement would have to be filed with the Registrar.
Employment Relations Act 1999 received Royal Assent on July 27th

Under its terms parents (including adoptive parents) with one year's service will have the right to take up to
13 weeks unpaid annual leave for the first five years of each child's life. Additionally, fathers will be able to
take leave when a child is born or adopted, and existing maternity leave provisions have been extended by
four weeks to eighteen weeks whilst the qualifying period drops to one year. Time off will also be allowed
for family emergencies. The DTI call the measures 'family friendly' whilst the CBI see them as 'an
unsustainable cost on business. Copies of the Act are available from The Stationery Office at 12.35.
see 'starting a family'
Study and Training leave is now available

(from 1st September) for employees of 16 and 17 in England and Wales who left school or college without
reaching a certain 'standard of achievement'. Qualifying employees have the right to reasonable time off
work to obtain or improve relevant qualifications. There is no exemption for small firms, and no qualifying
period for the employee. The Right to Time Off for Study or Training Regulations 1999 is available from
The Stationery Office at 2.00 per copy.
see 'Starting Work'.
Pension Guides
The Financial Services Authority has produced two updated guides: FSA guide to the risks of pension
transfer and FSA guide to the risks of opting out of your employer's pension scheme. Both are free, and
available from libraries, citizens advice bureaux and consumer advice agencies.
see Latest Pension Info and Planning for retirement.
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Small business newsbriefs - 10 August 1999
DTI payroll 'voucher' proposals

Some quarter of a million small firms could be eligible to receive vouchers worth from 50 to 200
redeemable against a range of payroll services if a DTI proposal goes ahead. A range of services from
training to software would be available under the scheme. Copies of the consultation document,
'Developing a payroll service for small businesses', are available from the DTI Business Link Directorate by
phoning 0171 215 5618.
DTI small business service

The DTI is seeking views on a proposal to set up an agency that will provide a single gateway to
government services, including payroll support and advice on regulation and training. It is proposed to set
up the agency within the DTI by April 2000. You can add your comments up until September 30th; copies
of the 'Small business service: a public consultation' are available from the DTI on 0870 1502 500.
Business Start-up guide

London accountants Glazers have revised their guide on business start-ups for those setting up in
freelance occupations. Contents include taxation, company legislation, business plans, cash flow and
raising finance. The guide is free from Glazers on 0208 458 7427.
see 'starting work'.
Employees using own car for work

Tax office booklet IR125, which explains the tax position where employees use their own car for work
purposes, has been revised. It can be obtained free from local tax offices.
see also 'personal tax' and 'accountants' brief'.

The Revenue has produced a new booklet (The Enterprise Investment scheme, IR137, available free from
local tax offices) which explains the main features of the Scheme. The EIS provides tax relief on certain
investments to help encourage the purchase of shares in small, high-risk unquoted companies.
see investment.
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Starting a family - managing budgets, changing lifestyle
STARTING A FAMILY
Starting a family is one of the major decisions of our lives. It is a very exciting time for all, but with it comes new
responsibilities which can be both challenging and daunting. Having a baby can often put a great strain on a
family's budget and the cost of food, nappies, clothing etc often prove to be more expensive than we imagined.
Managing difficult budgets, fundamentally changing lifestyle and suffering sleepless nights can be very waring.
And then there are those ongoing costs which seem never ending and get worse as your child gets older!
However, ask any parent - for some strange reason we all seem to think it's worth it!! We hope that you find the
information in our "Starting a Family" Section helpful as far as your financial planning is concerned.
Having a baby - employment

considerations
Providing Childcare
Education
Savings for children
Protection issues
Additional information:
Working Families Tax Credit
Married plus young children (Lifestages)
School Fees (Case Study)
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http://www.financial-planning.uk.com/consumer/start-family/index.htm [4/20/2002 5:53:11 PM]
Starting A Family, employment considerations - FSEC help information files
STARTING A FAMILY
Having a baby - employment considerations:
Present law in the UK allows every employed woman to take 14 weeks'

maternity leave. The Government has recently announced proposals to
extend maternity leave from 14 to 18 weeks - in line with statutory maternity
pay (see below).
If you earn 64 a week or more and have worked for the same company
for at least 26 weeks (by the end of the 15th week before your baby is due)
you are also eligible for statutory maternity pay (SMP) of 90% of your salary
for 6 weeks, and then 57.70 a week for the next 12 weeks.
If you do not qualify for maternity pay (you may be self employed or only
started your job recently) you can claim a weekly maternity allowance of
57.70. The maternity allowance is paid for 18 weeks - but only for the
weeks you don't work.
If you have worked for your employer for more than two years, you are
entitled to extended maternity absence. This is unpaid leave which can be added to your maternity
leave. The maximum maternity leave you are entitled to (including extended maternity absence) is 29
weeks after the birth of your baby.
You are permitted to keep up your pension contributions while you are on maternity leave - but only for
the weeks you are paid. Under current rules, you are not allowed to pay into a pension scheme if you
are not earning an income.
Don't forget you may be entitled to an income tax rebate depending on where your maternity leave falls
in the tax year.
Some employers offer their employees higher levels of pay than the statutory figures given above some will also pay their employees for longer periods of time. Some employers also offer incentives for
mothers to return to work.
The Sunday Times gives the following examples:
Abbey National: Pay their new employee mothers a taxable bonus of 102 a month for two years
to help them cope with the cost of childcare.
Midland Bank: Has set up a network of 100 nurseries with places for almost 1,000 children - a third
of these are on bank premises. Mothers pay half the true cost of the nursery place.
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Starting A Family, employment considerations - FSEC help information files
REMEMBER You should not use any information contained in this article as the basis of any action until
you have discussed matters with your financial adviser.
index |

Starting A Family, providing childcare - FSEC information help files
STARTING A FAMILY
Providing Childcare:
This is a difficult area for any mother and father with young children. The
standard of nurseries and nannies can vary enormously and it is
important to shop around for the right nursery or nanny for your child.
The number of nurseries available has declined in recent years because
of the Government's decision to fund education for 4 year olds. Many
primary schools have started reception classes (as a direct consequence
of this new Government funding) and this has forced many traditional
nurseries out of business. However, there are still good nurseries around
but sometimes they can take some finding. Cost is not always indicative
of quality so it is important that you take the time to visit a prospective
nursery and make sure it is suitable for your child. Nursery charges do vary and can impose a strain on
budgets.
A workplace nursery is still a very rare perk. Some employers give vouchers or cash towards the cost
of childcare - but these are taxable and you must declare such payments on your tax form. The
following are examples of employees who do make special provision:
Abbey National: Pay their new employee mothers a taxable bonus of 102 a month for two years
to help them cope with the cost of childcare.
Midland Bank: Has set up a network of 100 nurseries with places for almost 1,000 children - a third
of these are on bank premises. Mothers pay half the true cost of the nursery place.
If your budget allows, you may decide to employ a nanny. Again, selecting a good nanny is vital and
this can be fraught with difficulty (as recent high profile press cases have highlighted). If you employ a
nanny you are responsible for paying her tax and National Insurance contributions. You also have to
pay employer's National Insurance. The Sunday Times quotes the following example: If you pay a
nanny 150 net a week, it will actually cost you 198 a week. Employees and employers National
Insurance contributions would cost 26 and there would also be income tax of 22. A 200 weekly
wage would actually cost you 285. You must also give the nanny a payslip, showing her pay and the
breakdown of deductions. Your local tax office will send you a "new employers" start pack - this gives
step by step instructions as well as tax and National Insurance tables.
index |
Starting A Family, providing childcare - FSEC information help files

Starting A Family, education - FSEC information help files
STARTING A FAMILY
Education:
Many state schools are very good and you may be very happy with your
local school. Some state schools, however, do still have problems with
class sizes and resources in general. Remember that if your local state
school does not appeal to you, private education can be very expensive.
School fees vary enormously, and the quality of some private schools
may not necessarily be what you expect.
School fees (Case Study)
Conservative fees for a 4/5 year old attending day school are about
1200 a term (not including extras) - or 3,600 a year. If you are thinking
of sending your child to a private school between the ages of 4-11, for
example, you will not get much change out of 30,000 - and that doesn't
include uniforms, sports gear or any of the extras.
The Sunday Times reports that the cost of private education is currently
(2/99) rising by more than twice the rate of inflation.
All this means that early planning for school fees is essential, but fewer than 3 out of 10 of parents who
intend paying for their children's education, actually make any advanced provision.
The Sunday Times reports that experts apparently say that parents who want to send their children to
boarding school should save about 500 a month in a deposit account to meet the costs (from the time
their first child is born).
Bank deposit accounts are not always the most effective way to save for the longer term. Specialist
advisers offer bespoke school-fees investment schemes, but charges can be high.
Graham Bates of Bates Investment Services, an investment adviser: "School-fees packages tend to
charge a lot simply for the packaging, but all they contain are straightforward investments such as
endowment policies. Parents could do that on their own."
The Sunday Times reports that many advisers consider endowments as inappropriate. They suggest a
mix of cash on deposit, possibly through a TESSA, PEPs, ISAs and with-profit bonds.
Joe Collins, Director of Willis National, an independent financial adviser (and quoted in the Sunday
Times on 7/2/99) suggests that each portfolio should be individually tailored. He usually recommends a
selection of corporate bond PEPs, with-profit bonds and segmented endowment policies. These can be
partially encashed three times a year to pay each term's fees as they arise.
With profit bonds are lump sum investments that usually require a minimum deposit of 2,500, which is
then invested in the stock market. The proceeds are used to top up any shortfall from the endowment
Starting A Family, education - FSEC information help files
policy. The best bonds are currently yielding about 8.5%.
The earlier that planning begins, the less parents will have to pay - because your investment has a
longer time to grow. The Sunday Times suggests that if you start saving from birth towards a private
secondary education, you need to save 150-200 a month. If you start when the child is 5, these
monthly savings would have to increase to about 350 a month.
Another option is composition fees. These are usually schemes run by individual schools - and not all
schools will necessarily have such a scheme. If you know which school you want your child to attend,
you may be able to set up a scheme to pay the fees in advance - this should considerably reduce the
final bill.
index |

School Fees Planning, a Case Study help file provided by FSEC
School Fees Planning ....

This is a case study intended to raise issues rather than answer questions, and must
not be taken as advice. Do not take any action until you have consulted a professional
financial adviser.
Derek Battham is a businessman who has achieved considerable success at a comparatively early age. After
leaving school, he developed an interest in business applications for computers. In collaboration with some
friends, he started writing bespoke software, which he sold to some of his father's business contacts. Soon he
had a reputation, which he had the business sense to capitalise on and set up his own company with his old
school friends as fellow directors.
He is now married and has two sons, aged 2 and 4. When discussing the future
with his wife, Norma, the subject of schooling for the boys has been of paramount
importance. Norma attended a fee-paying school and has convinced Derek that
they should make plans to educate both the boys at a good public school.
Their family house is valued at 275,000 and they have an outstanding mortgage
of 75,000. Derek draws a salary of 35,000 pa and benefits from dividends,
which have averaged 10,000.
Over the years Derek has built up a small portfolio of investments:

Deposit Account
10,000
Unit Trusts
15,750 (3 different companies)
National Savings
Cert's 13th issue
10,000
Derek and Norma's main concern is how they will pay the school fees and how best to utilise their
current income and assets.
Derek is also concerned about the effect that the changes announced in recent budgets might have on
his plans.
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Norma and Derek need to review the major issues to consider when establishing the likely cost
of the boys' education.
What do you think they are?
Once they have estimated the cost of the education, they then need to pay for it.
What type of investments do you think could be suitable for the provision of school fees and university
education?
What do you think are the likely advantages/drawbacks of each selected investment?
Questions which Derek & Norma will need to make a decision on:
When would they like private education to start - at preparatory level or from age 11?
What basis do they intend to have the boys attend school i.e. day pupils or boarders?
Which schools have they chosen and do they have a copy of the fees structure?
Does the chosen school offer any assistance with fees through scholarships?
Will the chosen school involve any additional expense for sport or music or other activities?
Is it the intention that the boys will go on to university?
School fees require regular payments usually on a term by term basis. Fees can be provided through using
either existing capital, saving the necessary amount, or waiting until fees are needed and borrowing the
money.
Derek's existing capital, although not insignificant, is probably inadequate at present and he may therefore
wish to set up a programme to build up greater reserves to pay the fees without causing financial hardship in
other areas. Borrowing will depend on status at the time and the cost will be dependent on interest rates at
the time.
Action Planning:
Derek is not using his or Norma's PEP or TESSA allowances and should consider taking advantage for this
tax year. Contributions to the TESSA may also continue after April 1999 for the balance of the five year period
but no further PEP contributions can be made after April 1999. The introduction of Individual Savings Accounts
(ISA) next year not affect the tax free nature of these holdings, although the rate of return achieved in each case
will be reduced from 6th April 1999 due to a reduction in the reclaimable tax for the funds.
ISAs have been given a 'political' guarantee of a life span of at least 10 years.
The National Savings Indexed Certificates will ensure that part of his portfolio has a hedge against inflation. It
may be wise for Norma to consider making a similar investment. Care needs to be exercised to ensure that they
are always allowed to run for the full 5 years.
Information about Norma's employment is not available but if she is a non-taxpayer they could ensure that
her personal allowance is utilised by putting some investments in her name.
If either set of grandparents are willing to help they could consider using a Covenant to transfer money to the
children.
Derek may wish to consider protection to ensure that his plans are fulfilled whether if he dies or has an
accident or illness before the boys' education is complete.
The protection element if he were to die before all the fees were paid could be paid for by a decreasing
term assurance policy (probably Family Income Benefit Policy).
Also on the theme of protection, a Permanent Heath Insurance Policy may also be appropriate if Derek
loses his ability to generate an income due to an accident or illness.
Additionally, life assurance may be considered as a means of investment, perhaps with a
number of endowment assurance policies each capable of being cashed in a one year intervals, with a view to
providing the level of income required.
The drawback is that life assurance funds are taxed within the fund which does affect their growth in
comparison to say unit trusts and PEPs but life assurance does provide additional life assurance protection from
day 1.
The above is intended to give an idea of the possible investments/protection which
may be appropriate.
The eventual choice will depend on the individual's attitude to risk, timescale for
investment, amount required and funds available (currently and estimated for the
future), hence the reason why independent financial advice should be sought.
REMEMBER You should not use any information contained in this case study as the basis of any action
until you have discussed matters with your financial adviser.
case studies index |
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SAVINGS AND INVESTMENT - Personal Equity Plans (PEPS)
2.2.9 Personal Equity Plans (PEPS)
Since 6 April 1999 no new investments have been allowed to be placed into PEPs following the
introduction of ISAs (see 2.2.10). However, existing PEP holders are allowed to retain their
investments and continue to enjoy the taxfree status. They may also take out ISAs.
As there was no time limit imposed on length of investment, existing PEP holders are free to encash
their PEP at anytime.
It is not permitted to transfer PEP holdings into an ISA. (There would be no advantage anyway).
PEPs were first introduced in 1987 and provided a medium for those who wished to invest in equities
and to do so within a tax free environment. Naturally there were limits as to how much could be
invested in this way (9,000 in 1998/1999) but they did prove extremely popular - not just to
"experienced" investors but also to "the man in the street". PEPs were part of the then Government's
way of extending share ownership and privatisation programme. Monies could be invested directly into
equities (via stockbrokers) or more commonly through unit trusts and other collective investment
schemes.
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SAVINGS AND INVESTMENT - INDEX
Savings and Investment

Savings and Investment in context
The Need for Advice
Savings and Investment - Deciding Factors
Savings and Investment Products

The Providers
The Products and Their Uses
Bank Accounts
Tax Exempt Special Savings Accounts (TESSAs)
Building Society Accounts
National Savings Products
Shares/Equities
Gilts
Investment Trusts
Unit Trusts
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Personal Equity Plans (PEPs)
Individual Savings Accounts (ISAs)
Investment Bonds
Endowment Policies
Maximum Investment Plans (MIPs)
Annuities
Home Income Plans
Open Ended Investment Companies (OEICs)

Employee Share Option Schemes

Comparing Different Products
Investment Objectives
Surrender Values
Charges and Commissions
Risk and Accessibility
Tax Treatment
Comparing Similar Products from Different Providers
Comparing Providers
Investment Styles and Features of Funds

Investment styles
Volatility and risk
Inflows, Outflows and Cancellation Prices
main index |
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SAVINGS AND INVESTMENT - The Need for Advice
1. SAVINGS AND INVESTMENT IN CONTEXT

1.1 The Need for Advice
The extent of advice needed will only be revealed during the fact find and needs analysis stages.
Amongst other things, a full fact find and analysis will reveal shortfalls in:-
1. Income.
2. Capital.
3. Commitment to action i.e. financial planning.
Where there is lack of commitment, this is often because of:-
1.
2.
3.
4.
Lack of knowledge of the planning possibilities.

Lack of knowledge of the potential financial problems.
Lack of awareness of existing financial problems.
Lack of knowledge to be able to establish risk profile, affordability of options and
priorities.
Part of the adviser's role is to awaken the client to the potential shortcomings in the existing financial
situation, so that advice can be sought before taking further actions which could make the situation
worse.
The adviser will also provide general advice and guidance on prioritising and balancing the proposed
plan or plans i.e. spread of investment types, getting the timing right, major expenditure, ongoing
savings, establishing an emergency fund.
Once general plans have been laid, specific actions may be taken in the selection of products and
providers.
The very least a fact find and needs analysis can produce is a review of a well balanced action plan
and reassurance to the client
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SAVINGS AND INVESTMENT - Savings and Investments - Deciding Factors
1.2 Savings and Investments - Deciding Factors
For many people, the only way to achieve large ('large' being comparative) sums of cash is to save
regularly over as long a period as necessary.
The fact find and analysis must differentiate between:-
1. needs, and
2. 'wants'.
Only by separating the two is it possible to prioritise and plan accordingly. The emphasis for the
adviser must be on 'needs'. This is not to say that 'wants' should be ignored; indeed, planning will be
done following the client's wishes. The point to be made, however, is that whilst 'needs' should have
priority, the final planning may include items that are not strictly speaking 'needs'.
Where this happens, planning should be amended to take this into account.
Similarly, it would not necessarily be good planning to tie up all disposable income into a tightly
designed structure. There needs to be some leeway and flexibility, particularly if disposable income
varies, and impulse must be catered for.
Existing assets may affect the client's future actions:-
1.
2.
3.
4.
5.
Do they produce income e.g. rent or dividends.

Do they require expenditure on such things as maintenance or insurance.
Are they easily disposable.
Are there any charges on them which will need to be repaid at some point.
Is there a tax involvement e.g. capital gain rolled over, tax on income produced,
future IHT liability.
Full knowledge of the above and other related details will reveal the existence of any current income
and/or capital which may be used in more efficient ways to further future plans.
Similarly, identifying areas of tax liability will be useful in selecting investments which can make use of
the tax situation.
The client's age may also have an effect in that the wider the experience and knowledge, the wider the
potential range of requirements and queries that will need to be satisfied. Additionally, the older the
client, the greater will have been the potential for accumulating capital and other assets, and the
greater the potential for older members of the family to be leaving inheritances. In such situations, even
though the provisions of a will may be known, the prospect of inheriting cash or valuable assets should
not affect immediate plans to cater for 'needs'
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SAVINGS AND INVESTMENT - Savings and Investments - Deciding Factors
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SAVINGS AND INVESTMENT - The Providers
2. SAVINGS AND INVESTMENT PRODUCTS

2.1 The Providers
Banks, building societies and the Government are generally seen as secure repositories for deposittype savings and investments.
'National Savings' also provide secure homes for cash based deposits. The wide variety of products
tend to reflect market interest rates.
It should not be overlooked, however, that banks and building societies are commercial organisations
open to market forces, and so can flourish or fail as can any other trading organisation. Generally, the
greater risk is with the 'newer' companies who may over extend themselves, perhaps being swallowed
up by larger concerns or even ceasing involvement in certain sectors.
The other side of the coin is the greater freedom now available to building societies and friendly
societies to offer a wider range of products, where both product and performance may attract interest
away from the traditional sources
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SAVINGS AND INVESTMENT - The Products And Their Uses - Bank Accounts
2.2 The Products And Their Uses

2.2.1 Bank Accounts
Deposit accounts will generally pay interest net of 20% tax. The sum deducted can be reclaimed by
non-taxpayers. Alternatively, both non-taxpayers and taxpayers who are not UK resident may apply to
have interest paid gross. Higher rate taxpayers will pay the additional 20% tax.
The different types of bank account include:-
1. Current accounts, some of which pay interest, some of which do not.

2. High interest cheque accounts, which are more of a high interest deposit
account, but with cheque facilities.
3. Deposit accounts, which generally have a notice period to avoid loss of interest,
but are otherwise instant access accounts.
4. Money market accounts vary from short term 'overnight' facilities to fixed term no
access accounts with a high minimum requirement.
5. Term Accounts, similar to money market accounts but are usually fixed term,
fixed rate of interest, but not so high minimum input.
Risk in bank accounts is not so much one of loss of investment, although failure of a bank is not
unknown, but more loss of alternative opportunity, and reduction in value if inflation should be higher
than the interest paid.
Accessibility, contribution limits and penalties vary considerably from account to account, and may
depend on overall saving or investment levels of the individual account holder.
Bank accounts are generally useful for short-term purposes, in addition to the cash flow facility
provided by cheque accounts. Generally not for medium to long-term investors, or those with anything
other than medium to low risk requirements.
The same can generally be said for building society accounts and TESSAs, although the latter has
neither the cheque facility nor easy access without penalty
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SAVINGS AND INVESTMENT - Tax Exempt Special Savings Accounts (TESSAs)
2.2.2 Tax Exempt Special Savings Accounts (TESSAs)
Since 6 April 1999 it has not been permitted to open any new TESSA accounts. However, those with
existing TESSAs prior to that date can continue to make further annual deposits (up to the maxima
described below) for the balance of their 5 year period. They are also entitled to contribute to ISAs
concurrently (See 2.2.10).
1. TESSAs (Tax Exempt Special Savings Accounts) were introduced in January

1991. They can be offered by banks, building societies and incorporated friendly
societies and are really no more than deposit accounts which pay interest
without liability to income tax. TESSAs are available to anyone over the age of
18 and U.K. resident for tax purposes. It is not permitted for any individual to
have more than one TESSA at any one time. They must run for 5 years to
receive the full tax benefits.
2. The maximum investment in a TESSA is 9,000 in total over the five year term.
Up to 3,000 could be invested in the first year, up to 1,800 in subsequent
years, but limited to 600 in the fifth year if in years 1 to 4 the maximum
contribution has been paid. Interest is credited to the account without deduction
of tax and the account can be encashed at the end of the five year period.
3. It is possible to take withdrawals during the term, but the amount withdrawn
must not exceed the interest credited net of 20% tax. If more is withdrawn, the
tax advantages are lost and the account ceases to be a TESSA.
4. It is possible to transfer an investment from one TESSA provider to another, but
many of these arrangements have complicated rules in these circumstances and
there are often penalties on switching, or losses of special bonus additions
otherwise payable at the end of the term
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SAVINGS AND INVESTMENT - Building Society Accounts
2.2.3 Building Society Accounts
The tax and risk situation is the same as with bank accounts, and accessibility, contribution limits and
penalties are similar to bank accounts.
The different types of building society account include:-
1. Share accounts, which are suitable for small sum savings or temporary shelter
for cash 'between' investments.
2. Access accounts, often 7 day, 28 day, 90 day notification accounts, these being
the days warning of access required without loss of interest. Access can be
immediate, but with loss of interest for the notice period.
3. Term shares have a number of variations, offering interest slightly higher than
share accounts, the exact differential depending on the term and the sum
invested.
4. Cheque accounts, which generally pay interest, and which offer most of the
services offered by banks
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SAVINGS AND INVESTMENT - National Savings Products
2.2.4 National Savings Products
Tax free interest is provided by:-
1.
2.
3.
4.
National Savings Certificates.

The first 70 from the ordinary account.
Children's Bonus Bonds.
ISAs.
NB. The return from Premium Bonds is also tax free, but is in the form of prizes,
not interest.
Interest is paid gross on:
1.
2.
3.
4.
Capital Bonds.
Income Bonds.
National Savings Bank Investment Account.
Pensioner's Bonds.
Tax is deducted at 20% rate on Fixed Rate Savings Bonds.

National Savings Certificates provide fixed interest for a set period of time. They have no age limits for
purchase but withdrawals by children aged under 7 will require the signature of a parent or guardian.
No interest is payable if encashed within the first 12 months. Minimum purchase is 100 with a
maximum holding of 10,000 however there is no limit on reinvesting the proceeds of matured National
Savings Certificates. Normally interest is compounded annually, however on encashment of the
certificate after the first 12 months but before maturity, interest is earned for each completed period of
3 months. Certificates may be either fixed for a period of either 2 or 5 years, or index linked i.e.
providing a return at a fixed amount above RPI, thereby guaranteeing a real return.
National Savings Bank Ordinary Account pays a very low rate of interest and operates through a passbook system through post offices; interest rate varies with amount on deposit, the basic rate up to
500, and an extra sum over 500; the rate payable is variable; minimum deposit 10, maximum
10,000 plus accumulated interest; accounts may be opened for children, but withdrawals by children
aged under 7 will require the signature of a parent or guardian; interest credited each 31st December;
up to 100 can be drawn on demand or 250 at a chosen Post Office. Larger amounts must be applied
for direct to National Savings.
Children's Bonus Bonds offer a fixed rate of return over 5 years and are renewable to age 21; available
to children under 16; automatic encashment at 21; minimum investment 25, maximum holding per
child 1,000.
Capital Bonds provide a guaranteed fixed rate return over 5 years; no minimum age for holders but
withdrawals by children aged under 7 will require the signature of a parent or guardian. Minimum
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SAVINGS AND INVESTMENT - National Savings Products
holding 100, maximum 250,000 total holding; can be held as a joint investment. Requests for
encashment will normally be dealt with within 8 days.
Income Bonds provide monthly income from investments between 500 and 1 million (maximum for
individual or joint holding); rates payable are not fixed, and also vary with the sum invested; the
minimum for each purchase is 500; minimum withdrawal of 500 (with 500 remaining) and require
three months' notice; monthly payments commence after 6 weeks.
National Savings Bank Investment Account is a deposit account operated through post offices with a
pass book; one month's notice of withdrawal is required; withdrawals without notice are allowed, but a
penalty is charged; generally pays competitive rates of interest which is variable and which increases
once holdings exceed 500; minimum investment 20, maximum 100,000 plus accumulated interest
(for either individual or joint holding).
Fixed Rate Savings Bonds are guaranteed fixed interest investments for a term of either 6, 12, or 24
months. At the end of the term a further term is offered. The minimum holding is 500 and the
maximum 1 million. Interest is paid net of savings tax at 20%.
Pensioner's Guaranteed Income Bonds. Interest is paid monthly and is fixed for either 1, 2 or 5 years
at a time. Like income bonds, interest is taxable but paid without deduction of tax. Minimum investment
is 500 and the maximum 1 million whether held singly or jointly. Holders must be over age 60.
Withdrawals may be made at the end of the fixed period without penalty. Withdrawals can be made at
other times by either giving 60 days notice, during which period no interest will be earned on the
amount withdrawn or with no notice and the equivalent of 90 days interest will be deducted.
Premium Bonds are not really an interest bearing account, but is a prize draw each month. Prizes are
tax free. Top prize of 1 million. Minimum holding is 100 and a maximum of 20,000. Individual
holdings only age 16 and over. Minors may have a holding in the name of a parent or guardian.
Withdrawal of investment is instant but takes about 8 working days.
ISA. Cash mini I.SA - maximum investment 3,000 in 2001/2002 and 1,000 thereafter. Meets the CAT
Standards.
It can be seen that National Savings products have a number of uses:
1. Basic and higher rate taxpayers e.g. National Savings Certificates, Ordinary
Account, ISA.
2. Non-taxpayers requiring a low risk, known return e.g. Capital Bonds, Income
Bonds, Investment Account, Pensioner's Income Bonds.
3. Those looking for gross returns e.g. Income Bonds, Pensioner's Income Bonds,
Ordinary Account, Investment Account.
4. Those looking for tax free returns, e.g. Ordinary Account (70 limit), Savings
Certificates and ISA.
5. Children e.g. Children's bonus bonds.
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SAVINGS AND INVESTMENT - Shares/Equities
2.2.5 Shares/Equities
The primary market in shares is the new issue market.
The secondary market is the trading in existing shares.
Quoted shares are shares quoted on the Stock Exchange.
Unquoted shares are not quoted on the Stock Exchange.
Listed securities refers to securities traded on the Stock Exchange, including:-
1.
2.
3.
4.
5.
Unlisted securities include:-
1.
2.
3.
4.
Company Shares.
Fixed Interest Securities.
Government Securities.
Local Authority Securities.
Other Public Sector Stocks.
AIM Stocks.
Building Society Deposits.
Bank Deposits.
National Savings.
Types of shares include:-
1. Ordinary shares give owner the right to vote and an entitlement to share of
dividend.
2. Preference shares are given in return for loans and confer a preferential right to
interest dividend, and to repayment on winding up - but have no voting rights.
3. Debentures are a document of evidence of a loan.
4. Share warrants are issued to fully paid up shareholders to convert, say, loans to
fully paid up shares at a future date.
5. Scrip issues, also called capitalisation issues, are issues of 'free' or 'bonus'
shares in proportion to fully paid up shares; the exercise reduces the value of
each individual share but by spreading the valuation in this way it helps release
the built up capital reserves held in the fixed assets.
6. Rights issues are issues of additional shares at below market price in proportion
to fully paid up shares, but must be bought.
7. Stock is effectively a block of shares, issued usually in units of 100 value.
SAVINGS AND INVESTMENT - Shares/Equities
Income prospects for shares will depend on dividend payments, which themselves depend on the
overall profitable performance of the company.
Capital growth will be reflected in the increase in the value of the share, which itself will be caused by a
number of factors:-
1.
2.
3.
4.
Market perception of potential company performance in the future.

Capitalisation, market strength and management of the company.
The state of the economy, in particular the market sector of the firm in question.
Political influences affecting the market sector.
Shares of quoted companies are bought and sold through stockbrokers, whose role it is to obtain the
best market price for a client. It is essential to realise that shares do not have a fixed price, but change
according to the usual supply and demand pressures.
New shares may be purchased:-
1. Through an offer for sale to the public, the price being fixed.
2. Through a tender, as with privatisation issues, where the would be purchaser
offers a price.
3. Through a placing, where an issue is sponsored by a merchant bank who
effectively underwrite the risk of all the shares not being sold.
Charges for both buying and selling are through a fixed percentage on the value of the transaction
usually up to 1%, with a minimum charge imposed.
Shares may be suitable purchases for:-
1. Those requiring income, provided the shares pay dividends.

2. Those requiring capital growth.
3. Those looking for a risk element in their portfolio; the risk element of shares will
depend on market sector, economic conditions, political conditions,
management, market perception, amongst other factors.
4. Those looking for a medium to long term investment i.e. five years or more.
5. Those who wish to manage their own investment portfolio.
Income tax is payable on dividends received at the rate of 10%. No further liability for lower or basic
rate taxpayers. Higher rate taxpayers have an additional liability. Non taxpayers are unable to reclaim
tax deducted.
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SAVINGS AND INVESTMENT - Gilts
2.2.6 Gilts
Gilt-edged securities or "gilts" are fixed interest stocks issued by the Government. The gilt usually
has a fixed term at the end of which (the redemption date) the nominal value is repaid in full; it can be
bought or sold at any time at the market price prevailing. In the past it was possible to purchase gilts
listed on the National Savings Stock Register from the post office. This list has been replaced by the
Bank of England Register. Although post offices can supply the application form needed, British
Government Stock Leaflet (BOE Purchase), the completed form must be sent to the Bank of England
Registrar's Department in Gloucester.
The interest payable on a gilt is fixed at outset and is expressed as a percentage of the nominal value.
This is known as the "coupon" of the gilt. The coupon would be the actual return to the investor if the
price paid was exactly equal to the nominal value. In practice, the price of gilts generally fluctuates
inversely in line with interest rates. Thus if interest rates rise, the market price of a gilt will fall so that
the return available on the purchase price stays roughly in line with interest rates available in the
market generally.
The interest on gilts purchased on or after 6 April 1998 is paid gross unless an application for net
payment is made. The reverse applies to gilts held prior to 6 April 1998 i.e. interest will automatically
be paid net unless the holder applies to receive gross interest payments.
The total return for the investor is thus made up of two elements, partly the interest which is received,
and partly any capital gain (or loss) which arises between the date of purchase and the date when the
gilt is either sold or redeemed.
Gilts are therefore secure if held to the redemption date, because the redemption price is fixed.
However, the value of the gilt can fluctuate on the market, and if sold before redemption there may be
a gain or a loss to the investor. These fluctuations tend not to be as marked as in the equity market,
though, partly because of the guaranteed redemption value, partly because of the fixed interest, and
partly because interest rates tend not to swing wildly.
Gilts can be an attractive investment, particularly for those who require certainty of income, or for those
who believe that interest rates generally will fall and therefore expect a capital gain to be made on the
gilts.
Gilts can be 'shorts' (up to 5 years to redemption date), 'mediums' (5 to 15 years), 'longs' (over 15
years), or undated (no fixed redemption date).
From a tax point of view a particular advantage of gilts is that any capital gain made is free of CGT
(note also that any loss made cannot be offset against other capital gains for tax purposes). Income is
liable to income tax at 10%, 20% or 40% as applicable.
Corporate Bonds are similar to gilts. They are issued by both UK and foreign companies. They have a
fixed term and interest rates. The interest rates are higher than those offered by gilts.
They are transferable and can be bought and sold through a stockbroker and are CGT free, but losses
are not usually able to be offset against CGT.
SAVINGS AND INVESTMENT - Gilts
Interest is paid net of 20% tax, recoverable by non-tax payers, with higher rate taxpayers having to pay
more tax.
Where a bond is issued at a deep discount (the issue price lower than the redemption price), the gain
on the discount accrued over the period held, is charged to income tax.
Local Authority Bonds are like government issued gilts. They are short term, in the main one to four
years with the rate of interest fixed at outset. Rates are usually higher than that offered by gilts and are
as secure as the authority issuing them.
They may be bought and sold on the stock exchange. New bonds are bought from the Authority. The
minimum is 1,000 and thereafter in multiples of 1,000.
Interest is paid net of 20% tax
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SAVINGS AND INVESTMENT - Investment Trusts
2.2.7 Investment Trusts
Investment trusts are pooled or collective investments which allows smaller investors to join with others
to benefit from economies of scale on a spread of risk. They are themselves constituted as companies,
which are quoted on the Stock Exchange. Investors therefore buy shares rather than units as in unit
trusts, and the price of shares will reflect the normal laws of supply and demand rather than simply
underlying asset value. The number of shares in issue normally remains constant.
Investment trust shares can be traded at a price which is more or less than the value of the underlying
investments. The trust is said to be trading at a premium or at a discount respectively in these
circumstances. This adds a further potential for profit or loss for the investor, as not only can the
underlying investments increase or decrease in value, but the discount or premium can widen or
narrow.
The companies invest, generally in equities, and the investments are professionally managed. The
investment trust has no capital gains liability, but the investor would be liable to CGT on encashment if
a gain arose. Also, dividends are distributed subject to 10% income tax deduction.
Investment trusts carry a slightly higher risk/reward level than unit trusts. This is partly because of the
premium/discount situation, and partly because investment trusts, unlike unit trusts, are usually able to
borrow in order to gear up their investment performance, i.e. borrowing to make additional investments.
Additionally there are split level trusts, where different share classes have different rights to income
and/or capital growth. These are primarily for the specialist investor.
Investment trusts may be appropriate for those seeking a spread of investment risk, or regular savings,
or lump sum investment, for medium to long term investment
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SAVINGS AND INVESTMENT - Unit Trusts
2.2.8 Unit Trusts
Unit trusts are pooled or collective investments, offering the smaller investor the chance to join with
others to get the benefit of economies of scale and professional investment management. Units are
sold to investors by the unit trust manager at the offer price, and bought back at bid price, the
difference including the initial charge. Additionally there will be an annual management charge. The
number of units will vary as new unitholders invest and existing unitholders encash.
Most funds are allowed to have a bid/offer spread of around 10% but competitive forces normally mean
that funds will quote spreads of 5-6%. However, fund managers are able to move within the larger
band to their advantage depending on the demand for units. If demand is strong then the manager can
push the bid/offer spread up to the top of the permitted band (known as an offer basis) and conversely
if sellers are in the majority they can move the bid down towards the bottom of the band (a bid basis)
and the offer price will be some 5-6% above this.
Many unit trust providers are changing existing unit trusts into OEICs which have a single pricing
system. Single pricing is used in the rest of Europe.
No more than 5% of the fund value can be invested in any one asset, and holdings of a particular
share may not exceed 10% of the total issue. The investment objectives will be supervised by
Trustees, and set out in the governing trust deed. The deed must be approved by the Financial
Services Authority (FSA).
Unit trusts generally invest primarily in equities, and often specialise in a particular sector or
geographical area. Dividends are paid to unit holders, reflecting dividends received on the underlying
investments. They are liable to income tax, and are subject to the same tax treatment as dividends on
direct shareholdings.
Unit holders receive a tax credit of 10% along with their net distribution (dividend). Non taxpayers are
unable to reclaim the 10% tax credit. 10% taxpayers have no further tax to pay. 22% taxpayers, by
concession, are deemed to receive a tax credit and no further tax is payable. 40% taxpayers have a
further liability to pay. Where the addition of the tax credit and the net distribution to their income takes
a basic rate taxpayer into the higher rate band further tax is payable.
The unit trust does not itself pay tax on its capital gains, but on encashment, any gain made by the
investor is subject to capital gains tax, under normal CGT rules, including the annual exemption and
indexation/taper relief as appropriate.
Unit trusts are available as lump sum investments, or through regular savings schemes, which allow
monthly investments to be made.
For a unit trust to be eligible for cross-border selling within the EU it must be open ended, with at least
90% of assets in transferable securities such as shares, government stocks or bonds. If these
requirements are satisfied, such a unit trust would be termed an Undertaking for Collective Investments
in Transferable Securities (UCITS).
For those who want diversity of asset backed investment and a spread of risk, plus the alternative of
regular or lump sum contribution, this type of contract might be a useful alternative to investment trusts,
SAVINGS AND INVESTMENT - Unit Trusts
bonds and perhaps maximum investment plans.
In 1999, managed unit trusts were introduced. These can invest in UK equities, overseas equities,
cash, commercial property and fixed interest stocks.
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SAVINGS AND INVESTMENT - Individual Savings Accounts (ISAs)
2.2.10 Individual Savings Accounts (ISAs)
Introduced 6th April 1999 to replace TESSAs and PEPs.

The investments will be exempt from income and capital gains but it will only be possible to reclaim a
10% tax credit on dividends (and then only until April 2004).
The Government have stated that the accounts will be available for a period of 10 years.
Offered by banks, building societies, insurance companies and investment houses.
Investors must normally be aged 18 (16 for cash mini ISAs) and UK resident for tax purposes.
Investments can only be made in single names, not jointly.
There are three types:
1.
Maxi ISA
through one provider each year.
2. Mini ISA
through up to three providers each year, one for each category of

investment, no two components with one provider.
3.
only the capital, not interest, from a maturing TESSA can be invested in
addition to the usual limits. Must be invested within 6 months of maturity.
TESSA only ISA
Investment Options
Overall maximum contribution is 7,000 in each tax year until 5th April 2006 and 5,000 in
subsequent tax years.
1.
Mini ISA
Cash
3,000 until 5th April 2006
1,000 thereafter
Insurance
1,000 each tax year
Stocks/shares 3,000 each tax year
2. Maxi ISA
Cash
3,000 until 5th April 2006
1,000 thereafter
Insurance
1,000 each tax year
Stocks/shares balance up to 7,000 until 5th April 2006
balance up to 5,000 thereafter
3.
PLUS
TESSA only account from a maturing TESSA
CAT standards (charges, access and terms) are optional but if not upheld this must be notified
to investors.
Cash ISA standards:
1.
Charges
no one-off charges.
2.
Access
withdrawals within 7 days.

can withdraw less than 10
3.
Terms
interest rate no less than 2% below base rate.

upward change in interest within one month of change to base rate.
no other conditions e.g. notice or frequency.
Insurance ISA standards:
1.
Charges
annual charge no more than 3% of fund.

no other charges.
2.
Access
minimum premium no more than 25 monthly or 250 single.
3.
Terms
no surrender penalty.
after three years surrender value to be at least a return of premium.
surrender value should be asset value.
Equity ISA standards:
1.
Charges
total charge no more than 1% of fund p.a.

no other charges.
2. Access
minimum saving no more than 50 monthly or 500 single.
3. Terms
securities listed on EU stock exchanges.

gilts and government bonds allowed.
for OEICS, unit trusts and investment trusts, 50% must be invested in securities
listed on EU stock exchanges.
no split share classes.
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SAVINGS AND INVESTMENT - Investment Bonds
2.2.11 Investment Bonds
An investment bond is a single premium unit linked whole of life policy and therefore non qualifying.
The whole of life basis is used because there is no fixed maturity date, and therefore in keeping with an
open ended investment such as the bond.
The investment is through units into one or more sector funds, from which partial withdrawals (up to
5% per annum) may be taken without incurring any immediate tax charge. The investment risk will be
relevant to the underlying fund.
On death the return is 101% of the bid value of units.
Charges are the usual unit linked fund charges.
Tax liability on withdrawal will depend on income tax status. Basic rate taxpayers will not pay tax on
investment gains unless the gain (calculated by means of the 'top-slicing' method) on full encashment
or where withdrawals exceed 5% for the year pushes taxable income into the higher rate bracket. The
portion of gain over the basic rate taxable income level will then be charged at an additional 18% i.e.
40% less 22% (2001/2002). Note that the charge is to income tax only.
Bonds are open ended, with money available for withdrawal at any time. Similarly, additional money
may be invested in the fund at any time. Some funds may impose an early encashment charge, or may
reserve the right to pay out at a suitable time (e.g. property funds) or may restrict or depress unit
values depending on investment conditions (e.g. unitised with profits funds).
Such a contract may be useful in similar circumstances to the Investment Trust, with the additional
advantage of a tax deferred income
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SAVINGS AND INVESTMENT - Endowment Policies
2.2.12 Endowment Policies
Endowment Policies are effectively regular premium qualifying policies, combining savings and life
assurance cover.
Such policies usually have a minimum term of ten years, and pay out on maturity at the end of the
specified term, on death within the term, or on surrender before maturity.
The pay out for qualifying policies is tax free; the small scale policies offered by friendly societies also
grow tax free.
Growth is by means of bonus addition, either reversionary (usually an annual bonus), or terminal (may
be available depending on investment performance), payable on maturity.
Bonuses are not guaranteed until they have been 'declared', after which point they are guaranteed.
Until this point, the only guarantee is the payment of the sum assured on death.
There are a number of versions:-
1.
2.
3.
4.
5.
6.
Pure endowment (not generally available).

Non Profit - guaranteed sum assured only.
With profits - sum assured plus bonuses.
Low cost - relies on bonuses to build up to required target level.
Low start - as iv, but premiums stepped in early years.
Flexible (issued in 'clusters' of smaller policies)
Holders of endowment policies may find it beneficial to sell existing policies rather than surrendering
them if they wish to raise cash. The selling price of a traded endowment generally will be greater than
the surrender value. Most traded endowment policy (TEP) market makers prefer policies that have
been in force for at least 6 years. The best prices are normally paid for policies issued by reputable life
offices with a few years to maturity.
Investment in TEPs represents a relatively low risk investment with potential for a good return. The
purchaser pays the future premiums and receives the policy proceeds on the earlier of the death of the
life assured or maturity. For CGT purposes the premiums paid by the purchaser are treated as part of
the original purchase price. The proceeds are subject to CGT but benefit from taper relief.
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SAVINGS AND INVESTMENT - Maximum Investment Plans (MIPs)
2.2.13 Maximum Investment Plans (MIPs)
Effectively unit linked versions of endowment policies, so will be 10 year, regular premium, qualifying
policies. Growth depends on the underlying fund link, not bonuses. There may be an extension option
at the end of the initial term to allow encashment on more favourable terms.
Both MIPs and endowments may be useful for:
1.
2.
3.
4.
Those who require regular savings with an element of life assurance protection.
Those who require a cash lump sum at some specific point of time in the future.
Those who are prepared to save for between 7 to 10 years.
Those who want relatively low risk and will accept the relatively low growt
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SAVINGS AND INVESTMENT - Annuities
2.2.14 Annuities
Annuities convert capital to income.

An annuity is a periodic annual payment; in practice, payment will often be monthly or quarterly, may
be fixed, increasing or even variable, and may be payable 'in advance' or 'in arrears'. These latter
terms mean that once the payment frequency is agreed, payment is made either at the beginning of
the period, (in advance), or at the end of the period (in arrears).
May be payable immediately or be deferred.
Payments may be for a fixed period or may continue for life.
Generally, there are no underwriting requirements as with life assurance, because full payment is
made at the start of the contract, and longevity is not easily determined for specific individuals.
Annuities come in two broad categories:-
1. compulsory purchase annuities (CPAs), purchased by pension funds to provide

retirement income, and taxed as PAYE, and
2. purchased life annuities (PLAs), purchased by private investors, payments
comprising part taxed interest (as investment income), part untaxed return of
capital.
There are a wide variety of annuities, the following being the ones most usually encountered:
1. Annuity Certain (or Guaranteed Annuity)

Paid for a fixed period, whether the purchaser or beneficiary is alive or not.
Useful for school fees provision. Generally treated as a PLA.
2. Capital Protected Annuity
Total payments are guaranteed to equal purchase price, any underpayment on
death being returned as capital and not taxed. Generally treated as a PLA.
3. Compulsory Purchase Annuity (CPA)
Purchased by pension funds to provide the retirement income for scheme
members, and can be immediate or deferred. Taxed as earned income.
4. Contingent Annuity
Provides an income in the event of a particular situation coming about e.g.
providing an income for B in the event of A's death.
5. Deferred Annuity
Purchased by a lump sum or series of payments to commence at a future date
after a specific length of time i.e. the deferred period. Often used where
company group pension scheme members leave a pension scheme prior to
retirement to secure payment of accrued pension benefit at normal retirement
date.
6. Equity Linked
SAVINGS AND INVESTMENT - Annuities
7.
8.
9.
10.
11.
12.
13.
14.
Where the underlying value is unitised so that the annuity may withdraw some
units each payment period, the balance remaining in the fund to go up or down
with the fund value.
Escalating
Where the payment increases by a fixed amount over the payment period.
Guaranteed
Where payments are made for life, but if the annuitant dies within a specified
period, the payments continue for the balance of that period.
Immediate Annuity
One that starts after payment of the purchase price.
Joint Life Annuity
Payable until the death of the first of a 'group' of annuitants, often husband and
wife.
Last Survivor Annuity
Payable until the death of the last of a 'group' of annuitants, often husband and
wife.
Purchased Life Annuity (PLA)
An annuity purchased by an individual from private funds, and paid as part
interest and part return of capital, the balance of the two parts depending on the
age of the annuitant. Tax is levied only on the part representing interest
payments.
Reversionary
Where an annuity commences on the death of another.
Temporary annuity.
One which is paid for an agreed period, or to earlier death.
There is no investment risk attached to annuities, as almost all annuities have guaranteed returns. On
the other hand, there is unlikely to be any access to the invested capital.
It is clear that, provided permanent or temporary loss of access to capital is acceptable, annuities are
ideal for those who require a fixed or increasing income for a fixed term or for life. This may be an only
source of income, or it may be to top up existing income
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SAVINGS AND INVESTMENT - Home Income Plans
2.2.15 Home Income Plans
A particular type of annuity contract, whereby a homeowner may raise a loan on the house and invest
it in a purchased life annuity.
Generally available to those aged 80 or more.
Advances of up to 80% of the property valuation may be available.
The purpose of the contract is to provide income from the house equity. Essentially, the extra income
will be that remaining after the loan interest has been paid.
MIRAS relief is available on the interest payable on the first 30,000 of the loan but only for those
plans set up before 10 March 1999 by those born before 6th April 1935.
Alternatives to home income plans include:
1.
2.
3.
4.
Home reversion plans.

Roll up loans.
Shared appreciation mortgages (SAMs)
Protected appreciation mortgages.
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SAVINGS AND INVESTMENT - Open Ended Investment Companies (OEICs)
2.2.16 Open Ended Investment Companies (OEICs)
Open ended investment Companies (OEICs) are a type of collective investment. They were introduced
in the UK in 1998. They qualify as European collective investments under the Undertaking for
Collective Investments in Transferable Securities (UCITS).
OEICs are open ended. Originally OEICs could not invest in property or derivatives but as a result of
the Financial Services and Markets Act they can now do so.
OEICs are established as limited liability companies in which investors buy shares quoted on the stock
market. OEICs are governed by corporate law and have a board of directors. Each OEIC must have an
authorised corporate director (ACD) and a depository who is independent of the ACD.
OEICs have a single pricing structure. The initial selling costs include a separate change. A "dilution
levy" may be imposed when market demand is very high or low. This levy is added to the single price
at purchase or deducted from redemption proceeds.
An OEIC can provide different classes of shares and can be denominated in different currencies. The
tax treatment of OEICs is the same as unit trusts and investment trusts.
Many unit trusts have converted to OEICs.
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2.2.17 Employees Share Option Schemes

Save As You Earn (SAYE) Schemes
Employees save a fixed amount of between 5 and 250 p.m. This is invested with a building society
or via National Savings.
At the end of the fixed term of 3, 5 or 7 years a bonus is added to the amount saved. The proceeds are
then used to purchase shares in the employing company at not less than 80% of the market price at
the scheme commencement date.
Executive Share Option Schemes
Membership is limited to employees and full time directors who work at least 25 hours per week.
The amount of options granted to each member is limited to 30,000 at the time of allocation. The
exercise price of the option cannot be substantially less than the market value at the allocation date.
Provided options are exercised between 3 and 10 years after they were granted, there is no income tax
charge. The business asset rate of taper relief is used for capital gains tax purposes.
Company Share Option Plans (CSOPs)
Employers must impose a minimum qualifying period of service for employees to participate in CSOPs.
Employees can be granted an option to purchase up to 30,000 worth of shares in the employing
company. The purchase price on exercising the option is the price of the shares at the time the option
was granted.
Provided the option is held for three years no National Insurance or income tax charge will be incurred
by the employee. Any gain arising on disposal is subject to CGT but business asset taper relief applies.
Profit Sharing Schemes
Part of the company's profits are paid to a trust. The money is used to purchase shares in the company
which are held in the trust on behalf of the employees.
Employees are allocated shares under the scheme. The maximum allocation is the greater of:
3,000
or
10% of salary subject to an overriding limit of 8,000.
The employees receive the dividends from shares held in the trust on their behalf.
If the shares are held by the trustees for 3 years, no income tax liability is incurred by the employee.
However, if an employee sells shares within 3 years of receiving an allocation there will be an income
tax charge. The charge will be based on the lower of:
market value of the shares at allocation
or
sale price of the shares.
The tax charge is reduced by 50% if the employee leaves the company due to retirement, redundancy,
injury or disability.
All Employee Share Ownership Schemes
These schemes were introduced in 2000.

Each year an employer can give each employee up to 3,000 worth of shares in the company tax free.
The giving of shares can be performance related.
Employees can buy up to 1,500 worth of "partnership shares" per year from pre tax pay. These are
free of tax and National Insurance.
Employers can match the "partnership shares" by giving up to two free shares for each "partnership
shares" bought by an employee.
index |
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SAVINGS AND INVESTMENT - Comparing Different Products - Investment Objectives
3. COMPARING PRODUCTS AND PROVIDERS

3.1 Comparing Different Products
3.1.1 Investment Objectives
Product investment objectives should match the client's financial goals as closely as possible.
Factors to be considered:-
1.
2.
3.
4.
5.
6.
Is the need savings, investment, protection.

Are the goals short, medium or long term.
What sum is available.
What accessibility is required.
What are the tax ramifications.
Is the need income, growth or both
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SAVINGS AND INVESTMENT - Surrender Values
3.1.2 Surrender Values
It should be appreciated that 'surrender value' for one product will not necessarily have the same
interpretation for another.
With profits products have an 'unknown' surrender value because of the nature of the investment.
Unit linked products will have a clear surrender value because it is calculated on the bid value of
quoted unit prices.
Deposit based products will fall somewhere between the above two in terms of ease of calculation, as
the surrender value will depend on interest earned to date, less any penalties for early surrender.
Key features documents for life assurance products help to identify potential surrender values
index |
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SAVINGS AND INVESTMENT - Charges and Commissions
3.1.3 Charges and Commissions
All products will have a charging structure depending on some or all of the following factors:-
1.
2.
3.
4.
Amount and frequency of contribution or involvement.

Term of the contract.
Ease of access or notice period required.
Type of contract i.e. investment, savings, protection.
Unit linked products generally have explicit charges built into the contract and calculated as a
percentage of the value of units.
The exception to this rule is the unitised with profit fund which generally allows the actuary to control
the unit price in certain circumstances to inhibit the withdrawal of funds buy use of a 'market value
adjuster'.
With profits products have implicit charges, taken into account in the calculation of bonuses.
Deposit accounts and National Savings products also work on an implicit charge basis.
Shares and gilts generally have dealing charges calculated by a combination of flat rate and
percentage charges relative to the scale of the purchase or sale.
Commission payments are one of the reasons charges are incurred on products, as they increase the
cost of selling the product. Where commission is paid on up-front indemnity terms in particular, the cost
is heavy, and will usually be funded by reduced allocation of contribution over the first few years.
Details can be found on key features documents
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SAVINGS AND INVESTMENT - Risk and Accessibility
3.1.4 Risk and Accessibility
Risk needs to be viewed in terms of:-
1. Comparative product investment risk.

2. The client's perception of risk.
3. The size of the portfolio and its capacity to accept different levels of risk in its
balanced spread i.e. how much loss of capital is acceptable, will such a loss
affect anything else, such as spending plans.
4. Specific factors such as loss on surrender, investment sector risks, opportunity
cost of different choices.
Accessibility is to a certain extent a factor in risk assessment in that the easier the access, the lower
the return, and vice versa. This involves opportunity cost risk in particular.
Accessibility must also be differentiated in terms of time scale in that an emergency fund should have
instant access whereas this is not necessary for long term accumulation. Consequently, product
accessibility needs to match plans closely.
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SAVINGS AND INVESTMENT - Tax Treatment
3.1.5 Tax Treatment
Reference should be made to whether the product pays out:-
1. Gross.
2. Net of tax.
3. Tax free.
Reference should be made to the investor's tax rate, and whether income tax liability or capital gains
tax liability will take the client into the next tax band or over the allowance limits. If this is the case,
alternative products may need to be investigated and compared with the key requirements for the
product.
It should be made clear that decisions should not be taken solely for tax efficiency. The tax element
should be merely one of the underlying factors which needs to be considered
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SAVINGS AND INVESTMENT - Comparing Similar Products from Different Providers
3.2 Comparing Similar Products from Different Providers
Assuming that a number of providers supply the 'same' product which will fit the client's needs, a
number of factors will need to be considered:-
1.
2.
3.
4.
5.
Charges, including surrender value performance.

Consistency of investment performance, including bonuses.
Policy options, and whether they bear any additional charges.
Product guarantees.
Flexibility e.g. stopping and re-starting premiums, investment funds available,
switching facilities, changing the amount of regular premium.
The final decision will depend on the prioritising of needs for particular features i.e. those that do not
appear as a specific 'need' should not have any weight in the decision making process
index |
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SAVINGS AND INVESTMENT - Comparing Providers
3.3 Comparing Providers
Reference should be made to previous notes in Unit A - Protection.
In addition, specific attention should be paid to:-
1. Consistency of fund performance.

2. Consistency of the fund manager's ability to react to the various investment
pressures.
3. Size of the fund.
4. The underlying investment base i.e. where shares are held, size of individual
holdings, how active is the management.
Investment performance in particular sector funds may be compared against relevant indicators and
indices to measure performance.
index |
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SAVINGS AND INVESTMENT - Investment Styles
4. INVESTMENT STYLES AND FEATURES OF FUNDS

4.1 Investment Styles
Investment style relates to the strategy used to select investments for the fund which will enable the
fund to meet its investment objectives.
Generally, the fund's investment managers will meet periodically, possibly monthly, to discuss the
strategy for the fund. They will agree a strategy to be followed for a set period e.g. the following month.
After agreeing the strategy the investment managers will select stocks that they consider will meet the
strategy in the required time period. Each particular stock will be chosen following research into the
issuing company.
The investment managers place greater emphasis on the objectives of the fund than its legal
construction e.g. unit trust, OEIC, investment trust.
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SAVINGS AND INVESTMENT - Volatility and Risk
4.2 Volatility and Risk
Both the income produced from an investment in the form of dividends or distributions and the capital
invested are subject to volatility and therefore risk. The level of volatility varies depending upon the
type of investment.
Guaranteed investments: no volatility e.g. current and deposit accounts and National Savings.
Low risk investments: gilts are not completely risk free as between purchase and the redemption
date their value fluctuates according to demand. Securities issued by foreign governments can be
more risky depending upon which government issued them. They are also subject to currency
exchange rate variations.
Balanced or medium risk investments: corporate bonds issued by companies. These are more
secure than shares issued by the same company. However, their redemption is dependent upon the
continued existence and financial strength of the issuer.
High Risk investments: ordinary and preference shares are both high risk investments. Preference
shareholders have an advantage as they have a right to income before ordinary shareholders. If a
company fails preference shareholders receive a proportion of any remaining assets before ordinary
shareholders who may receive nothing.
Collective investments: the risk and volatility of a share held within a collective investment is the
same as if the share is held directly. However, as collective investments contain a wide spread of
investments the risk is lessened. The volatility of a fund depends upon the spread and make up of the
underlying investments. Tracker funds must mirror the investment spread of the chosen index and will
rise or fall in price according to movements in the index.
Speculative investments: these are high risk investments that in a worse case scenario an investor
may receive no income and lose the capital invested. Examples include commodities and futures and
options.
index |
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SAVINGS AND INVESTMENT - Inflows, Outflows and Cancellation Prices
4.3 Inflows, Outflows and Cancellation Prices
The price of investment trust shares is demand sensitive. Unit trust and OEIC prices are not directly
influenced by demand but can be varied at the fund manager's discretion.
The bid and offer prices of a unit trust can be varied, within limits, to encourage investors to buy or
retain units. Fund managers can increase the bid/offer spread to 13%. This is achieved by valuing both
bid and offer prices on the offer price or on the bid price basis. The bid or offer price is moved within
the 13% range but the bid/offer spread remains at its usual level e.g. 6%.
index |
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PROTECTION - Term Assurance
2.2 Product Features

2.2.1 Term Assurance
Term Assurances generally have the following characteristics:
1. Policy pays out only on death within the policy term.

2. No payout at the end of the term.
3. No surrender value or any other accrued value in the policy
Level Term Assurance has a fixed sum assured during the term. Suitable where a fixed level of
protection required.
Decreasing Term Assurance reduces the level of cover over an agreed period, usually on a predetermined scale. Suitable to cover a reducing risk or debt, such as a capital and interest mortgage,
when it is often termed mortgage protection.
A specialised form of decreasing term cover is used to cover any outstanding tax due on a Potentially
Exempt Transfer (PET) during a gift's seven year tapering relief period. The cover is often termed Gifts
Inter Vivos cover.
Convertible term permits the policyholder to change cover into a policy providing permanent or longer
term cover without providing further medical evidence. The premium applicable will be that relevant to
the age of the policyholder on conversion. The right to convert cannot be refused by the life office
under normal circumstances. Suitable where current funds do not permit taking out permanent cover,
or where future plans are not finalised.
Family Income Benefit is in essence a decreasing term assurance policy where the sum assured is
payable by instalments from the date of claim until the original term expires. The income may be level
or increasing, or may be exchanged for a lump sum. Suitable for providing guaranteed income during
periods of expensive dependency following death of, say, the main income earner. Particularly useful
for guardians.
Renewable Term effectively guarantees insurability, as the option in the policy is to extend for a similar
term at the end of the initial term. The option usually ceases at an 'age ceiling' and may include an
option to increase the sum assured by, perhaps, 50%. As with convertible insurance, underwriting is
not required at this point, and premiums will relate to current age.
Where a policy includes a non-medical, no-underwriting extension or increase, it could prove to be a
valuable asset in the event of ill health, as the conversion or renewal option is available whatever the
state of health.
index |
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PROTECTION - Term Assurance

Case studies - The Life of Brian tracing the life of Brian Riley from birth to death, his trials and tribulations, his failures and successes
CASE STUDIES
Introduction
Mortgages
School Fees
The Life of Brian

tracing the life of Brian Riley from birth to death, his trials
and tribulations, his failures and successes.
REMEMBER You should not use any information contained in this case study as the basis of any
action until you have discussed matters with your financial adviser.
main contents |
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http://www.financial-planning.uk.com/consumer/casestdy/index.htm [4/20/2002 5:54:06 PM]
Mortgage Case Studies Introduction
INTRODUCTION TO THE CASE STUDIES

The major obstacle to successful financial planning is not the time it
takes to pull a plan together, nor the confusing choice of products and providers
it is usually our own inability to recognise that we need help to avoid a problem or to get
out of one.
Given the human penchant for imagining the worst, we will often in our
mind, run through worst case scenarios. What if my job disappears? What if I fall ill and
cant work? What if Im killed in an accident? What if I have to take early retirement?
Most of us are quite skilled at avoiding taking such thoughts too far,
partly because we may know someone who has been through such horrors and we dont
like to think of ourselves going through that, and partly because we dont like to admit,
even to ourselves, that we dont know the answer.
The first thing to do is quite simple talk to someone who understands these things, a
financial adviser to whom planning exercises represent everyday life, and who wont laugh at you when you
admit to not knowing what zerocoupon bonds are.
If you want to prime yourself before such an exercise, check out the case studies which
follow. You may find someone like yourself, who has similar problems. Observing them, their problems and
solutions, may help remove some of the mystique of the financial planning process.
Becoming aware of the traps and pitfalls is an essential part of planning, almost as
important as having goals and targets to help you reach your aims.
The case studies show a variety of people facing different financial challenges, each with
commentary on what could be done to resolve, ease or cope with the situation.
If you do recognise yourself here, PLEASE DO NOT be tempted to take any

action or inaction without professional advice. Part of the planning process is to
decide on priorities; the suggestions offered in the case studies will match only the invented
priorities of our fictitious subjects. They wont necessarily match yours.
Laying bare your finances can be as much a shock to the system as having a dental or
medical check-up we dont really want the examiner to find anything wrong, do we? On the other hand, if
remedial action is required, do we really want to wait until the situation deteriorates beyond redemption?
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Mortgage Case Studies Introduction
Additionally, being armed with an appreciation of terminology policies and practice

within the financial sector will give added confidence and an ability to gauge the level
of advice given.
Mortgages summaries
School Fees summaries
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http://www.financial-planning.uk.com/consumer/casestdy/mortgage-gen.htm (2 of 2) [4/20/2002 5:54:08 PM]
Mortgage Case Studies - Scenarios ....
Mortgage Case Study Scenarios ....

Mary and Stephen Casey
Steven Casey is a self-employed plumber aged 30. He has
been in business for 4 years, prior to which he worked for a large local
contractor. The business is financially buoyant and growing gradually.
Steven is married to Mary and they have two young children. Mary is a
qualified accountant but has deferred progressing her career until her
youngest child starts school. She does not think it will be difficult to find a
suitable job. In the meantime, she helps Stephen with the books for his
business.
Click to read more
Judy Brown and Paul Williams
Judy and Paul are prospective first time buyers. They are getting married
shortly and are looking for advice on house purchase. They would like to buy as soon as
possible.
Click to read more
Abigail and Mark Upton
http://www.financial-planning.uk.com/consumer/casestdy/mortgage-sum.htm (1 of 2) [4/20/2002 5:54:10 PM]
Mortgage Case Studies - Scenarios ....
Abigail and Mark Upton took out a mortgage five years ago.
The account is now in arrears to the tune of 51,000, including repayment
arrears of 1,100, (which represents three months payments). Their mortgage
is linked to a low cost, with-profits endowment policy.
Click to read more
REMEMBER You should not use any information contained in this case study a
page back

http://www.financial-planning.uk.com/consumer/casestdy/mortgage-sum.htm (2 of 2) [4/20/2002 5:54:10 PM]
Mortgage Case Studies, self-employed plumber aged 30
MORTGAGE CASE STUDY: self employed

Mary and Stephen Casey
Steven Casey is a self-employed plumber aged 30. He

has been in business for 4 years, prior to which he worked for a large
local contractor. The business is financially buoyant and growing
gradually.
Steven is married to Mary and they have two young
children. Mary is a qualified accountant but has deferred
progressing her career until her youngest child starts school. She does
not think it will be difficult to find a suitable job. In the meantime, she
helps Stephen with the books for his business.
They live in a rented flat at the moment, but have

decided they want to buy a house. They like the look of this one, which is
currently vacant.
Age
: Built 1973
Tenure
: Freehold
Type
: Detached bungalow
Location
: Rural
Utilities
: Mains water, electricity, no gas
Road
: Made up fully
Alterations
: Garage added 1986
Accommodation : 2 reception rooms, 3 bedrooms, 1

bathroom/wc, 0.15 acre site, floor space
1,100 square feet, brick construction with
tiled roof.
Usage
: Residential
Essential
repairs
: Part finished extension, causing present

exposure to weather. As the property is a
repossession, the work was abandoned.
Early attention to this work is essential.
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Current value
: 70,000
Insurance value : 130,000
Steven anticipates that when he has completed the extension and various other
ideas he has, the value could rise to 120,000.
Steven and Mary clearly have questions to ask, some of themselves (e.g. Will the rural
location be suitable for the children as they become of school age?) and some of their surveyor (e.g.
Has exposure damaged the extension?) These are practical considerations which only they can
resolve, but some of which may have more impact than others on their course of action.
The purpose of this study, however, is to provide some indication of the thinking going on
in the mind of the person who might be considering a loan application. Bear in mind that
whilst most lending organisations have guidelines to help their staff determine loan
agreements, the final discretion is often exercised by another person.
Before moving on, can you guess at some of the information that the lender will
need? Imagine that you are the lender, and need to assess a loan application.
The following are some of the more important points that need to be satisfied.
Often, these queries uncover other points that need to be answered also.
1. What information will you need from Steven and Mary to determine how much
they can borrow (the maximum sum is called their borrowing ceiling')?
As the lender you will need to see:
a business plan for Steven's business, if he has one;

three years accounts prepared and signed by a qualified accountant; if three
years accounts are not available, as many accounts as are prepared together
with projections drawn up with the assistance of an accountant;
certification that schedule D taxes have been paid in full;
details of other income;
details of outgoings and current debts;
other relevant factors under the headings of income, expenditure, assets and
liabilities.
2. How would you check the accuracy of the information they give you?
The information could be corroborated by checking Steven's business accounts

in detail and asking relevant questions of the accountant (the applicant's
permission is required for this).
Bank statements should be sought to identify cash flow and seasonal variations.
You should run a credit check with a recognised bureau.
References can be taken as required from landlord, bank, business suppliers,

other loan sources.
3. What are the main risk factors associated with these particular borrowers?
4. What are the main risk factors associated with the security offered and what
constraints could you put in place to reduce or eliminate these risks?
Borrower Security
The applicants are first time buyers and so have no track record to date.
The business is apparently successful and has got over the initial few years,
generally the most vulnerable.
Self-employed status implies general lack of security. The plumbing business is
dependent to some extent on the well-being of the construction industry.
The business may be subject to seasonal fluctuations.
There is no guarantee that Mary will actually return to work, so potential
earnings should be ignored.
The property is rural, so access is important. Proximity to local amenities may be
a factor influencing value. It is also a repossession, which would affect short
term perceptions of value.
Is the garage, which was added subsequent to construction of the dwelling, fully
compliant with local authority planing consents?
The unfinished extension is a major work which will require resilience to
complete, as well as additional funding. If unattended, this could affect the
property value adversely within a short period of time. Also query as for garage.
It is likely that, as a lender, you will insist on a retention, holding back the cost of
the work to be completed pending final inspection of the finished job.
5. As Mary is a potential high earner, would you take her future income into
consideration in deciding on the amount to be advanced?
No - Mary's possible income should be discounted for the purpose of this

application. It could be considered for future loans, however, once she has
actually returned to work.
The purpose of all these queries is not to make it difficult to get a loan, merely to
ensure the security element for the lender. Once you know what information is relevant, it could make it
simpler for your applications by having the necessary information and balanced expectations of the
outcome ready. Be prepared!
One final point. Before finalising their mortgage Steven and Mary should be given certain
information required by the Mortgage Code. This Code, currently voluntary, sets minimum standards of
service that borrowers can expect from mortgage lenders and intermediaries which subscribe to the
Code. Ask your lender or adviser for details.
page back

Mortgage Case Studies - first time buyers
CASE STUDIES
MORTGAGE CASE STUDY: first time buyers
Judy Brown and Paul Williams
Judy and Paul are prospective first time buyers. They are getting
married shortly and are looking for advice on house purchase. They would like to buy as
soon as possible.
Judy has worked in the Civil Service for 5 years, and currently earns
16,000 per year with no overtime or bonuses. Paul has worked as a technical author
for an IT company for the last 4 years. He earns 17,500 per year, with a potential
annual addition of 2,500 in bonuses. His bonuses for the last 3 years have been:
1997 : 1,000;
1996 : 1,750;
1995 : no bonus paid.
They have no children.

At present Judy lives with her parents. Paul has a flat which he rents for 110 per week. He
also has a car loan with a finance company on which he originally borrowed 5,000 and currently owes
3,000. Both have credit cards and owe balances of approximately 1,000. They have no other debts.
The couple have saved 7,000 between them, which is in a building society account. Judy
also has a legacy of 2,000 which will be paid soon.
They wish to buy a property for about 75,000. They know little about mortgages but
make it clear that they intend to shop around for the best deal.
This study is an 'average' scenario of the first-time

buyer.Surprisingly, considering such an investment is probably the largest and
most important in most people's life, and given the abundance of advice
available in books and magazines, mortgage advisers and lenders still find that
much of the house buying process remains a mystery to their enquirers.
Remember Rule 5P Proper Preparation Prevents Poor
Purchasing!
Some of the basic questions with some opinions that Judy and Paul should
be asking themselves are as follows:
1. How much will we be able to borrow?
One 'rule of thumb' formula which is commonly used is to take the whole of the higher income plus half
of the lower income and multiply the total by 3. This would give them a loan potential of 76,500.
The higher income could be calculated by taking some of the additional income
into consideration. One method is taking an average over the three years, though you may take a
view that this income is too volatile to be considered at all. Here we will include it.
Higher
income
(rounded)
= 17,500
+ (1,750+1,000) = 18,417
Lower
income
= 16,000 (x
)
Income
multiple
= 26,417 x 3 = 79,251 loan potential
The property value they have in mind is within both calculations.

2. Will we need to provide proof of earnings?
Yes.Some or all of the following will be needed by the lender:

employers' references from both applicants, with P60's as a crosscheck to prove income;
possibly a landlord's reference or sight of a rent book to prove reliability
in paying;
credit check on both applicants;
sight of bank statements as cross reference to income and
expenditure;
check of own institution's records on existing business relationships, if
any, and to check on how such relationships have been managed.
3. Will we need a deposit? What else?
Deposit of up to 10% usually, although there

is no upper restrictions. Requirements vary
with lenders.
7,500
Valuation fee; assume:
150
Legal costs and other outlay associated with

the purchase. Assume
1,000
Stamp duty
750
Indemnity guarantee
150 one off

payment (depending
on policy and
amount of loan
compared to
property valuations)
4. What is the 'indemnity guarantee' mentioned above?

The full name is Mortgage Indemnity Guarantee. It is an insurance intended to protect the lender in the
event of loss on high percentage advances.
Payment of this does not reduce the obligation to pay - if claimed upon, the insurance company can
sue the borrowers for what has been paid out.

One way of approaching this with the customers is to emphasise that it does enable the financial
institution to provide a higher percentage advance, thereby reducing the need for a larger deposit.
5. Do we have to use the method of repayment suggested by the lender? What
repayment methods should we consider?
Borrowers have an absolute right to choose whether to take a capital and interest mortgage or an
interest only mortgage. Forcing them to do otherwise would contravene 'best advice' principles.
The lender WILL insist on property insurance to protect the security for the loan. The lender's branded
product may be compulsory if tied into a special rate of interest, but many lenders do not insist on this.
The pros and cons of an interest only mortgage are:
Potential for a tax free lump sum at the end of the term.
If the supporting investment policy is unit-linked, life cover is part of the contract.
Track record of unit linked policies is impressive, though past performance is no

guide to the future. Long term, market-related investments tend to out-perform
capital guaranteed investments over long periods.
Expert fund management, although all long term investments are speculative to
some extent, so returns are not guaranteed. The product may not pay off the
mortgage if investment returns are disappointing.
If PEP linked, life cover has to be bought separately.
May not suit the 'risk averse' i.e. those who do not like the thought of the fund
they are building to repay their mortgage fluctuating in value with the movement
in investment generally.
Early surrender can result in getting less back than capital invested.
Advantages of a repayment mortgage:
Guaranteed repayment of loan at end of period.
More and more capital is repaid as the period advances.
Because it is not linked to investment products with a finite item, restructuring

the loan on a different basis e.g. longer term, is more easily accomplished.
Disadvantages would be:-
The whole process must be repeated, and a new repayment term started, with
each house move.
The terms of the loan may be varied at the discretion of the lender.
There is no surplus cash at the end of the term.
Separate life assurance is required to cover the loan.
There is no investment product to produce 'excess' growth, so there is no

chance of early repayment except by injection of an outside source of capital.
Reducing level of interest affects tax relief.
6. What else should we consider to help protect our investment?

Additional products the couple might consider are:
a combined buildings and contents insurance package;
mortgage protection if the capital and interest method is chosen;
sickness, accident and redundancy insurance;
possibly critical illness cover.
These contracts have become 'standard' when putting together a suitable mortgage and protection
package. Much will depend, however, on the couple's financial profile and preferences. Only a
complete analysis with a financial adviser can determine their needs.
7. What are the catches associated with very low repayment rates or rates fixed
for a specific term?
Judy and Paul should be made aware of the potential problems associated with
(apparently) very low fixed rates of interest. These could include:
the rate might mask compulsory purchases of other products alongside the
mortgage, such as buildings and other insurances;
the initial fixed rate will be offered only if the borrowers agree to a penalty for
early redemption - this may well extend beyond the fixed term;
once the fixed rate period expires, there is no guarantee that the mortgage will
be competitively priced, and the borrowers can still be tied in by redemption
penalties;
the mortgage indemnity, valuation and legal fees may cost more than other
providers;
the rate advertised may be a base rate only for low loan-to-value cases.
Generally, few products, if any, offer 'something for nothing'. The prospective borrowers should
therefore seek answers to all of the above issues.
An adviser is obliged under the Mortgage Code to clarify the drawbacks as well as the benefits of the
product before signing up the customer. The products should be explained in plain English. The lender
should publish tariffs and charges up front and regularly (at least annually) thereafter.
A lender is obliged to put products 'on the table' but not to insist upon a specific one. This should be
the borrower's choice.
8. Why do we need to engage a solicitor? We could quite easily do it all ourselves.
What does the solicitor do for the money?
Most lenders insist that either a solicitor or a licensed conveyancer must be appointed when a
mortgage is arranged. This is to ensure that all legal work is carried out correctly and thoroughly.
The solicitor carries out several important roles:
dealing with the purchase/sale transaction on behalf of the borrower;
investigating title to ensure that the vendor can sell and the buyer can buy;
drawing up the mortgage contract and any other documentation;
dealing with financial matters, such as the deposit, the advance itself and stamp
duty;
ensuring that appropriate advice is given at all stages, such as putting the
property on cover from exchange of contracts/conclusion of missives;
dealing with any anomalies as they arise.
If they are offered the opportunity to do their own conveyancing, they should ask themselves if they will
have the time to bring all of the activity together, and if they are happy that they know enough to do it.
9. We understand that MIRAS is the tax relief system whereby we can obtain tax
relief on interest payable on our mortgage loan. BUT, do we qualify?
The loans eligible for MIRAS are:
purchase of an only and main residence;
purchase of a share in an only and main residence;
purchase of a freehold interest;
purchase of an annuity if the borrower is over 65 (male) or 60 (female);
remortgaging of an existing eligible mortgage.
Grounds for removal from MIRAS are:
by instruction from the Inland Revenue;
if a fraudulent self-certification of eligibility for inclusion is discovered;
property or borrower no longer qualifies;
letting of the property;
mortgage being repaid by a third party;
arrears in excess of 1,000 or 12 months repayments with no arrangement in

place;
repossession;
death of a sole borrower.
10. Could we get a mortgage if we decided to build a house ourselves?

Judy and Paul would have to provide estimates of the cost of acquiring the site (if not already owned)
and all relevant building costs, including construction, connection of utilities and professional fees.
Proof of planning consent must be obtained. A supervising architect is essential and the costs of
engaging his services must be included in the budget.
The lender will normally provide finance in stages, with funds drawn down at specified 'milestones' in
the construction process. These are referred to as 'stage payments'. They are typically offered in either
three or four portions.
Before entering into such a arrangement, the lender will need to be persuaded that the applicant is fully
committed to completing the project and has the finance to do so.
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Mortgage Case Studies - problems?
MORTGAGE CASE STUDY: problems?

Abigail and Mark Upton
Abigail and Mark Upton took out a mortgage five years ago.
The account is now in arrears to the tune of 51,000, including repayment
arrears of 1,100, (which represents three months payments). Their mortgage
is linked to a low cost, with-profits endowment policy.
The property is worth about 60,000.
They acknowledge that they should have addressed the

problem earlier, but Mark has been away looking for jobs and Abigail did
not want to take any action on her own.
Four months ago, their business failed. They had run their own
restaurant business but had to abandon this once debts started to escalate.
They ended up owing 6,000 to the bank, about half of which has now been
paid off. They are being threatened by the bank with legal action to recover the outstanding amount.
They owe an additional 1,000 in total on credit cards and other small debts.
They have very little cash in the bank and no other resources.
Both Abigail and Mark have found jobs and between them earn 1,000 per
month. The jobs are not ideal but have been taken out of desperation. Aside from the mortgage, their
outgoings are 500 per month plus living expenses.
Although of no consolation, many people find themselves in similar

situations to Abigail and Mark hoping the problems will pass; not wanting to
admit that it is a problem, perhaps not even recognising their situation to represent a
problem; too embarrassing to discuss it with each other and with anyone else.
Apart from practical decisions which could perhaps have been addressed at an
earlier stage with the business all part of the financial planning process they
should have contacted their lender as soon as they saw the possibility of having
to stop their mortgage payments. Lenders are in business to make a profit, like any other
business, but they may be able to offer practical advice before you go into payment arrears; they
respond well to forethought in lenders. Once payments are missed, however, the greater the amount of
arrears and the greater the time before contact, the more limited becomes the advice and sympathy
available.
The Mortgage Code, in any event, commits lenders to dealing with such cases
sympathetically and positively. It also states that the lender will, with the consent of the
borrower(s), discuss potential alternative solutions which might resolve the situation. Signatories to the
Code also agree to be bound by the Statement of Practice on Arrears produced by the Council of
Mortgage Lenders. Ask your lender or adviser for a copy, it is quite short and easy to follow.
Even at this stage, however, there are routes open to them, provided they have the
determination to see them through and to follow advice. As so many different strands need to be
brought together, the advice of a specialist mortgage adviser may be appropriate but check the costs
involved beforehand. Other than approaching a professional financial adviser, Abigail and Mark could
also have initial conversations with the local Citizens Advice Bureau, a Money Advice Centre or the
Consumer Credit Counselling Service.
The first thing for Abigail and Mark to do is to compile a written statement of
income and expenditure to identify their precise financial situation and so help them
determine the most sensible courses of action. This will inevitably raise other questions.
Their adviser will see that they have to pay just over 300 per month to the
lending institution out of an income of 1,000. They state that their outgoings are 500
per month. As it would be difficult to live on the balance, the adviser must determine what exactly the
500 is paid out on. Is it spent on essentials or less vital purchases? What lifestyle do they live?
The lender must be made aware of other debts and the degree of urgency in
servicing these. Have minimum payments been made on credit cards and other debts? Are the
couple in default with the bank yet? Have endowment premiums been kept up to date?
By running through income and expenditure, the adviser may secure agreement
to put a certain minimum amount towards the mortgage each month, and to
reduce less essential payments elsewhere.
As the endowment has been running for only five years, surrender or sale of the
policy is not a cost effective use of the product. (Cancellation or continuation of such a
policy is often a difficult decision, and should be considered only with qualified professional help). As a
last resort, however, this is a source of cash which can be tapped if necessary. Arguably, it is better to
cash in the policy than lose the house. If this is done, the mortgage would be converted to the capital
and interest method and (perhaps) a rescheduled term might be contemplated.
Assuming that the borrowers will pay as much as they can towards the
mortgage, various options are available:
Ideally, the couple should trim expenditure to the bare minimum to enable
repayments to be made over and above the monthly repayment, thereby
enabling the arrears to be paid off; if they cut their cost of living sharply, they
may be able to meet the repayments, enabling the lender to freeze the arrears
pending a review in 1- 3 months time.
If they can afford only a proportion of the repayment, the debt will continue to
escalate, so any agreed minimum repayment must be reviewed frequently,
taking stock of any changes in circumstances.
Assuming that the endowment policy has not lapsed, the insurance company
may be prepared to offer a premium holiday, reducing monthly outgoings.
The nature of the endowment product will determine whether an extension of the
mortgage term is an option. If so, this must be used selectively.
The lender should find out whether all sources of income have been tapped; this
might include debts outstanding from their former business. They might even
consider letting to derive an income from the property, though some lenders
would not agree to this as a matter of policy.
If the financial problems are pressing from all directions, the couple may have to
consider putting the property on the market and trading down to something more
affordable, or perhaps renting.
What happens if, despite all good intentions, their situation worsens?
Suppose they should both lose their jobs?
As the mortgage pre-dates the revised Income Support - Mortgage Interest (ISMI) arrangements, they
will get support after sixteen weeks from the Department of Social Security. This will provide money
towards payment of interest only, so their other outgoings will stand unsupported.
If they have 8,000 or more in investments, ISMI is lost. If they obtain employment it will also be lost.
If unemployment is prolonged, and they cannot reach any accommodation with their creditors,
repossession may be the next step, even though lenders will take every step necessary to avoid such
action.
Unless an arrangement is made, the lender will normally commence legal proceedings when arrears of
three months are owed.
The lender will apply for a possession order (England and Wales) or a Notice of Default/Calling Up
Notice (Scotland).
When the case is presented to the Court it may order outright possession; award a suspended
possession order; or adjourn or suspend proceedings.
At this stage, the lender has to be fully prepared to prove to the Court that all possible steps have been
taken, and seen to be taken, to assist Mark and Abigail to bring the account to order.
An outright order will give the lender the right to obtain vacant possession in (usually) 28 days. A
suspended order will require the borrower to make payments in accordance with the Courts
instructions. Adjournment/suspension delays the proceedings pending specified actions by either party.
If possession is obtained, the lender can exercise its right to possession on the specified day.
The property is valued and brought to market by the most suitable method. A buyer is secured and the
monies obtained used to pay off the debit balance on the mortgage. If insufficient, the lender has the
right to pursue the shortfall by suing the borrower for the amount owed. If a Mortgage Indemnity
Guarantee is in place, this will be claimed upon to reduce any loss.
The Mortgage Indemnity Guarantee insurers are likely to use their rights under the Guarantee to claim
back any loss they may sustain from Mark and Abigail.
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The Life of Brian - a financial case study
The Life of Brian Riley

A brief look at a financial life in 8 episodes, with the occasional what if excursion,
tracing the life of Brian Riley from birth to death, his trials and tribulations, his failures
and successes.
All that stands in the way of Brian and financial security is poor advice.
Although there is obviously a historical connotation to a life story such as this, for
convenience, and to make it relevant to current conditions, each episode of Brians
Life will be assumed to take place here and now.
Once all 8 episodes are collated, they will form a life-stage model
that, will form a practical counterpoint to the life stages found
elsewhere on the site. It will help support the idea that financial
planning (as essential as any other planning) is not a once only
affair.
The family history
Life of Brian - Phase 1 (just born)
Life of Brian - Phase 2 (age 9)
Life of Brian - Phase 3 (university)
Life of Brian - Phase 4 (employment)
Life of Brian - Phase 5 (re-employment)
Life of Brian - Phase 6 (self employment)
Life of Brian - Phase 7 (retirement)
Life of Brian - Epilogue
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The Life of Brian - a financial case study
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The Life of Brian, a financial case study - family history
The Life of Brian Riley family history
Arthur and Mavis Riley are pleased to announce the birth of their son, Brian Arthur George on 1st April.
Brian is born into a secure family of father, Arthur (38), mother, Mavis (33) and two older sisters, Veronica and
Susan, aged 8 and 4 respectively. Arthur and Mavis have been married for 10 years.
Arthur is a civil servant in Whitehall; Mavis teaches the flute and piano from home. Arthurs salary is 25,000;
Mavis is self employed and earns approximately 16,000 net. Mavis has no pension or life assurance cover of
her own, but Arthur has the full civil service pension scheme of 50% of salary, plus a widows pension on death,
before/after retirement, of 50% of his expected/actual pension. Life assurance cover is only twice salary.
At the end of each month they have surplus income of about 400. The repayment based mortgage has 50,000
outstanding. It is covered by a joint life mortgage protection policy. Ownership of the house is on a tenancy in
common basis.
Grandparents George and Mildred Riley retired to Jersey some years ago, to escape the rigors of mainland
weather. George is now 66, Mildred 69. Both are in good health and they live off their invested capital. Maternal
grandparents James (52) and Ellen (50) Hickmott live abroad in an artists commune. Not much has been heard
of them for ten years but they are alive, as Arthur and Mildred received a Christmas card last year, and the girls
always receive a birthday card.
Arthur and Mavis each have a brother and sister, who have two children each.
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The Life of Brian, a financial case study - family history
Brian, as the first male child/grandchild, is expected to follow his father and grandfather to boarding school
(Ramsdean School for Boys) and from there to Cambridge and probably to Whitehall. Arthur already has his son
down for the school and his Club (Wetheringtons).
Veronica and Susan attend the local primary school (Anthony Street School) and will move on at the age of 11 to
St. Mildreds, a private day school.
As responsible parents, Arthur and Mavis will already have considered the changes a new child will bring to their
financial arrangements. If they havent already asked the questions, they should now be investigating the
provision of school fees and life assurance and sickness protection both for the family as a whole, and baby
Brian in particular.
Here is a summary of their investigations:
Life Assurance
Sickness Protection
School Fees
Additional Considerations
REMEMBER You should not use any information contained on this site as the basis of any action until you
have discussed matters with your financial adviser.
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LIFE OF BRIAN PHASE 1 (just born) - case study
LIFE OF BRIAN PHASE 1 (just born)

Life Assurance - On Arthur's death:
Current Situation
A lump sum of 50,000, would be paid

to Mavis.
The Mortgage would be paid off.
POSSIBLE REMEDIES
Protection for Mavis whilst the children children
are still dependent, which could be up to Brian. s

22nd birthday. As a minimum, the sum assured
should be enough to replace the lost income less
reduced outgoings (including any extra costs such
as as( childcare).
Term Assurance - is likely to be the most cost
effective cover, although the most suitable could

be Family Income Benefit.
Mavis would receive a widows pension
of 50% of Arthur. s expected pension
(25% of his salary), increasing in line
with Retail Prices Index (RPI).
Whole of life with critical illness - To cover loss of
income/childcare for both Arthur and Mavis, both

while the children are dependent and in later
years.
(See also Additional considerations).
On Mavis' death:
Current Situation
The Mortgage would be paid off.
Her 16,000 income no longer comes into

the family budget.
POSSIBLE REMEDIES
Similar to above, to protect Arthur whilst the

children are still dependent. The sum
assured should cover the loss of income less
reduced outgoings. PP Term Assurance
allows tax relief to be claimed on the
premiums. Some allowance could perhaps
be considered for the cost of childcare.
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LIFE OF BRIAN PHASE 1 (just born) - case study
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PROTECTION - Whole of Life
2.2.2 Whole of Life
With a Whole of Life policy:
1. The sum assured pays out on the death of the policyholder, whenever that may
be.
2. As it is a certainty that these policies will have to pay out, there is an investment
element within the premium, (unlike term assurance). After an initial period, a
surrender value will accrue giving the policyholder additional options encashment, policy loan, or making the policy paid-up.
3. The benefit of such a policy lies in the payment at the end of life whenever that
occurs and which may facilitate, for example, payment of an inheritance tax bill.
Non Profit Policies

Whole of life policies written on a non profit basis simply give a guaranteed sum assured payable on
death, and, as with other forms of whole of life policies, premium payments may cease at an earlier
age, say 80 or 85, with the life cover continuing.
With Profits (Conventional)

A guaranteed basic sum assured is payable on death to which reversionary bonuses attach as
declared by the life office, with a terminal bonus perhaps becoming payable when the policy becomes
a claim. Some allowance for terminal bonus may be taken into consideration if an early surrender takes
place.
The concept of With Profits is to provide a policy that increases in value each year.
Bonuses may be given on the following basis:-
1. A reversionary bonus is declared as an addition to the basic sum assured

payable on death. Normally such a bonus is expressed as a percentage of the
basic sum assured and such bonuses can be simple (applying to the basic sum
assured only), or compound (applying to the basic sum assured plus previously
declared reversionary bonus).
2. An interim bonus rate may also operate which will apply in the event of claims
arising before the next bonus declaration.
3. Terminal bonus may be payable on death or sometimes earlier surrender and is
often expressed as a percentage of attaching reversionary bonuses. The
purpose of the terminal bonus is to enable policies on death to fully share in the
surplus within the with profits fund, and in particular to reflect most recent
experience in stock-market conditions. A terminal bonus is not the same as a
4. Special Bonus; these latter may result, for example, from windfall profits or
revaluation of assets.
The point should be emphasised that bonuses are not guaranteed. Only after
being declared are they secure, and once declared cannot be clawed back.
Surrender Values.
1. After an initial period (usually 2 years or so), with profits policies will accrue a
cash-in value known as the surrender value. In the early years this will usually
represent less than premiums paid, but as reversionary bonuses accrue, these
will have the effect of increasing the surrender value available. On surrender,
some allowance may be made for the value of any terminal bonus that would
have applied had the policy been a claim at that time.
During the course of the 1950's, the concept of 'Investment Linking' (unit linking) was introduced. The
underlying investment performance of the assets held by the life office are immediately and directly
reflected in the policy value through the medium of the 'unit price'.
In the simplest of terms, the unit price is calculated as the value of the fund's underlying assets, divided
by the number of units in issue.
With profits policies have no explicit or visible charges, except in the case where a policy fee is
applicable. The charges under unit linked policies are completely explicit or visible to the policyholder,
and usually are structured as below.
Charges
1. Bid-Offer Spread
Units are purchased from the life office at 'offer' price, and are sold by the policy
holder at the lower 'bid' price. The difference between offer and bid prices is a
matter for the life office concerned, but usually is set at 5% plus rounding.
2. Annual
An annual management charge will usually be reflected in the unit price directly.
This can be up to 1% or more per annum which is taken by the life office from
the fund usually on a daily basis.
3. Initial
Whole of Life policies carry a high level of initial expenses, particularly in the
form of commission. Most life offices recoup such expenses through heavier
charges or reduced allocations in the first years of the policy.
4. A monthly fixed charge of say 1.50 is sometimes levied to meet premium
collection costs.
Fund Links
1. Life offices offer a number of unit linked funds, and policies issued may be linked
to one or more of such funds, where investments may be switched between the
available funds.
2. Typically, the range of unit linked funds on offer would include:UK Equity, Fixed Interest, Cash and Building Society, Property, Specialist
Equity, International, Managed.
Unitised With Profits
1. There has been a movement in recent times away from traditional with profits
business towards 'unitised' with profits, generally because the concept of unit
linked funds is easier for the investor to understand. Additionally, it is actuarially
more efficient, because of the lack of an underlying guaranteed sum assured
which needs to be backed with a fixed interest type of investment.
2. Unitised with profits funds behave as any other unit linked fund except that the
unit price grows in accordance with the company's declared reversionary bonus
rate, and an additional terminal bonus is payable, if appropriate, on claim. A
variation on this theme is for 'bonus units' to be added in accordance with the
office's bonus declaration.
Surrender values under unit linked policies
1. The surrender value under such policies will be clearly expressed. It may simply
be represented by the full value of units where the policy charges are front end
loaded i.e. fully recouped.
2. Alternatively, the face value of the units may be subject to a deduction to take
account of any initial expenses which have not been fully recouped.
Unit Linked
1. This type of policy offers a variable mix between investment and life cover. Such
policies are regular premium contracts where the initial level of life cover is set
for an initial period on the basis of an assumed growth rate (often 6% pa). This
level of cover is usually referred to as 'standard cover'. At the end of the initial
period, the policy is reviewed to see how the actual growth rate compares with
the assumed growth rate, and an adjustment may then be necessary in either
the premium or sum assured which will then continue until the next review date.
Initial reviews usually take place either 5 or 10 years from the commencement of
the policy, and then every five years, but possibly more frequently once the life
assured reaches age 70 or 75.
2. The premium will be invested in one or more funds, with the life assurance cost
funded by unit cancellation to purchase sufficient cover to fill the gap between
the value of the linked funds and the guaranteed sum assured. A point will be
reached where the value of the underlying investments exceeds the guaranteed
sum assured, at which point unit cancellation for this purpose ceases.
3. Charges are levied as noted previously.
4. The earliest policies had a fixed relationship between the premium and the sum
assured but more recent versions allow the policyholder to vary the mix, within
limits, between investment content and life assurance cover. The higher the
level of life assurance cover selected, the lower the amount of residual funds
available for investment in units, with the policy consequently accruing a lower
cash value.
5. Variation in the sum assured may be possible in accordance with the
policyholder's requirements, although any increase will be subject to medical
evidence. If a higher than 'standard' sum assured is selected then at some stage
in the future either the sum assured may need to be reduced or it may be
necessary to increase the premium for this level of cover to be maintained.
Low Cost
1. These contracts operate as a combination of whole of life with profits and

decreasing term assurance, where the difference between the basic whole of life
sum assured and the total amount of cover required is filled by the decreasing
term assurance element.
2. Policies of this nature may be written as qualifying or non-qualifying policies.
The main benefit in writing the contract as a 'qualifying' policy is that on death
there is no tax charge, whereas a non-qualifying policy may be subject to a
higher rate tax charge.
3. For qualification purposes, rules exist regarding the relationship between
premium and maximum sum assured.
Universal
1. These have developed out of the original concept of unit linked whole of life
policies, and include a range of optional extra benefits to provide even greater
flexibility. Each month the cost of the chosen benefit is met by cancellation of
units.
2. The range of benefits usually available includes:- death lump sum
- waiver of premium in the event of ill health
- accidental death lump sum
- permanent disability cash or income
- critical illness cover
- hospital in-patient cash
- Retail Price Index linked increases
- permanent health insurance
3. In addition, options may be available under the policy including:- options to increase cover on pre-determined dates, or in the event of
certain contingencies e.g. marriage
- suspension of premiums, e.g. during unemployment
- options to add or delete a life assured e.g. on marriage or divorce
4. Because of the range of benefits, such policies are non-qualifying.
5. Although regular premiums will be the norm, single premiums may also be
accepted.
Whole of life policies may be suitable for a number of risks:
1.
2.
3.
4.
Business protection e.g. key employee, share protection, partnership protection

IHT planning i.e. payment of tax bills on death
Long term permanent cover.
The unit - linked version may offer a flexible protection with the ability to vary the
sum assured/investment content.
5. The Universal version may provide a suitable one-stop policy for a number of
needs
index |
back page

Life of Brian Phase - 1, an FSEC case study, School fees

School fees
Current Situation
Where are the funds coming from to

put the girls through private school?
Where are the funds coming from to
send Brian to Ramsdean (and from
what age)?
POSSIBLE REMEDIES
Considerations here are timing, any protection

element, tax efficiency, security of investment.
Suitable contracts might be one or more of:
1. Personal Equity Plan, but bear in mind the
fact that these are being replaced by ISAs

on 6th April 1999. Existing funds will
continue to be invested in PEPs after the
April deadline.
REMEMBER You should not use any
information contained on this site as the
basis of any action until you have
discussed matters with your financial
adviser.
2. Unit Trust. Open ended, similar to a PEP in
concept, but possible taxation drawbacks.

Can be minimised by choosing a non or
low income producing fund.
3. Endowment Assurance - life assurance
element giving some protection on early

death. Less tax efficient but fund choice
can cater for more cautious investor. Fixed
maturity date. A number of segmented
plans could be set up to produce the fees
(or a portion of the fees) required.
4. Unit Linked Maximum Investment Plan.
Potential for a good level of growth. Can

be taken out as a basic 10 year plan but
with facility to mature after longer periods
with no penalty, thus giving flexibility.
5. Educational Trust Investment is another
less obvious possibility which necessitates

the creation of (usually) an Accumulation
and Maintenance trust, the maintenance
portion giving the trustees scope to pay for
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Life of Brian Phase - 1, an FSEC case study, School fees
educational/ maintenance costs whilst the

rest of the trust fund accumulates for the
benefit of the beneficiaries (usually at 25)
6. Family Income Benefit with a term set for
how long the fees will be needed

(including university cost?). To protect
commitment to pay school fees on death
before the children finish their education.
Additional considerations
Writing the life policies under trust is a major consideration, so that the intended
beneficiaries receive the policy monies.
Accumulation and maintenance trusts are a possibility, to allow for education and
maintenance before the children reach adulthood and become entitled to the
proceeds in their own right (at trustees discretion).
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Noticeboard - ISA information
Individual Savings Accounts - ISAs

What is an ISA?
6/6/99: Tips on ISA Mortgages
ISA Facts
4/4/99: How to pick the right ISA path
7/1/99: By Christine Stopp of the Observer
28/5/98: The Government has announced that there will be approved standards for
ISAs
REMEMBER You should not use any information contained in this article as the basis of any
main index |
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Noticeboard - ISA information - 10 tips on ISA mortgages
6/6/99: Tips on ISA Mortgages: The Sunday Times published 10 tips on ISA
mortgages today. The following provides a selection:
1. What is a ISA Mortgage? It replaces the PEP mortgage and is similar in structure to an
endowment or pension mortgage. You take out an ISA and your monthly contributions to the tax-free
ISA savings scheme should grow over the mortgage term to enable you to repay your mortgage capital
debt. You repay the interest on the amount borrowed on a monthly basis.
2. How do I select the best ISA mortgage? If you tell a mortgage lender you want an interestonly loan, many will try to sell you their own ISA or endowment. The Sunday Times states that "the
average building society might do a good line in home loans, but you will invariably get superior
investment expertise from a specialist fund manager." They add "the range of ISAs is baffling, but you
need a scheme that invests in stocks and shares through a pooled investment such as a unit trust. A
cash ISA is not suitable for a mortgage." The Sunday Times says that advisers recommend you invest
with three different fund managers with a proven track record over the mortgage term. You must also
be willing to monitor the value of your ISAs to ensure they are on track to pay off the home loan and be
ready to transfer to another fund manager if performance declines.
3. Are ISA home loans risky? The Sunday Times says you should be willing to take some
investment risk. Towards the end of the term, it is crucial to move into lower risk investments, such as
corporate bonds, to guard against a stock market crash at the 11th hour.
4. What are the tax advantages? You do not have to pay income tax or capital gains tax on your ISA
investment.
5. Does an ISA beat an endowment loan? ISA home loans are more flexible. They do not have
a fixed life and you can withdraw some of your investment to repay a chunk of your loan early. You can
also usually stop, start, and vary contributions without penalty. However, with-profit endowments are
less volatile than an equity ISA. Ray Boulger of John Charcol, a mortgage broker was quoted as
saying: "Endowments smooth out the ups and downs of the stock market and can be better suited to
the more cautious investor."
6. Is an ISA cheaper than an endowment? The charging structures make it difficult to compare
costs. If you keep the two for the full 25 year term, the Sunday Times says there is probably not much
in it. However, endowment policies usually load the charges in the first few years so if you have to cash
in early, you will probably lose out.
7. Would a repayment loan be better? With a repayment mortgage you pay off capital and
interest each month. You know that the debt will be paid off at the end of the term. Neither
endowments nor ISAs can offer you the same security. In addition, the Government can only
guarantee that ISAs will exist for the next 10 years.
8. Do I still need life assurance? If you have no dependants and your employer's death in service
benefit will cover the mortgage if you die suddenly, you may not need to take out a separate policy.
Some lenders, however, will insist that you take out life assurance. You may also need extra cover if
you have a family.
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Noticeboard - ISA information - 10 tips on ISA mortgages
main index |
notice board |
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ISA Facts, eligibilty & options

Eligibility for investing in an ISA
Normally an investor must be a UK Resident over the age of 18. However, cash ISAs are available to 16 and 17
year olds.
Each investor may only hold an ISA individually and not jointly with another investor.
ISA Options
In any one tax year, an investor can choose to invest in either:
1.
One MAXI ISA with one provider
A MAXI ISA may consist of three compartments:
Stocks and Shares element
Life insurance
Cash
Or
2.
Up to three MINI ISAs, restricted to one of each type (cash/ insurance/stocks & shares), with three
separate providers.
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Cash ISA: This includes
Deposit accounts from banks and building societies
Especially designed National Savings products
Money market Unit trusts
Insurance ISA: This includes own

life plans especially designed for
ISAs
Unit linked
With Profits
Stocks& Shares ISA: This

includes
Shares of PLCs anywhere in the world
UK authorised unit trusts
UK OEICs
UK investment trusts
UCITs
Corporate bonds
UK Government gilt stock
index |
page back | limits | advantages

ISA Investment limits & advantages

MAXIMUMS
Maxi ISA
7,000 Per Tax Year

Within this maximum an investor can spread their investment as
follows:
1.
All 7,000 into Stocks and Shares
2.
A combination of
a)
3,000 into Cash
b)
1,000 into Life Insurance
c)
The balance into Stocks and shares
MINI ISAs
STOCKS & SHARES
INSURANCE
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3,000 ceiling for

the Stocks &
Shares ISA
1,000 ceiling for the

Insurance ISA
3,000 ceiling for

the Cash ISA
CASH
MINIMUMS There are also no statutory minimum subscription levels

Additional Extra Investment An investor whose TESSA has completed its 5 year term can transfer the
TESSA capital into a TESSA only ISA. The interest element may still be invested but it would be included within
the CASH allowance.
This means that an investor could transfer their TESSA capital into a TESSA only ISA and still invest up to the
maximums in either a Maxi or all 3 Mini ISAs.
Transfers into TESSA only ISAs are in addition to the ISA annual subscription limits. But clearly this is a once
only benefit for existing TESSA holders. Such transfers must be made within 6 months of the TESSA maturing.
Advantages of Maxi & Minis
A MAXI ISA will be appropriate for investors wishing to use the stocks and
shares element to its full potential. The MAXI allows a higher stocks
and shares investment limit, which makes it an attractive
replacement for PEPs.
The main advantage to an investor choosing Minis is that they can take out each
ISA with a different provider. For example, the investor may want a Cash ISA
from their bank, a stocks and shares ISA from an investment house, and tax
efficient With-Profits investment from a Life office.
index |
page back | eligibilty & options

Noticeboard - ISA information - How to pick the right ISA path
4/4/99: How to pick the right ISA path:

The Sunday Times today published the following useful information about ISAs.
The ISA is launched this week (ISAs will be available from 6th April)
ISAs replace PEPs and TESSAs
More than 50 banks, building societies, supermarkets, fund managers and insurers are already
tempting investors with ISA offerings
From Tuesday 6th April, investors will only be able to reclaim 10% (previously 20%) of tax paid on
share dividends. This will cut the income-tax advantage of saving through an equity ISA. The same
position will apply to existing PEPs. The Sunday Times gave the example of someone investing in the
Invesco GT Income ISA for 5 years. If you invested 3,000 in this ISA for 5 years, your tax advantage
would be reduced from 173 to 104 because of this change.
The low annual allowance on cash savings also limits the tax-free benefit of cash ISAs to 12 a year
on the maximum deposit of 1,000 after year one, assuming an interest rate of 6%.
The decision by the retail giants Marks & Spencer and Sainsbury not to sell ISAs in stores makes less
Government's dream of making ISAs available to the shopping public less likely.
What are the different types of ISAs?

There are 3 types: cash, equity and insurance ISAs.
A cash ISA can either be a simple deposit account or a cash unit trust.
The equity ISA is for individual shares and investment funds such as unit trusts.
An insurance ISA is a shelter for investment bonds issued by insurance companies, such as with-profit
bonds, which invest in the stock market and include a nominal amount of life insurance.
Not all companies will offer every option - many fund managers will only offer equity ISAs.
How much can I invest?

Up to 7,000 in the first year. The first year runs from 6th April 1999 to 5th April 2000. The allowance is
reduced to 5,000 a year after the first year. In year one you can put up to 3,000 in cash, 1,000 in
insurance and the rest in equities. Alternatively, you can put the full 7,000 in equities. In subsequent years,
investors can put 1,000 in cash, 1,000 in insurance and 3,000 in equities. Alternatively, they can put the
full 5,000 into equities.
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Should I buy a maxi or a mini ISA?

If you buy a maxi ISA, your full allowance must be invested with a single company. You cannot take out a maxi
and a mini ISA in any one tax year. If you go the mini ISA route you can invest in separate mini cash, insurance
and equity ISAs - but you can only invest 3,000 in the first year in the mini equity ISA. Alternatively, you can
invest 7,000 in a single maxi equity ISA.
Christine Ross, Regional Director of Willis National, an IFA, was quoted in the Sunday Times article as saying:
"Most people want to save long term and should be trying to invest as much in equities as possible. This makes
the maxi ISA the better bet."
Can I swap ISAs?
You can switch from one ISA manager to another, even in the same tax year, as long as you stick to the same
type of ISA. You still have to pay any relevant charges on the new ISA. You cannot switch between the cash,
insurance and the equity components of a mini ISA. In other words, you cannot switch the money you have
invested in your cash mini ISA with an equity mini ISA.
What return can I expect?
The best cash ISAs will pay interest of about 6.5%. The interest rates are variable. If bank base rates tumble,
ISA rates could also go down.
Returns from equity ISAs will depend on the type of investment you pick and how long you invest for. The
Sunday Times states that most experts expect a return of about 10% each year, before charges, from the British
stock market.
Can I take out my money?
You can - but the ISA is designed to encourage long-term saving. If you withdraw money from an equity ISA
within five years you might get back less than you invested if charges and stock markets have been adverse.
What is a CAT standard?
An official stamp of approval for ISAs that meet certain minimum standards on cost, access and terms (cat). The
standards are voluntary and aim to ensure that investors get a fair deal from scheme managers.
To meet the CAT standard on cash ISAs, for example, managers must pay an interest rate no less than 2%
below the Bank of England base rate - currently 5.5% - on a minimum balance no higher than 10.
Should I buy a CAT marked ISA?
The CAT standard ensures no hidden charges, easy access and no unreasonable terms - but does not
guarantee good performance. The Sunday Times quotes Christine Ross, Regional Director of Willis National, an
IFA, as saying: "Don't buy CAT marked schemes without looking at the competition. When buying an equity
fund, the cheapest isn't always best."
Should I buy my ISA now?
Graham Hooper of Chase de Vere, an IFA was quoted in the Sunday Times article as saying: "Many ISAs will
not be launched until mid May so it makes sense to wait until there is greater choice."
What happens to my PEP and TESSA?
As from 6th April, you cannot take out a new PEP or TESSA. Also contributions into existing PEPs are also
banned. Any money you have already paid into your funds will be ring-fenced from the taxman.
You can continue to pay into an existing TESSA until it matures. You then have 6 months to switch the original
capital - not the interest - into a cash ISA on top of the annual allowance.
Many companies are launching special ISA accounts for people who have maturing TESSAs.
main index |
notice board |
page back

ISAs
7/1/99: The following article was written by Christine Stopp of the Observer
When the plans for individual savings accounts (ISAs) were announced by the Government, they were meant to
be the ultra-simple solution to tax-efficient savings. But since then ISAs have run into controversy as more rules
have been added, scrapped or changed. Even now, just four months from their launch, the industry is uncertain
over how ISAs should be sold. On 6 April 1999, we're supposed to wake up to ISAs, but Don Clark, of brokers
Financial Discounts Direct, reckons we'll be facing "a bit of a dog's breakfast."
As a result, the industry has almost ignored the approach of ISAs. There has been very little advertising and no
new products launched. Most fund managers, independent financial advisers (IFAs) and brokers would rather
sell personal equity plans (PEPs). "They want to fuel the last minute rush into PEPs," explains Don Clark. At the
moment, he says, they are happy to play down the impact of ISAs, but greater enthusiasm for them will be
generated after the PEP income stream dies in April 1999.
But there are even doubts that ISAs will be available from April. Hardly anyone is offering them - most
companies have done no more than make vague statements of intent. Jason Hollands, of investment analysts
BestPEP, says: "They'll be pushed to have products in place for next April. There is almost a case for delaying
implementation."
So while the investment companies ignore ISAs, what can you do? More than you probably think.
You may not be able to compare the details of different ISAs - but you can at least work out how ISAs will affect
your future plans. All the ISA rules have now been finalised by the Inland Revenue. And from these you can
start to work out your new investment choices. When the plans for individual savings accounts (ISAs) were
announced by the Government, they were meant to be the ultra-simple solution to tax-efficient savings. But
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notice board |
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Noticeboard - ISA information - approved standards for ISAs
28/5/98: The Government has announced that there will be approved standards for
ISAs
There will be approved standards for ISAs (Individual Savings Accounts - to be introduced from April 1999).
ISAs will have to perform to set levels of costs, access and terms.
Helen Liddell (Economic Secretary to the Treasury) is currently proposing that only single-priced unit trusts or
OEICS tracking a general UK-based index will qualify for the standard. The benchmarking discussion paper was
released week commencing 18/5. It said of "tracker funds": "The evidence is that trackers are only slightly more
volatile than managed funds on average.
On the evidence of the past 10 years, the performance of trackers is likely to exceed that of the average
managed fund by some 1.8 percentage points a year. Helen Liddell believes that investors in equity ISAs, even
first time investors, will be taking a long term view of the market, typically 5 years or more. The volatility of
tracker funds is not, therefore, an issue with the Treasury.
main index |
notice board |
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Noticeboard - ISA information - approved standards for ISAs
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The Life of Brian Riley, Phase 2 Brian is now 9 - a financial case study
The Life of Brian Riley, Phase 2 Brian is now 9

Brian is now 9, and boarding at Ramsdean as planned. He is called into the head's office
to discuss, he assumes, his future; all of the class is going through the same routine. Instead,
the head informs him that his mother is coming to collect him, due to an emergency. Later
that day his mother tells Brian that his father died last night, in a hit and run motor accident.
His father left everything to his mother, including 40,000 outstanding on the mortgage. He
had stopped the capital repayments 5 years ago, but maintained the interest payments
(currently at 8%) and mortgage protection policy, which will payout 30,000. There are
sundry other debts of 8,000 and private life assurance totalling 60,000. He had no
investments except collections of antique glass and Edwardian photographs, which might
raise perhaps 10,000 if sold. There is also 50 worth of premium bonds.
There is a widows' and dependants' pension of about 10,000 pa, plus a tax free cash sum of
80,000 payable through Arthur's pension scheme. The scheme administrator informs Mavis
that Arthur's beneficiary nomination form (needed by the pension scheme to distribute the tax
free cash and death in service benefits) shows that he requested half of any death in service
sums to be paid to Rachel Shaw, his secretary. Mavis is naturally shocked and upset at this,
and takes legal advice. She plans to 'recover' the balance of the lump sum for her own use. It
may however, take some time to settle this matter, as it lies in the discretion of the scheme
trustees.
The current level of school fees for Ramsdean are 1266.66 and for St Mildreds 500, per
term. Veronica is planning to go to university next year once her 'A' levels are finished.
Brian's grandparents, George and Mildred, have said that they will support the children in
anyway they can in the short term.
Mavis intends to continue working, in order to take her mind off the tragedy. Her income has
risen to 30,000 pa.
Mavis's situation after Arthur's death
Considerations for Mavis
Considerations for Brian
index |
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Although at Brian's birth all seemed well, it is clear to see now that far more questions should
have been asked and satisfactory answers given as a forerunner of certain actions. For
example:
Did life cover assessment include all debts?
Was indexation included in the life assurance recommendation?
Had a nomination form been completed for the pension scheme and details obtained?
Did Arthur understand the reducing nature of mortgage protection policies?
Were any life policies written on a joint life basis?
Should trusts have been used to keep monies out of the estate and speed up
payment?
Should life cover have included accidental death cover?
Was a valuation of the whole estate made to consider potential Inheritance Tax
liability?
Mavis's situation after Arthur's death
Income:
30,000.00 pa
Assuming self employment continues
10,000.00 pa
Widows Pension from Scheme
1,856.40 pa
Child Benefit (Tax free)
3,364.40 pa
Widowed Mothers Allowance
45,220.80
Plus
3,150
Total
48,370.80
Income from Investments (5%) (Assuming 40,000 is

used to pay off mortgage) and 30,000 is kept in
reserve.
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Expenditure:
3,800.00 pa
3,000 pa
St Mildreds
3,200 pa
net mortgage payments *
10,350
* 40,000 @ 8% =
Capital:
60,000
1,000
** 50
Debts:
PLUS living expenses
3,200
** 10,000
Total
Ramsdean
MIRAS no longer available after 6/4/99
Life Cover (excludes mortgage protection)

Antiques etc
Widows Payment
Premium Bonds
40,000
D.I.S. (possible additional 40,000)
30,000
Mortgage Protection
141,050
40,000
8,000
Mortgage
Sundry Debts (Arthurs)
48,000
** It may be that Mavis decides to keep these items, which would reduce the scope to provide
as much additional income.
index |


Considerations for Mavis
Immediate:
Check Arthur's will is valid.
Check who is (are) Executor(s).
Claim Widow's Payment.
Claim Widow's Mother's Allowance.
Clear 8,000 debts from estate monies.
Check mortgage protection policy in force and sufficient.
Discuss income/expenditure with George and Mildred (paternal Grandparents).
Planning:
Consider life cover to protect the children against liabilities in the event of Mavis's death.
Consider Critical Illness and PHI to give protection in event of ill health.
Make pension arrangements to provide future income.
Check position re Veronica at University and availability of grants and loans.
Design investment portfolio for balance of capital.
Notes:
1. Income after death including State Benefits represents a decrease but this is compensated to some
extent by the mortgage being paid off and other life assurance of 100,000.
2. School Fees will increase.
3. A period of re-settlement will be needed (especially in view of Rachel) and help from George and
Mildred should be considered.
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4. Mortgage Protection policy has gone down in value but the Mortgage debt has not decreased at the
same rate due to Arthur only paying the interest on the loan for the past few years. Mortgage Protection
is 30,000 and the outstanding mortgage is 40,000 leaving a 10,000 imbalance.
index |

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Considerations for Brian
Check to see if the school have any designated funds or special funds for pupils in Brian's situation.
Does Brian qualify for a scholarship either at Ramsdean or at any other less expensive boarding
school?
Will Mavis want Brian to continue at boarding school?
Assess Brian's need for any special equipment (e.g. sport or music) and/or financial assistance for
school trips or vocational courses.
Local State schools should be checked in case it becomes impossible for Brian to continue at
Ramsdean.
Grandparents, George and Mildred, could consider helping with school fees through an Accumulation
and Maintenance Trust arrangement, which may have IHT saving advantages for both George and
Mildred and advantages for Brian, as the ultimate recipient.
If Brian is going to complete his education in the way his parents planned, then Mavis must consider her
life assurance and health cover (including Private Medical Insurance if affordable), to ensure her ability
to meet future fees if disaster strikes.
If the "surplus" capital is going to be earmarked for future fees, consideration should be given to
maximising tax advantages through PEPs and TESSAs, bearing in mind the forthcoming ISAs, and the
overall risk profile.
It may be a time to plan the distribution of some of the capital to Brian (and his sisters) to reduce any
future IHT liability providing the income production is not affected to an extent that reduces the ability to
meet future fees.
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The Life of Brian Riley, Phase 3 University - a financial case study part 3
The Life of Brian Riley, Phase 3 University

Over the next 4 years, Brian's paternal grandparents support the school fees
and a number of expenses for the family.
They have made it plain that now Brian is to move up to the senior school, they
feel it about time that their daughter-in-law and her family became more self
sufficient.
The school fees therefore cease, and Brian and his family move from the old
home to another, smaller house. This allows for the mortgage to be repaid in
full. Brian, like Susan, has been moved to the local high school, while Veronica
has gone through university and subsequently gone off with her boyfriend to
live in the USA, to start a new life.
Susan has no intention of going on to further education and will be leaving
school at her first opportunity to earn her own way, as she wishes to move out
of the family home.
Brian does well in his GCSEs and A levels, and eventually goes on to do an engineering
degree at the local university. He receives a grant and has loans totalling 2,000 a year. His
goal at this point is to get a good degree, some sound engineering experience and set up his
own business by the time he is 30.
Mavis has been working full time and with this income and the civil service pension, has an
income of about 30,000. After many an argument with the Civil Service administrators she
manages to 'recover' the balance of the death in service lump sum from Rachel. Mavis is
able to give Brian an allowance each month, which he supplements by part-time jobs and
holiday jobs.
With the benefit of the information we now know, both Mavis and Brian may have previously
planned differently. This part of the case study considers what both Mavis and Brian could
have done differently with the benefit of such hindsight.
Review of previous planning
Current Situation
What Mavis should now do
What Brian should do now
index |

The Life of Brian Riley, Phase 3

Was State Schooling investigated?
Were any grants or scholarships available?
Could Mavis continue working and producing sufficient income?
Any problems in administering Arthur's will?
Did the portfolio produced from the capital left by Arthur meet her objectives?
How accurate were the income/expenditure forecasts?
What was the impact of emotion on decision making?
Taking account of the emotions, should the move to a smaller house have been anticipated and could
any similar decisions have been made earlier?
Current Situation
Brian and Susan attend local State School.
Mortgage is repaid in full.
Mavis has an income of 30,000 (made up of 10,000 pension and 20,000 selfemployed earnings).
40,000 lump sum received from Scheme Trustees; it can be assumed that some
balance of the inherited 111,000 is left.
Veronica has started a life independent of Mavis in USA.
Susan wishes to leave school as soon as possible, earn her own living and leave
home.
Brian is studying for an Engineering Degree and receives a grant, loans of 2,000 p.a.
and a small allowance from Mavis.
Brian also has part-time and holiday jobs.
Mavis' in-laws no longer want to subsidise the family.
What Mavis should now do

Income and Expenditure
Review self-employed income and ensure all allowances are being claimed.
Can the invested capital be used to increase income as there is no longer any support
from George and Mildred.
Will Susan be making any contribution to the family budget after leaving school but
before actually leaving home.
Future income in the guise of pension from her own income needs to be planned,
particularly if she is finding it difficult to manage on current levels.
Will Susan expect some support after leaving home, or help in buying a property.
Capital
The current risk profile of the portfolio should be reviewed in respect of the change in
circumstances.
As there is now a need to be more self-reliant the accessibility of the funds should also
be reviewed.
Some of the 4,000 'refund' could be passed to Brian as a Potentially Exempt Transfer
(PET) or put into a Trust arrangement with the income being available to subsidise his
income.
Mavis' capital position plus the value of the house (assuming that inflation has
increased the market price) indicates that a probable future IHT bill exists and
therefore it could be an appropriate time to review life assurance and wills.
What Brian should do now

Immediate Action
He should investigate local banks and/or building societies to ensure he gets the best
deal suitable for his particular circumstances; free overdrafts, discount deals,
insurance deals, special loan availability etc.
As he has his own tax allowance (and has done since birth) he should keep a close
watch on the levels of income. Once he becomes a tax-payer he might wish to
consider a Cash ISA as a home for his capital in order to take advantage of the higher
rates.
The part-time and holiday jobs may incur tax-deductible expenses and records should
be kept to mitigate any possible tax bill. Similarly if he is being paid with an automatic
basic-rate tax deduction the records could help him obtain a tax rebate at the end of
the year.
Future Action
Investigate the employment situation in his chosen area of study.

As he wants to set up his own business later on he could also start to research the
availability of grants from Government Bodies, Local Governments, and the EU.
Although there is unlikely to be a large income from his temporary jobs he may want to
look into Contracting-Out of SERPS or, if income is reasonably high, he might
consider making single contributions into a Personal Pensions transferring these to his
own Occupational Scheme when he starts his own business.
index |

PENSIONS - Contracting Out
3.8 Contracting Out
Contracting out' refers to a decision to leave the State Earnings Related Pension Scheme, SERPS (not
the basic pension).
Contracting out involves establishing an occupational or personal pension scheme to replace the
SERPS benefits normally accruing during the period in that scheme.
Contracting out also entitles contributors to rebates in NI contributions, which result in:
1. Lower NI contributions where the contracting out is done through an

occupational scheme (providing a GMP prior to 6th April 1997 and 'requisite
benefits' related to the reference scheme from that date).
2. Redirected NI contributions where the contracting out is done through an
Appropriate Personal Pension (APP), FSAVC or COMP.
Where contracting out is achieved through a defined benefit occupational scheme, the scheme must
provide GMP (Guaranteed Minimum Pension) prior to 6th April 1997 and requisite benefits from that
date. These minima essentially guarantee that the member will not be worse off than had he remained
a member of SERPS.
Under defined contribution (i.e. money purchase) schemes, whether occupational or personal, the
redirected NI contributions provide Protected Rights, which are subject to a number of special
provisions, but are not guaranteed to match SERPS.
Contracting out was handled by the Occupational Pensions Board (OPB) prior to it being dissolved on
5th April 1997. Their jurisdiction as regards contracting out has now passed to the Department of
Social Security, who will need to be satisfied that the scheme meets the necessary requirements, both
financial and administratively.
Please also refer to Contracting Out Rebates
index |
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PENSIONS - Contracting Out
4.5 Contracting Out
Employees who participate in the State Earnings Related Pension Scheme (SERPS), and are not
already 'contracted out' through membership of an occupational pension scheme, may use a PPP to
contract out of SERPS.
A PPP used for this purpose is known as an 'Appropriate Personal Pension', and must be approved as
such by the D.S.S. as well as receiving approval from the PSO.
APPs receive rebates of National Insurance contributions from the Department of Social Security
(DSS)
index |
back page

PENSIONS - INDEX
Pensions
Pensions in Context
Evaluating Pension Requirements
Dependent Factors
State Pensions
The Basic Pension
State Earnings Related Pension Scheme
State Second Pension (S2P)
Pension Products
Providers
Background Legislation
Social Security Act 1973
Finance Act 1973
Social Security Pensions Act 1975
Finance Act 1981
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PENSIONS - INDEX
Health and Social Security Act 1984
Finance (No 2) Act 1987
Income and Corporation Taxes Act 1988 (ICTA 88)
Information for Members
Pensions Act 1995
Welfare Reform and Pensions Act 1999
Occupational Pensions
Approval of Occupational Schemes
Tax Concessions
Setting Up The Occupational Scheme
Approval Conditions and Maximum Benefits
Eligibility
Final Remuneration
Costing and Investment Base of Occupational Schemes
PENSIONS - INDEX
Contributions
Underfunding
Surpluses
Contracting Out
Executive Pension Plans (EPPs)
Additional Voluntary Contributions (AVCs)
Free Standing AVCs (FSAVCs)
Small Self Administered Schemes (SSASs)
Leaving Service
Refund of Contributions
Deferred Pension
Transfer to a New Employer's Scheme
Transfer to S.32 Buy Out Policy or to a Personal Pension Policy
Personal Pensions
Introduction
Retirement Annuities Pre-1988
Eligibility for Personal Pensions
PENSIONS - INDEX
Contribution Limits and Tax Relief
Relevant Earnings
Net Relevant Earnings
The Earnings Cap
Tax Reliefs and Other Tax Breaks
Carry Forward Facility
Carry Back Facility
Excess Premiums
Contracting Out
Contracting Out Rebates
Who Should Contract Out?
Contracting Out Options
Contracting In Again
Transferability of Personal Pensions
Benefit Options
Pension Benefit at Retirement
Cash Sum at Retirement
Lump Sum Death Benefit
PENSIONS - INDEX
Waiver of Premium Benefit
Writing Benefits Under Trust
The Use of a Flexible Trust
Putting Existing Policies Into Trust
Group Personal Pensions
Self Invested Personal Pensions
Stakeholder Pensions
Introduction
Eligibility for Stakeholder Pensions
Contribution Limits
Charges
Terms
Contracting-Out
Employer Obligations
Concurrency
Scheme Investments
Individual Pension Accounts
Interaction of Stakeholder with other Schemes
PENSIONS - INDEX
Use of Pension Products

Use of Pension Products

Eligibility
Minimum Contribution Levels
Transfer Values
Benefits Payable
Tax Treatment
Waiver of Contributions
Comparing Options
Comparing Providers
Financial Strength
Quality of Service
Investment Choice and Performance
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PENSIONS - Evaluating Pension Requirements
1. PENSIONS IN CONTEXT
1.1 Evaluating Pension Requirements
Retirement generally means that earned income ceases, which in turn will more than often produce a
reduction in overall income. Whether this affects the client's standard of living will depend on the level
of income from other sources, which in turn will depend on previous planning and, perhaps,
inheritances.
Few people retire on Revenue permitted maximum pension benefits, whether from an occupation
pension source, or personal pension source.
State Earnings Related Pensions are calculated only by reference to earnings in a particular band of
earnings, and only by reference to a maximum number of years. The result of this method of
calculation is that once earnings exceed a certain amount no further earnings related pension is
awarded.
The combination of the above points could lead to an uncomfortable retirement through insufficient
income.
Long-term planning should aim to bridge the gap between pre-retirement income and the required level
of income in retirement. Bearing in mind that the maximum from an occupational scheme will be no
more that 2/3rds of pre-retirement earnings, some careful planning will be required if it is decided that
post retirement income should be equal to or exceed working income.
Minimum pension requirement will be based on total regular expenditure plus any need to build
reserves, plus allowances for care in old age and inflation
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PENSIONS - Dependent Factors
1.2 Dependent Factors
Age. Generally, the older one gets, the more relevant and important planning a retirement income
becomes. Unfortunately, the later it is left, the less time an investment has to grow.
Income. Income will determine the pension target in an occupational pension scheme, and maximum
contribution into a personal pension scheme. With a personal pension, contributions may increase with
age. With an occupational scheme, it may be possible to contribute to an AVC or FSAVC to top up
pension planning. The fundamental point, however, is that the greater the income, the greater the
potential ability to make suitable contributions.
Dependants will affect decisions during working life and in retirement. Pre-retirement will be the
decision on whether to provide protection for them now or in retirement. Post retirement the decision
will be, "How best to provide for them", whether in terms of a fixed dependant's pension or in some
other fashion. In some instances, namely personal pensions, providing dependants' pensions will
reduce the income of the planholder.
Previous and Current Pension Arrangements will naturally have a bearing on plans. If maximum
contributions have been made to date, or if maximum permitted pension is being funded through an
occupational scheme, careful consideration should be made of required retirement income. This is an
extreme, and unusual, situation. More often than not, additional income will be due from one or more of
the following sources:-
1.
2.
3.
4.
Basic State Pension.

State Earnings Related Pension Scheme (SERPS).
Current occupational scheme, or
Current Personal Pension (not usually concurrent with an occupational pension
scheme).
5. Benefit earned in a previous occupational scheme, including an in-house AVC
scheme (retained benefits).
6. Benefits from a previous Personal Pension.
7. Benefits from an AVC or FSAVC
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PENSIONS - State Pensions
1.3 State Pensions
Unlike occupational schemes, the State Pension schemes are not funded in advance by means of
invested funds. State Pensions, and most other benefits, are effectively paid directly out of money
collected in from contributions. This is termed 'pay as you go'
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PENSIONS - The Basic Pension
1.3.1 The Basic Pension
1. A flat rate for a single person, increased for a married couple.

2. Payable from 60 for retired women (although this will extend to age 65, phased
in over 10 years from 2010) and 65 for retired men.
3. A married woman may be able to claim an element of pension based on
contributions paid by her husband.
4. To qualify for the full amount of basic pension, an individual must have paid
sufficient NICs during working life. This is generally taken to mean paying for at
least 90% of working life between ages 16 and state retirement age. Reduced
amounts will be paid to those who have not satisfied this condition. Class 3 NIC
may be paid to make up this difference.
5. A forecast of the Basic Pension due can be made available by the DSS upon
receipt of form BR19. This may be useful to bring up to date missed
contributions that cannot be made up after state retirement age
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PENSIONS - State Earnings Related Pension Scheme
1.3.2 State Earnings Related Pension Scheme
1. When the scheme started in 1978, the aim was to provide an additional 25%
retirement income, based on the best 20 years earnings, revalued in line with
inflation.
2. In 1986, however, the basis was reduced to 20% of average career earnings,
revalued in line with inflation; a significant reduction.
3. People retiring up to tax year 1998/9 will have their earnings related entitlement
calculated as 1% of each year's revalued earnings (maximum 20 years,
equivalent to 25%).
4. Those retiring between 2000 and 2010 will be subject to a transition from the old
scale to the new.
5. Those retiring after tax year 2009/10 will have SERPS entitlement reduced to
20% of revalued earnings.
6. Not all earnings count towards the SERPS calculation, but only 'middle band'
earnings between the Lower Earnings Level and the Upper Earnings Level.
7. Proposals exist to replace SERPS with a new second tier State Pension from
2002
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PENSIONS - State Second Pensions (S2P)
1.3.3 State Second Pensions (S2P)
The Government intends to discontinue SERPS and replace it with a new secondary state pension
called the State Second Pension (S2P) with effect from 6th April 2002.
The intention is to provide a greater state pension for lower paid employees. Those earning less than
the lower earnings threshold will be treated as if they earn the lower earnings threshold. Carers, and in
some circumstances, those with disabilities will also be treated in this way.
S2P will operate in 2 phases, phase 1 lasting for 5 years. During the first 5 years the S2P will be
earnings related. Earnings are split into 3 bands to calculate the pension amount.
Band 1
40% of earnings between the lower earnings limit (LEL) and the lower earnings threshold (LET)
plus
Band 2
10% of earnings between the LET and the upper earnings threshold (UET)
plus
Band 3
20% of earnings between the UET and the upper earning limit (UEL)
The LET is expected to be 10,500. The UET is expected to be 23,700. These figures are provisional.
The LET will increase in line with earnings.
Under S2P nobody will be worse off than under SERPS. Those earning below the LET will receive at
least twice the benefit they would have received from SERPS.
During phase 2 the S2P will be calculated on a flat rate for those aged under 45 at the time but will
continue to be earnings related for older individuals.
During phase 2 the scheme is aimed at those earning less than the LET. No pension will accrue in
respect of earnings over the LET for those aged under 45.
It will be possible to contract out of the S2P via occupational pension schemes, personal pensions and
stakeholder pensions (either individual or group).
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PENSIONS - State Second Pensions (S2P)
PENSIONS - Providers
2. PENSION PRODUCTS
2.1 Providers
Apart from provision of additional income from other personal investments, specific pension provision
can come from the following sources:-
1. State Schemes - Basic and SERPS.

2. Occupational Schemes - Private sector and public sector.
3. Personal Pension Schemes - Personal contribution only or personal plus
employer contribution.
Occupational schemes may be:-
1. Funded, as with most private sector schemes, or

2. Unfunded as with many public sector schemes, where pensions are paid out of
current revenue on a pay as you go system like the State Schemes.
Where the scheme is funded, it may be:-
1. 'Insured', which merely means that it is managed and administered by an

insurance company, or
2. Self Administered, where the company organises the scheme itself, hiring
suitable professionals to carry out such functions as investment, actuarial and
legal work. Certain related benefits, such as life assurance benefit, will usually
be insured through specialist companies
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PENSIONS - Background Legislation
2.2 Background Legislation
To obtain tax benefits, occupational schemes must seek exempt approval by the Inland Revenue
Savings Pension and Share Scheme department (IR SPSS), previously known as the Pension
Schemes Office (PSO). To gain such approval must provide benefits within a framework of permitted
benefits.
Before describing the maximum benefits regime it is useful to consider related legislation. It should be
noted, however, that many of the developments described below have limited effect on defined
contribution schemes
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PENSIONS - Social Security Act 1973
2.2.1 Social Security Act 1973
Granted as a right, a preserved benefit for leavers who were over 26 and had completed five years'
qualifying service. Qualifying service will generally mean membership of the pension scheme in almost
all cases, as preservation is linked to scheme membership rather than employment. The exception to
the rule is where a transfer is received by a scheme and service is aggregated. After this period a
refund of any member's contributions to the scheme were not permitted. In subsequent Social Security
Acts the age stipulation was dropped and the required service period was reduced to two years
In addition, the Act
1.
2.
3.
4.
Ended the graduated scheme from April 1975.

Introduced earnings related N.I. contributions.
Introduced annual review of social security rates.
Set up the Occupational Pensions Board (OPB
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PENSIONS - Finance Act 1973
2.2.2 Finance Act 1973
The act made it possible, for the first time, for controlling directors to become members of a company
pension scheme, effectively opening the door to arrangements such as the Executive Pension Plan
(EPP), which is aimed primarily at this market
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PENSIONS - Social Security Pensions Act 1975
2.2.3 Social Security Pensions Act 1975
The Act established the State Earnings Related Pensions Scheme (SERPS) in addition to the basic flat
rate pension. It came into operation in April 1978 and, (with subsequent amendments) is still in
operation.
Proposals exist to replace SERPS with a new second tier state pension from 2002.
It became possible to contract out of SERPS by providing at least equal benefits (the GMP) through a
defined benefit occupational scheme.
Click for information on contracting out
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PENSIONS - Finance Act 1981
2.2.4 Finance Act 1981
Section 32 introduced the concept of transferring the cash equivalent of accrued pension rights other
than to another approved pension scheme, by permitting an individual to choose the insurance
company with which a single premium 'buy out' contract, is to be established
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PENSIONS - Health and Social Security Act 1984
2.2.5 Health and Social Security Act 1984
If a member leaves service and has a preserved pension under a contracted out scheme, the GMP
element has to be increased between the date of leaving and retirement. Prior to this Act, most
schemes offset these increases as far as possible against the rest of the member's preserved pension,
thus minimising their effect. This procedure was known as 'franking'.
This Act introduced 'anti-franking' rules to prevent franking being applied to new cases, but the
legislation was not retrospective for members who had already left prior to 1.1.85
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Revaluation of preserved pension in excess of the GMP, was introduced by this Act.
With effect from 1 January 1986, pension benefits in excess of the GMP, on leaving service after that
date have to be revalued by the lesser of 5% pa and the Retail Prices Index, from the date of leaving to
retirement date. This provision applies only to benefits accrued in respect of post 1 January 1985
service. This has been extended by the Social Security Act 1990 to cover all service for post 1 January
1991 leavers.
Members leaving after 1 January 1986 with preserved pensions have a right to transfer out.
With transfers, where the receiving scheme is unable to accept the member's GMP liability, it used to
be possible to buy the member back, into the State scheme by a payment of a Transfer Premium.
However from 6th April 1997, no transfer premiums are allowed (except for the Contributions
Equivalent Premium in cases of less than two years service and a refund being taken)
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Changes were introduced to SERPS:-
1. Lifetime earnings became the calculation base, changing from best 20 years'
earnings.
2. Benefits to be based on a maximum or 20%, not 25%, of 'band' earnings, i.e.
earnings between lower and upper earnings levels.
3. Widow's and widower's pension to be 50% of entitlement, (widower's pension
accrued after 6/4/88).
Changes were also introduced to contracted out occupational schemes with effect from 1988:-
1. 'Money Purchase' schemes may now contract out.

2. GMPs, accrued after 6/4/88, to be escalated, once in payment, by the lower of
RPI or 3% pa compound.
The Act also contained the initial legislation for the 'new style' personal pensions which were to replace
retirement annuity contracts from 1st July 1988. Sale of Retirement Annuity Contracts ceased
30/06/1988, but they remained open to receive ongoing premiums.
Occupational scheme membership is now voluntary, rather than mandatory as was often the case
before.
Reduced the 'vesting' age for pension benefit from 5 to 2 years i.e. scheme members now need only 2
years to secure benefits if they leave
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PENSIONS - Finance (No 2) Act 1987
2.2.8 Finance (No 2) Act 1987
Introduced new limitations on benefits from group schemes, including a cap on lump sum cash at
retirement.
Introduced Free Standing AVCs (effective from 26/10/87)
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http://www.financial-planning.uk.com/info-fp2/unit-c/2-2-9.htm
2.2.9 Income and Corporation Taxes Act 1988 (ICTA 88)
Legislation for retirement annuities and personal pensions is now encompassed in this Act:-
1. Retirement Annuity - sections 618-629.

2. Personal Pensions - sections 630-655.
Finance Act 1986 introduced regulations relating to pension scheme surpluses which came into force
on 7th April 1987. These are now contained in sections 601-2 of ICTA 88.
If, when using the prescribed Government valuation basis, a pension scheme's assets exceed its
liabilities by more than 5%, the surplus will have to be reduced to less than 5%. This can be done by
one or a combination of the following:-
1. Increasing benefits.
2. Reducing/suspending employee and/or employer contributions for up to 5 years.
3. Refunding sums to the employer to reduce the asset value to exactly 105% of
liabilities. (Subject to tax at 40%).
Two types of scheme are exempt from the surplus rules:-
1. Those with less than 12 members.

2. Certain 'insured' schemes which provide that funding levels take account of
surpluses
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Pensions in payment in respect of pensionable service from 6 April 1997 will be increased during
payment, by Limited Price Indexation (LPI) which is the lesser of increases in RPI and 5% p.a. The
Pensions Act 1995 set out the date, and confirmed that pension accrued only after this date must be
increased.
However, if a surplus arises in the scheme, pensions in respect of pre Appointed Day service (i.e. 6
April 1997) will be required to be increased before any refund of surplus is made to the employer.
The Act also established the Pensions Ombudsman office and a Registrar of Occupational and
Personal Pension Schemes. The former is a complaints service, the latter a tracing service.
The total preserved pension (in excess of the GMP) for employees leaving on or after 1 January 1991
must be revalued by LPI. Previously this was limited to benefits in respect of service from 1 January
1985.
Self-investment to be limited to 5%
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PENSIONS - Information for Members
2.2.11
Certain information relating to the main details of the scheme must be made available to the scheme
members and all employees who may be eligible to join.
The Occupation Pension Schemes (Disclosure of Information) Regulations 1986 introduced specific
regulation on provision of details relating to the scheme constitution, administration, finance, rights and
obligations.
Trustees must now make available copies of an annual report, audited
scheme accounts, latest actuarial statement, names of trustees, names of professional advisers,
investment report containing investment policies and portfolio make up.
Regarding portfolio makeup, there is a specific requirement where large scale 'concentration of
investment' is involved: this means investment of more than 10% of the scheme assets in any one
investment. This excludes investment in the employer. Such an investment must be notified to the
actuary. The scheme audited accounts, however, must provide details of any single investment which
is 5% or more of the fund
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PENSIONS - Pensions Act 1995
2.2.12 Pensions Act 1995
This Act received Royal Assent on 19th July 1995.

It is only a framework document, and much of the substance, as well as the fine detail, has been left to
formal Regulations, included in Statutory Instruments. Most of the changes brought about by the Act
were implemented from 6th April 1997.
The main provisions include:
1. The Occupational Pensions Board (OPB) had jurisdiction up to April 1997. The new
Occupational Pensions Regulatory Authority (OPRA) was set up to supervise the
protection introduced by the Act for all scheme members.
2. Scheme members have the right to choose at least one third of the trustees. There will be at
least two such trustees, except in schemes with less than 100 members, when there will be at
least one. Schemes can continue with existing arrangements or make alternative
arrangements if this is acceptable to the members. Members nominated as trustees must be
allowed sufficient leave from their normal duties to receive training as a trustee and to perform
their trustee duties.
3. The Act specifies responsibilities and procedures with which the trustees must comply. These
include:
Ensure proper investment of scheme assets by taking advice or

appointing an investment manager where appropriate.
Prepare a written statement of investment principles.
Ensure that the scheme is adequately funded to comply with the
new minimum funding requirements for defined benefit schemes.
Ensure that members have the opportunity to see all scheme
documents, including Rules and annual reports.
4. Defined Benefit (i.e. Final Salary) Schemes have to meet a minimum funding requirement.
Schemes will have one year to bring the value of assets up to 90% of their total liabilities and
5 years to reach the 100% level.
5. Actuarial valuations must be carried out at least every three years.
6. A schedule of contributions must be maintained, and if contributions are not paid in
accordance with this schedule, the trustees must inform OPRA. Any unpaid contributions will
stand as a debt against the employer.
7. Trustees have the responsibility for appointing actuaries, auditors, investment managers and
legal advisers where required to do so by the Act. Actuaries and auditors will have a statutory
duty to report breaches by trustees, employers and advisers to OPRA. Other professional
advisers and scheme administrators are also expected to report any breaches to OPRA.
8. From 6th April 1997, pensions in payment, accruing from service after that date, must be
increased automatically by Limited Price Indexation (LPI). This is at the rate of the lesser of
RPI and 5% p.a. The same requirements apply to benefits under defined contribution
schemes in respect of contributions made on or after 6th April 1997. Pensions secured by
AVCs, FSAVCs and Protected Rights from Personal Pensions are exempt.
9. Arrangements to contract out of SERPS will be revised:
Guaranteed Minimum Pensions were replaced (for future accrual

only) after April 1997 by a "requisite benefit" test. A minimum
accrual rate will apply to the scheme as a whole, rather than have
to cope with the complications of GMPs.
For those contracted out through a money purchase scheme, or an
appropriate personal pension, age related rebates were introduced
from 6th April 1997. These are independent of sex and marital
status.
The existing 1% incentive, for those over age 30 who are
contracted out through a personal pension, was abolished from 6th
April 1997.
The Contributions Agency of the DSS is now responsible for issuing
contracted out certificates from 6th April 1997 instead of the
Occupational Pensions Board.
From 6th April 1997 those who have contracted out through a
personal pension plan will be able to draw their protected rights
benefits from age 60. This brings them into line with those
contracted out through money purchase schemes.
Scheme members who left employment before 1st January 1986
had no statutory right to a transfer. The Pensions Act extends the
right to a transfer to this group.
10. The Pensions Compensation Board was appointed. Compensation payments will be made
on schemes, subject to certain conditions, where the scheme assets have been reduced due
to fraud or theft. This will be limited to 90% of the shortfall, calculated on the minimum funding
requirement basis at the application date.
11. On divorce, Courts can order that pension scheme benefits form part of a settlement made
after 6th April 1996 in respect of benefits payable after 6th April 1997.
12. Schemes must establish a complaints procedure, nominating a person to arbitrate on any
complaint from a member. If the complaint cannot be resolved, the trustees will investigate,
and, if necessary, refer the complaint to OPAS or to the Pensions Ombudsman.
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2.2.13 Pensions Act 1995
This Act received Royal Assent on 19th July 1995.

It is only a framework document, and much of the substance, as well as the fine detail, has been left
to formal Regulations, included in Statutory Instruments. Most of the changes brought about by the Act
were implemented from 6th April 1997.
The main provisions include:
1. The Occupational Pensions Board (OPB) had jurisdiction up to April 1997. The new
Occupational Pensions Regulatory Authority (OPRA) was set up to supervise the protection
introduced by the Act for all scheme members.
2. Scheme members have the right to choose at least one third of the trustees. There will
be at least two such trustees, except in schemes with less than 100 members, when there will
be at least one. Schemes can continue with existing arrangements or make alternative
arrangements if this is acceptable to the members. Members nominated as trustees must be
allowed sufficient leave from their normal duties to receive training as a trustee and to perform
their trustee duties.
3. The Act specifies responsibilities and procedures with which the trustees must comply.
These include:
Ensure proper investment of scheme assets by taking advice or appointing an

investment manager where appropriate.
Prepare a written statement of investment principles.
Ensure that the scheme is adequately funded to comply with the new minimum
funding requirements for defined benefit schemes.
Ensure that members have the opportunity to see all scheme documents, including
Rules and annual reports.
4. Defined Benefit (i.e. Final Salary) Schemes have to meet a minimum funding
requirement. Schemes will have one year to bring the value of assets up to 90% of their total
liabilities and 5 years to reach the 100% level.
5. Actuarial valuations must be carried out at least every three years.
6. A schedule of contributions must be maintained, and if contributions are not paid in
accordance with this schedule, the trustees must inform OPRA. Any unpaid contributions will
stand as a debt against the employer.
7. Trustees have the responsibility for appointing actuaries, auditors, investment managers
and legal advisers where required to do so by the Act. Actuaries and auditors will have a
statutory duty to report breaches by trustees, employers and advisers to OPRA. Other
professional advisers and scheme administrators are also expected to report any breaches to
OPRA.
8. From 6th April 1997, pensions in payment, accruing from service after that date, must be
increased automatically by Limited Price Indexation (LPI). This is at the rate of the lesser of
RPI and 5% p.a. The same requirements apply to benefits under defined contribution
schemes in respect of contributions made on or after 6th April 1997. Pensions secured by
AVCs, FSAVCs and Protected Rights from Personal Pensions are exempt.
9. Arrangements to contract out of SERPS will be revised:
Guaranteed Minimum Pensions were replaced (for future accrual only) after April
1997 by a "requisite benefit" test. A minimum accrual rate will apply to the scheme
as a whole, rather than have to cope with the complications of GMPs.
For those contracted out through a money purchase scheme, or an appropriate
personal pension, age related rebates were introduced from 6th April 1997. These
are independent of sex and marital status.
The existing 1% incentive, for those over age 30 who are contracted out through a
personal pension, was abolished from 6th April 1997.
The Contributions Agency of the DSS is now responsible for issuing contracted out
certificates from 6th April 1997 instead of the Occupational Pensions Board.
From 6th April 1997 those who have contracted out through a personal pension plan
will be able to draw their protected rights benefits from age 60. This brings them into
line with those contracted out through money purchase schemes.
Scheme members who left employment before 1st January 1986 had no statutory
right to a transfer. The Pensions Act extends the right to a transfer to this group.
10. The Pensions Compensation Board was appointed. Compensation payments will be made
on schemes, subject to certain conditions, where the scheme assets have been reduced due
to fraud or theft. This will be limited to 90% of the shortfall, calculated on the minimum funding
requirement basis at the application date.
11. On divorce, Courts can order that pension scheme benefits form part of a settlement made
after 6th April 1996 in respect of benefits payable after 6th April 1997.
12. Schemes must establish a complaints procedure, nominating a person to arbitrate on any
complaint from a member. If the complaint cannot be resolved, the trustees will investigate,
and, if necessary, refer the complaint to OPAS or to the Pensions Ombudsman.
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PENSIONS - Approval of Occupational Schemes
3.1 Approval of Occupational Schemes
Governing legislation is under the Income and Corporation Taxes Act 1988.
Certain basic conditions need to be met before a pension scheme will be granted approval by the
Pension Schemes Office (PSO):-
1. Must be established under irrevocable trusts to separate scheme assets from

company assets.
2. Employees eligible for membership must be given written details of the scheme
features and conditions.
3. An administrator, resident in the UK, must be appointed.
4. The employer must pay at least 10% of the total contributions; individual
contributions are not a requirement.
5. The scheme is established by a UK resident in the UK for a business in the UK.
6. Benefits do not exceed certain agreed criteria (see Revenue maximum benefits
later).
7. Contributions do not exceed certain agreed criteria.
8. No pension can be totally surrendered for cash.
9. No benefits are payable under the scheme other than members' and
widow's/widower's pensions not exceeding a 1/60th per year of service formula.
Approval under the strict conditions of the 1988 Act is not usually sought, as more flexible benefits are
generally desired. In any event, approval only provides that any employer contributions are not treated
as a taxable benefit of the employee.
Usually, therefore, exempt approval is sought on a discretionary basis under the wide ranging powers
of the PSO. These powers are set out in the guidelines of their Occupational Pensions Scheme
Practice Notes IR12 (1997) and subsequent memoranda, and generally referred to as the Practice
Notes
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PENSIONS - Tax Concessions
3.2 Tax Concessions
Occupational Pension Schemes attract substantial tax concessions:-
1. Tax relief on any contribution made by the scheme member is allowable against
income tax (at highest rate paid), subject to a limit of 15% of remuneration.
2. Contributions made by the employer are allowable as a trading expense.
3. Employer contributions are not treated as a benefit in kind to the employee for
income tax purposes.
4. The pension fund is free from taxation on its capital gains, but it is no longer able
to reclaim tax deducted from UK dividends (July 1997)
5. Part of the fund accumulated at retirement may be available as a tax free cash
sum.
6. Death benefits may be provided for dependants, free of inheritance tax.
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PENSIONS - Setting Up The Occupational Scheme
3.3 Setting Up The Occupational Scheme
Only employees are eligible for occupation schemes; these may be employees of companies,
partnerships or sole proprietors.
There are a number of ways in which the trust may be established:-
1. By a formal document known as a Trust Deed, which appoints the trustees, and
adopts a set of scheme rules. To speed things up an interim deed is often used
at outset, which contains sufficient provisions for the scheme to operate until the
Definitive Deed is finished.
2. By a Declaration of Trust. This is the usual route to establish a trust for
Executive Pension Plans. It is a simple document where often the employer is
appointed as trustee.
3. By a board resolution. The trust may be established in this way provided the
necessary powers are contained in the company's Memorandum and Articles of
Association.
4. By letters of exchange. Only suitable for individual arrangements such as
EPPs, the trust may be created by a simple exchange of letters between the
employer and the employee regarding benefits to be provided.
Whichever route is adopted, it is necessary also to appoint a scheme administrator who is responsible
for the day to day operation of the scheme. Usually the Trustees or the company are appointed.
Once the necessary documentation has been received by the PSO, provisional tax relief will be
granted on any member's contributions. The majority of insurance companies have their
documentation approved by the PSO as standard documents to speed the process of approval.
Schemes may be established either as a:-
1. Final salary, or defined benefit, scheme, whereby the employing company

makes a promise of benefit related to salary. This may be a flat percentage, or a
formula, based on length of service; or
2. Money Purchase, or defined contribution, whereby the company merely makes a
contribution relevant to salary level.
3. The former benefit promise is an unknown quantity, as salary inflation and
investment returns are difficult to predict - high salary inflation combined with
poor investment performance in the fund could lead to funding problems for the
employing company.
4. Money Purchase, on the other hand, is effectively a fixed overhead, as
contribution is linked to salary. Although still an expense, the contribution is
known as soon as salary increases are known, and can be planned for at an
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PENSIONS - Setting Up The Occupational Scheme
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PENSIONS - Approval Conditions and Maximum Benefits
3.4 Approval Conditions and Maximum Benefits
To obtain approval, detailed requirements must be satisfied.

Benefits provided must be within approvable limits, and pensions maxima include pension from all
sources.
The rules relating to these limits are complex resulting as they have from a series of legislative
changes which in each case have become effective from a particular date without amending the rules
concerning existing schemes.
Because the 1987 and 1989 budgets introduced changes to approvable benefit levels, there are now
effectively 3 different approval categories rather than a single, simple set of approvable benefits:-
1. Group 1. covers all those who were members of an existing scheme with their
current employer before 17 March 1987.
2. Group 2. are those who are neither Group 1 nor Group 3.
3. Group 3. are those who are members of a scheme established on or after 14th
March 1989, or who joined a scheme established before that date where their
joining date was on or after 1st June 1989.
The earnings cap for 2001/2002 is 95,400.

The main differences are summarised in the following table:
FEATURE
GROUP 1
FINAL REMUNERATION No upper salary

limit
PENSION
ENTITLEMENT
GROUP 2
GROUP 3
Limited to 100,000 Limited to

(not indexed) for
earnings cap for
calculation of tax
all benefits
free cash only
1/60th final
As Group 1
remuneration for
each year of
service. Maximum
40 years service
(retained benefits in
addition).
As Group 1
MAXIMUM PENSION
LATE ENTRANTS
PENSION
No monetary limit
(limited to 2/3rds
final remuneration)
As Group 1
Uplifted Scale
(accelerated
accrual)
Accelerated accrual As Group 2

simplified to 1/30th
for each year of
service, maximum
20 years service
i.e. 2/3rd max
pension after 20
years (to include
retained benefits)
Years
1-5
1/60th each
year
8/60th
16/60th
24/60th
32/60th
10
+ 40/60th
2/3rds of earnings
cap
(To include retained

benefits)
MEMBER'S
CONTRIBUTIONS
DEATH IN SERVICE
LUMP SUM
WIDOW'S /
DEPENDANT'S
PENSION
15% remuneration
As Group 1
As group 1,
subject to
earnings cap
4 x final
remuneration, plus
return of member's
contribution and
reasonable amount
of interest.
As Group 1
As group 1,
subject to
earnings cap
2/3rd maximum
member's pension
2/3rd maximum
member's pension
2/3rds maximum
member's pension
MAXIMUM TAX-FREE
CASH ENTITLEMENT
3/80th final
remuneration for
each year of
service, maximum
40 years.
As Group 1
As group 1,
subject to
earnings cap
LATE ENTRANTS
MAXIMUM TAX-FREE
CASH
Uplifted scale
(accelerated
accrual)
As Group 1
schemes, but if
pension benefit not
payable at
maximum rate,
then lump sum
maximum is scaled
down but not below
3/80ths basisIf
pension more than
1/60th but less than
N/30th, tax free
cash based on
difference between
3/80th and uplifted
scale in same
proportion as
pension difference
between 1/60th and
N/30th (Max final
remuneration
100,000 for this
purpose).
Greater of 3/80th x
final remuneration
for each year of
service, maximum
40 years or 2.25 X
initial pension
before
commutation and
allocation for
escalation and
dependants'
pensions.
Years
1-8
3/80th for
each year
30/80th
10
36/80th
11
42/80th
12
48/80th
13
54/80th
14
63/80th
15
72/80th
16
81/80th
17
90/80th
18
99/80th
19
108/80th
20 +
120/80th
(To include retained

benefits)Can have
uplifted tax-free
cash without any
pension
EARLY LEAVERS
Maximum benefits
as per early
retirement.
As Group 1
Not left service,

(opted out), as
Group 1
schemes.Left
Service. Maximum
pension as per
early retirement.
EARLY RETIREMENT
As Group 1
Males not before
schemes
age 50. Females
not before age 45 (if
Normal Retirement
Age (NRA) lower
than 60 and within
10 years of it).
Earlier for certain
approved
occupations and
serious ill health.
Males and
Females not
before age 50. As
Group 1 schemes.
EARLY RETIREMENT
MAXIMUM PENSION
1/60th each year of

service (maximum
40) or, if greater
N x P
NS
As Group 1
Schemes
where
N = number of
actual years
service, max 40.
NS = potential
years service to
Normal Retirement
Date (NRD), may
be limited to 40.
P = maximum
approvable pension
had employee
served to NRD.
1/30th for each

year of service.
Max 20 years i.e.
2/3rds max after
20 years. Final
remuneration
subject to
earnings
cap.Advance
funding for
maximum early
retirement not
permitted
EARLY RETIREMENT
TAX FREE CASH
3/80ths for each

year of service
(maximum 40) or, if
greater
As Group 1, but
Final Remuneration
subject to
maximum 100,000
for this purpose
N x LS
NS
Greater of 3/80th
final remuneration
for each year of
service maximum
40 years or, 2.25 x
initial pension.
whereLS =
maximum
approvable lump
sum had employee
served to NRD.
LATE RETIREMENT
As Group 1
Benefits may be
schemes
increased to the
maximum
approvable on the
basis that the actual
date of retirement is
the NRD.
If total service
exceeds 40 years,
each year in excess
of 40 falling after
NRD may earn a
further 60th of final
remuneration up to
an overall maximum
of 45/60th.
Alternatively, the
maximum
approvable pension
at NRD may be
increased by the
RPI or actuarially to
the date of
retirement.
Controlling
Directors - years of
service are
increased until
actual date of
retirement (up to
age 70).
If tax free cash sum
taken at NRD but
pension deferred
the pension
maximum can be
increased in line
with RPI or actuarial
Benefits may be
increased to
N/30ths of actual
service (subject to
maximum 2/3rds)
or by reference to
final remuneration
at actual
retirement.
Benefits can only
be taken at the
time of leaving
service, except
that they must be
taken at age 75.
factors reflecting
age and investment
yield, but not in line
with members
earnings. Only RPI
linkage is allowed
up to age 70 for
controlling directors.
Provided the occupational scheme Trustees do not step outside the regulatory and legislative
guidelines, there is quite wide leeway to structure the scheme rules as the company wishes.
Retirement Through Ill Health
1. If an individual is unable to follow normal employment through accident or

illness, then retirement may occur at any age, with the maximum approvable
pension being related to the fraction of final remuneration that would have
applied had the individual stayed in service until normal retirement age. The
same principle applies to the tax free lump sum.
2. In exceptional circumstances and where life expectancy is so short as to make it
unreasonable for any of the benefit to be taken in pension form, it may be
possible for the entire early retirement pension to be commuted for a cash sum.
The element of the payment representing pension which otherwise would not
have been payable in cash is subject to tax at the rate of 20%
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PENSIONS - Eligibility
3.5 Eligibility
Each occupational scheme will have its own particular rules formulated by the company, covering such
aspects as who may join, when they qualify, levels of benefit, retirement ages, personal contributions.
Since April 1988 compulsory membership of occupational pension schemes is not allowed. Employees
may choose not to join, or may leave an existing scheme (opt-out).
It is not unusual to see a large occupational scheme with different levels of pension benefit and
different levels of related benefits for different types of employee e.g. white collar, blue collar, factory
floor.
Legislation exists, however, to ensure that such differentiation does not become discrimination:-
1. The Sex Discrimination Act 1986 effective from March 1987, prevents an
employer from imposing different compulsory retirement ages for men and
women. (permitted ages range are now 60 to 75 for men and women, although
particular occupations, such as various sporting professions, have earlier normal
retirement ages down to age 35).
2. The Social Security Act 1989 (which implements the Third Directive on Equal
Treatment in occupational Pension Schemes) seeks to prevent discrimination on
the basis of sex, family or marital status. However, under this legislation a
scheme did not need to have the same pension age for men and women so long
as the State scheme continued to operate different ages. This was subsequently
altered as a result of the Barber case.
3. The Barber v GRE case in 1991 decided that it was in breach of EC Law for a
scheme to offer a woman an immediate pension on redundancy, where a man of
the same age would receive only a (less valuable) deferred pension. This
enforces the general principle of no discrimination on grounds of sex, and was
clarified in the Maastricht Agreement in December 1991. The specific pension
scheme ruling applied only to benefit earned after 17th May 1990
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PENSIONS - Final Remuneration
3.6 Final Remuneration
Calculation of pension rests on the definition of final remuneration, which may range from basic salary
only up to full PAYE earnings.
The Revenue will accept the following definitions:1. Basic pay in one of the last five years before retirement date, plus the average of three or
more consecutive years' fluctuating emoluments such as bonus or commission payments.
2. The average of total earnings in three or more consecutive years in the ten years prior to
retirement date.
NB
i. Taxable benefits in kind may be used in calculating final remuneration.
II. If the definition is anything other than the last twelve months' earnings before
retirement, then earnings during the definition period may be increased in line with a
suitable inflation index to produce a higher national salary figure for calculating
pension. This is termed 'dynamisation'.
The definition used takes no account of whether the pension in payment will be flat rate, increasing at a
fixed rate or, like Public Sector schemes, linked to increases in the cost of living
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PENSIONS - Costing and Investment Base of Occupational Schemes
3.7 Costing and Investment Base of Occupational Schemes
A group pension scheme represents a significant commitment for an employer and the cost
implications must be carefully planned.
Costing assumptions will need to be made relating to:-
1.
2.
3.
4.
5.
6.
7.
Salary increases.
Investment performance.
Annuity rates.
Early leavers.
Changes in scheme membership.
Deaths.
Future legislation.
Each assumption is important, but should not be viewed in isolation. It is the effect of the package of
assumptions that is important. Some of the assumptions are inter-related too. For example, high levels
of salary increase alone would increase costs substantially, but may be accompanied by high
investment returns and high interest rates, which means relatively high annuity rates. These
accompanying factors would tend to reduce costs. Conversely, low inflation, low investment returns
and low maturity rates increase costs.
These assumptions will be reviewed regularly by the scheme actuary, generally every three years.
Use of assumptions enable pensions to be funded in advance, and there are a number of ways of
approaching this:-
1. Controlled funding, which enables an 'average' cost to be charged for each

scheme member, rather than the actual cost for accumulating that member's
projected benefit. In general, this reduces the costs for the employer. It is only
appropriate for group occupational schemes, rather than individual account
schemes like Executive Pension Plans and Additional Voluntary Contributions.
2. Deposit Administration, where contributions are invested to produce a yield
rather like a deposit account, and possibly bonuses similar to a with profits
contract.
3. Deferred annuity basis, either guaranteed or with profits, providing a guaranteed
amount of future pension or a fixed contribution over the period
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PENSIONS - Contributions
3.7.1 Contributions
The employer must contribute to a scheme if it is to be approved; the employee may contribute if
required to by the employer, or on a voluntary basis to secure extra benefits.
Employee contributions
1. An employee's contributions must not exceed 15% of total emoluments up to the

earnings cap (including benefits in kind). In addition, it is important to remember
that the total of benefits provided, including those arising from the employee's
own contributions, must not exceed Inland Revenue limits.
2. The employer may require employees who join the scheme to contribute
(although he cannot insist that an employee joins the scheme).
3. Employee contributions are usually regular, and are often expressed as a
percentage of earnings, but special, one-off contributions (within the normal
limit) qualify for tax relief in the normal way.
4. Tax relief is granted through the 'net pay system' i.e. deducted before other
allowances and the operation of the tax code.
Employer contributions
1. Employer contributions are not limited directly as a percentage of earnings of

members, but must be reasonable in relation to the benefits being provided.
2. Regular Employer contributions to exempt approved schemes qualify as an
expense in the year of payment only; unlike some expenses that may be carried
back or forward.
3. Tax relief on regular contributions may be spread in certain circumstances e.g.
where the scheme member has less than three years to retirement, or where a
regular contribution is reduced or stopped.
4. Tax relief on single contributions may be spread by up to 4 years if the single
payment exceeds 500,000, and have to be reported to the Revenue if over this
figure.
5. Where the single payment is made to finance cost of living increases for
pensioners, the tax relief will not necessarily be spread.
6. Similarly, where a single payment is made to purchase unfunded past service
benefits, and where the payment is no higher than the regular annual
contribution, tax relief is unlikely to be spread
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PENSIONS - Underfunding
3.7.2 Underfunding
A defined benefit scheme can be underfunded, that is, its assets are less than the accrued liabilities for
benefits in respect of service to date. This would mean that if the scheme was wound up by the
employer, there would be insufficient money to provide the promised benefits. In these circumstances,
the scheme becomes a creditor of the employer.
If the scheme is ongoing, however, the actuary will take account of the deficit in recommending a
change to the contribution rate, with the intention that the deficit will be reduced by future contributions,
and eliminated over a period of time.
A deficit can arise as a result of many different circumstances, including poor investment performance,
higher than expected salary increases or worsening annuity rates. Provided the scheme is continuing,
and the deficit is being dealt with, there is nothing untoward about this situation
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PENSIONS - Surpluses
3.7.3 Surpluses
Similarly a surplus may arise, perhaps because of very good investment performance, or numerous
other factors. Because the Inland Revenue are concerned that the tax advantages of pension funds
should not be abused, they require that the Trustees act to reduce any such surplus if it exceeds 5% of
scheme liabilities.
There are a number of ways of doing this, including contribution holidays for employer and/or
employees, benefit improvements, or, as a last resort, a return of monies to the employer.
The Inland Revenue specify the assumptions to be used in calculating any surplus, and must agree the
proposals for its reduction. The timetable is also controlled by the Inland Revenue.
Where a refund is made to the employer, it is subject to tax at the special rate of 40%, and the tax must
be deducted and paid to the Inland Revenue at the same time as the refund is made
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PENSIONS - Executive Pension Plans (EPPs)
3.9 Executive Pension Plans (EPPs)
These are effectively one person occupational pension schemes, money-purchase based, subject to all
the usual rules and regulations discussed previously.
Can be suitable for any employee, but generally targeted at 'executives' because of higher minimum
premium levels
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PENSIONS - Additional Voluntary Contributions (AVCs)
3.10 Additional Voluntary Contributions (AVCs)
Available only to members of occupational schemes.

Additional contributions from the employee only, must be within the overall personal contribution limit of
15%, and must not take projected benefits over Revenue maxima.
Schemes must offer the chance to contribute to an AVC, which may provide extra benefit by means of
'additional years' in final salary schemes, or additional fund.
Charges are borne by the employer through the scheme.
Tax relief for the contribution is immediate, as AVCs are deducted from gross salary, together with any
usual contribution to the main scheme. This is known as the "net pay" system
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PENSIONS - Free Standing AVCs (FSAVCs)
3.11 Free Standing AVCs (FSAVCs)
Similar to AVCs with a number of additional points.
It is permissible to contribute to only one contract each tax year.
When annual contributions exceed 200 p.m. gross (2,400 p.a.) there is a 'headroom' check to
ensure maximum benefits are not being exceeded.
The contract is separate from the main scheme, with contributions being paid net of basic rate tax
direct to the provider from the planholder (higher rate taxpayers can claim additional 18%, 2001/2002).
Charges are borne by member but a wider choice of funds are available
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PENSIONS - Small Self Administered Schemes (SSAS)
3.12 Small Self Administered Schemes (SSAS)
Since 1991 the following elements must be present for a scheme to be considered a SSAS:-
1. There must be less than 12 members.

2. At lease one must be a controlling director.
3. Some or all of the assets must be invested other than in insurance policies.
SSASs are subject to the usual pension scheme rules, plus additional controls to take account of the
fact that the trustees are directly responsible for managing the scheme and its investments, and
because of the likelihood that the company directors, scheme members and trustees will be the same.
It is usual that the controlling directors of a company will be the main or only members of the scheme,
and in their capacity as trustees control the scheme assets.
Areas of investment are strictly defined, and exclude such items as non-income producing assets,
personal items such as cars, and residential property.
Permitted investments would be investment in the company's own shares, the purchase of commercial
property and loans to the company or its subsidiaries, in addition to shares and derivatives.
SSASs must also have a special trustee called the Pensioneer Trustee whose role includes the
particular duty of ensuring that the scheme is not wound up except in accordance with the deed and
scheme rules
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PENSIONS - Leaving Service - Refund of Contributions
3.13 Leaving Service

3.13.1 Refund of Contributions
Available provided the employee is leaving with less than 2 years pensionable service and the scheme
rules allow it.
It should be borne in mind:-
1. The ex-employee will lose the benefit of any contributions which the employer
may have made to the scheme.
2. Refund is only available for the excess over the cost of GMP/requisite benefits
or Protected rights.
3. Refunds are subjected to a 20% tax charge deducted by trustees.
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PENSIONS - Deferred Pension
3.13.2 Deferred Pension
Benefits earned to date can be 'preserved' in previous employer's pension scheme. There is a legal
right to a preserved benefit if the individual leaves with 2 or more years pensionable service.
It should be borne in mind that:-
1. Paid up pensions may benefit from discretionary increases made by the exemployer's scheme.
2. There may be associated benefits (e.g. widow(er)'s pensions).
In the case of a Money Purchase scheme, the accrued individual entitlement will be allowed to
increase with the value of the fund.
In the case of a Final Salary scheme:
1. There will be a guaranteed benefit.

2. Pension benefits accrued after 1.1.85, in excess of any GMP or requisite
benefits, have to be revalued until retirement by 5% p.a. or RPI if lower. For
leavers on and after 1.1.91 all pension benefits, in excess of GMP or requisite
benefits, have to be so increased.
3. Scheme rules may allow for higher revaluation than (ii) but not at such a rate
that would exceed maximum benefit levels by the time NRD is reached.
4. Pensions, once in payment, may benefit from guaranteed increases (possibly in
line with LPI depending on when the benefits were secured) or discretionary
increases.
5. Paid up pensions may benefit from any future surplus arising under the exemployer's scheme
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PENSIONS - Transfer to a New Employer's Scheme
3.13.3 Transfer to a New Employer's Scheme
The cash value of benefits accumulated to date may sometimes be transferred to the new employer's
scheme. Note, however, that although a scheme must offer a transfer, there is no obligation on
scheme trustees to accept one.
If the new employer's scheme is a Money Purchase scheme:-
1. Benefits will increase with the value of the individual's fund.

2. There will be no guarantees.
If the new employer's scheme is a Final Salary scheme:-
1. There will be the opportunity to purchase added years or fixed amount of

additional benefit, according to the rules.
2. Additional years, if purchased, will provide benefits geared to the member's final
remuneration from his new employer
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PENSIONS - Transfer to a S.32 Buy Out Policy or to a Personal Pension Policy
3.13.4 Transfer to a S.32 Buy Out Policy or to a Personal Pension Policy
The value of benefit accrued to date may be transferred to a buy-out or personal pension policy.
It should be borne in mind:-
1. Policy belongs to the individual, who can choose the investment medium (within
the normal guidelines) for the funds.
2. Loss of guaranteed benefits (other than GMP or requisite benefits if S.32).
3. Loss of guaranteed or discretionary increases.
4. Loss of possibility of sharing in future surplus.
Features of the S.32 Contract:-
1. The maturity date of the S.32 must be the same as the normal retirement date
under the ceding pension scheme - but provision may be made for early and late
retirement, with appropriate adjustments to benefits.
2. Lump sum death benefits may be written under trust for inheritance tax planning
purposes.
3. Any relevant benefits may be provided (within approvable limits) whether or not
the benefits were provided for in the rules of the original scheme. For example,
an escalating pension could be provided in place of a level pension.
4. The value of the benefits may be transferred subsequently to another approved
pension scheme, apart from any portion which secures either the GMP or
requisite benefits and these must be retained within the S.32 - it is only the
remainder of the value which may be transferred.
5. Protected rights benefits accrued as a member of a contracted-out money
purchase scheme or a personal pension scheme may not be bought out.
6. S.32 contracts cannot be assigned.
7. Availability of open market option.
8. Transfer values may be split between different policies, but the benefits must all
be taken at the same time.
Features of a Personal Pension contract relevant to accepting Transfers:-
1. PPs can accept transfers of FSAVCs whereas S.32 contracts cannot.

2. Where the transfer value is split, the benefits can be taken at different times
under each policy, which is not possible under a S.32 contract.
3. PPs can accept transfers which include protected rights, whereas S.32 contracts
cannot
PENSIONS - Transfer to a S.32 Buy Out Policy or to a Personal Pension Policy
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http://www.financial-planning.uk.com/info-fp2/unit-c/4-1.htm
4. PERSONAL PENSIONS
4.1 Introduction
From 6th April 2001 personal pension policies (PPPs) may be set up by:-
1. The self employed.

2. Individuals who are not members of company pension schemes, including those
without earnings. Prior to 6th April 2001 it was not possible for an individual
without an earned income to contribute to a personal pension.
These policies became available on 1 July 1988, as a consequence of the Finance (No. 2) Act 1987,
now incorporated into the Income and Corporation Taxes Act 1988, Chapter IV, ss 630-655.
PPP providers are primarily insurance companies, but they may also be banks, building societies,
friendly societies, licensed deposit takers, and authorised unit trust companies. The eventual pension,
however, must be provided by an annuity purchased from an authorised insurance company.
PPPs may be used to contract out of the State Earnings Related Pension Scheme (SERPS). This
option is only relevant to employees, as self employed people are not members of SERPS in the first
place and therefore cannot contract out.
These policies operate under 'money purchase' principles, where the accumulated fund is used to
secure retirement benefits.
Personal pension policies attract substantial tax concessions:
1. Tax relief on contributions made by individuals and employers, within set limits.
2. The pension fund is free of taxation on its income and capital gains except for
tax credits on dividends, which can no longer be reclaimed.
3. Part of the fund at retirement may generally be taken as tax free cash at
retirement.
4. Death benefits may be provided, free of inheritance tax, for dependants.
Individuals may choose to have personal pensions from different providers, provided contribution limits
are not exceeded.
All pension providers must have their particular personal pension scheme approved by the Pension
Schemes Office (PSO).
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PENSIONS - Retirement Annuities Pre-1988
4.2 Retirement Annuities Pre-1988
At one time Retirement Annuity Contracts (RACs) were the means by which the self employed, those
in non-pensionable employment and controlling directors provided for their retirement.
The legislation governing RACs originated in ss 23/24 of the 1956 Finance Act. They later became
subject to the provisions of ss226-229 of the Taxes Act 1970, and currently ss 618-629 of the Income
and Corporation Taxes Act 1988. Retirement annuities have not been available since 30th June 1988,
but further contributions may be made to existing contracts, which may have a knock on effect on
subsequent personal pension contributions.
They cannot be used for contracting out purposes.
See also Contribution Limits and Tax Relief for contribution maxima. Note however that no employer
contributions are allowed
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PENSIONS - Contribution Limits and Tax Relief
4.4 Contribution Limits and Tax Relief
Contributions may be made by both individuals and/or their employers where appropriate, in addition to
any payments by the DSS, (N.I Rebate), if the scheme is used to contracted out.
The maximum permissible contribution for any tax year including employer contributions and
contributions related life assurance, are as follows:
Age at 6 April
(NRE)
% Net Relevant Earnings
Up to age 35
17.5%
36-45
20%
46-50
25%
51-55
30%
56-60
35%
61+
40%
N.B.
1. From 6th April 2001, up to 10% of contribution may be paid towards life assurance and/or
dependants' pensions on death before retirement. For pre 6th April 2001 policies the limit
continues to be 5% of net relevant earnings.
2. Where the personal pension is used to contract out of SERPS, the DSS contributions are in
addition to the above.
3. Earnings cap applies.
The self employed and employees pay contributions net of basic rate income tax and higher rate
taxpayers claim any additional tax relief due in their returns. Employers can deduct contributions as a
business expense for corporation tax purposes.
The maximum permissible contributions that may be made into existing RACs are as follows:
Up to age 50
17.5% of NRE
age 51 to 55
20% of NRE
age 56 to 60
22.5% of NRE
age 61 to 74
27.5% of NRE
Where an individual has a PPP and an RAC contract in force, and makes a payment in the same tax
year to each, the overriding limit will be the PPP limit.
All contributions must be paid gross to retirement annuity contracts
PENSIONS - Contribution Limits and Tax Relief
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PENSIONS - Eligibility for Personal Pensions
4.3 Eligibility for Personal Pensions
Under the defined contribution tax regime applying from 6th April 2001 virtually everybody will be able
to contribute to a personal pension. This will include most active members of occupational pension
schemes who previously could only have a personal pension in the limited circumstances detailed
below. For the first time, individuals without earnings will be able to contribute to a pension via a
stakeholder pension.
Those eligible include:
1. employees;
2. the self employed;
3. individuals who do not have earned income e.g. carers, housewives and the
unemployed;
4. certain active members of occupational pension schemes and
5. children, if the plan qualifies as a Stakeholder personal pension, because these
do not have a minimum eligibility age.
An active member of an occupational pension scheme will only be eligible for concurrent membership
of a personal pension if:
1. the member is not, and has not been, a controlling director in any of the previous
five tax years. The five year period commences on 6.4.2001)
and
2. the member's grossed up remuneration does not exceed 30,000 pa in any one
of the previous five tax years. (The five year period commences on 6.4.2001).
Where such members are allowed to also contribute to a personal pension the
amount of contributions is restricted to 3,600 p.a.
Prior to 5th April 2001 PPPs could be effected by anyone below age 75 who had earned income which
was not covered by an occupational scheme.
If an employee has a job which offers membership of an occupational pension scheme, there is a free
choice between the company scheme and a personal pension. There are very few instances where a
client is likely to be better off by not joining. The adviser should take great care in this area and files
should be well documented concerning advice given to the client and advice taken.
Prior to 5th April 2001, an individual could not participate in an occupational pension scheme and have
a personal pension but there were exceptions to this rule:
PENSIONS - Eligibility for Personal Pensions
1. If the occupational scheme provided only dependants' benefits by cash sum

and/or pensions, the individual could also have a personal pension.
2. Members of occupational pension schemes who are also entitled to SERPS (i.e.
they are contracted in to SERPS) could have had a 'rebate only' personal
pension scheme to contract out of SERPS. Contributions could not be made by
the individual, the only contributions permitted were the Department of Social
Security (DSS) N.I. rebate payments.
3. Occupational pension scheme members could have had a personal pension
which was used only to accept a transfer payment from another scheme.
4. Individuals with 2 or more sources of income could make personal pension
contributions in relation to any source which was 'non-pensionable'; for example,
an office worker could be a member of the employer's occupational scheme but
may have had a second source of income as a self employed musician. A PPP
on these self employed earnings could have been established.
5. Some doctors and dentists in general practice are employed directly by the NHS
but are treated as self-employed for tax purposes. Special arrangements can be
made, enabling them to receive tax relief on both their NHSSS contributions and
personal pension contributions.
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PENSIONS - Relevant Earnings
4.4.1 Relevant Earnings
Relevant earnings are defined in section 623(2) of the Act and include:-
1. Schedule E earnings including benefits in kind.

2. Income chargeable to income tax under Schedule D from a trade, profession or
occupation i.e. relating to persons in business on their own account or in a
business partnership with others.
3. Income from certain commercial lettings of holiday accommodation.
Relevant earnings do not include, for example, investment income or income from an IPI policy or
pension scheme. Nor do they include remuneration of a controlling director of an investment company
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PENSIONS - Net Relevant Earnings
4.4.2 Net Relevant Earnings
Net relevant earnings (NRE) represent an individual's relevant earnings less business expenses,
including those in respect of losses or capital allowances. Personal charges such as alimony and nonbusiness interest are not taken as reductions nor are personal allowances and mortgage interest.
For the employed, this effectively means that full Schedule E earnings will qualify as NRE. It is unlikely
that deductions will be available to the employed - tax, national insurance contributions, for example,
would not be taken into account to reduce NRE
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PENSIONS -
4.4.3 The Earnings Cap
The 1989 Finance Act introduced an 'earnings cap' that imposed maximum earnings for all pension
calculations.
The earnings cap does not apply to RACs unless the individual contributes to both an RAC and a PPP
in the same year.
Earnings cap for 2001/2002 is 95,400
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PENSIONS - Tax Reliefs and Other Tax Breaks
4.4.4 Tax Reliefs and Other Tax Breaks
Contributions made by individuals within the above limits are eligible for income tax relief and are paid
net of basic rate tax.
Employees and the self employed must claim any relief against higher rate tax from the Inland
Revenue via their annual tax return; where the tax rate of the individual is less than the basic rate,
however, basic rate relief is still applied.
Employer contributions are allowable as a deductible expense.
Tax relief is available in respect of the tax year in which contributions are made
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PENSIONS - Carry Forward Facility
4.4.5 Carry Forward Facility
Generally, carry forward for personal pensions was abolished from 6th April 2001. However, if it is
combined with carry back, carry forward may still be used between 6th April 2001 and 31st January
2002. Carry forward for RACs continues unchanged.
A plan holder may make a higher than usual contribution to make up for 'unused' (within the
contribution band) contributions in previous years, provided they were eligible for a plan in those
previous years.
Tax relief on such contributions is based on the tax rates in force during the year in which the premium
is actually paid. Consequently, relief is available in the current year, and has no effect on the tax
situation in any past year.
Unused relief from the 6 previous years may be used up only after the maximum contribution for the
current year has been paid. The individual must be eligible for a pension plan in the tax year in which
the contribution is actually paid (or to which it is carried back as described below).
Employer's contributions cannot be dealt with in this way
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PENSIONS - Carry Back Facility
4.4.6 Carry Back Facility
Any part or all of a contribution made in the current tax year may be carried back to the previous tax
year for relief purposes, and indeed, to the year before that, if there were no net relevant earnings in
the previous year.
Under new rules applying from 6th April 2001, a contribution must be paid and an election to carry
back made by 31st January in the tax year in which the payment is made e.g. 2001/02 a contribution
must be made and an election made by 31st January 2002 if the contribution is to be carried back to
2000/01.
Prior to 6th April 2001, an election to carry back contributions had to be made to the Inspector of Taxes
by the 31st January following the end of the tax year in which the contributions were made e.g. A
payment in the 1999/00 tax year must have been subject to an election on or before 31st January 2001
to carry back to 1998/99. The contribution had to be received by the provider on or before 6th April of
the current tax year.
Contributions carried back in this way are treated as though they had been paid in that year - tax rates
and contribution limits for that year apply.
This exercise can be beneficial; for example, if one's marginal rate of Income Tax was higher in the
year to which contributions were carried back, the higher tax relief is gained.
Using carry forward and carry back in conjunction may allow contributions to be paid in respect of
earnings over a 7 or 8 year period. This will continue to apply for retirement annuities but will only be
possible using a personal pension until 31st January 2002. The contributions paid must not exceed
NRE in the year against which relief is claimed. (i.e. normally NRE for the current tax year, or, if carry
back is used, the preceding year).
N.B. Total contributions must not exceed total taxable earnings in the year of payment.
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PENSIONS - Excess Premiums
4.4.7 Excess Premiums
Under Section 640 of the 1988 Taxes Act any excess contributions over the maximum limits must be
repaid to the contributor if carry back/carry forward facilities cannot be utilised.
With retirement annuities, excess contributions (on which no tax relief would be available) are not
expressly prohibited, but insurance companies must not knowingly accept excess contributions
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PENSIONS - Contracting Out Rebates
4.5.1 Contracting Out Rebates
As from 6 April 1997, rebates for money purchase plans were changed to age related amounts. From
this date the amounts for Appropriate Personal Pensions are as follows:
Age
Age
15
3.4
40
5.4
20
3.6
41
5.6
25
3.9
42
6.0
30
4.2
43
6.7
32
4.3
44
7.4
34
4.4
45
8.2
36
4.7
46
9.0
38
5.0
47 and over
9.0
Age is that attained on 5 April each year.
For all Appropriate Personal Pensions the DSS will pay the rebate 6 months after the end of the tax
year.
The rebate under an APP breaks down as follows:
Age 15
Age 46
Employee
1.6
Employee
1.6
Employer
1.8
3.4
Employer
7.4
9.0
Tax relief on employee

contribution
0.45
Tax relief onemployee

contribution
0.45
Total
3.85
Total
9.45
PENSIONS - Contracting Out Rebates
For Contracted Out Money Purchase Schemes there is an immediate requirement to pay 3.1% as this
is a reduction in the levels of NIC paid by the employer and employee, with the balancing rebate being
paid 6 months after the tax year end. The overall level of rebate is slightly lower than the APP rebates,
due to the 3.1% being paid immediately and a sample of the amounts are as follows:
Age
Age
15
3.1
40
5.2
20
3.4
41
5.4
25
3.6
42
5.8
30
3.9
43
6.4
32
4.0
44
7.2
34
4.2
45
8.0
36
4.5
46
8.9
38
4.8
47 and over
9.0
In both cases the proportion relating to the employee is 1.6% throughout, with tax relief being added for
APP only.
Rebates were reduced for COMPS from 6th April 1999, making contracting out by this route less
attractive. Some providers have pulled out of the market, in favour of the Group PP route.
Prior to 6/4/97, the rebates were flat rate (i.e. not related to age or sex) and relate to band earnings i.e.
total earned income between the Lower Earnings Level (LEL), and the Upper Earnings Level (UEL).
Both employee and employer qualified for the rebate, which in total amounted to 4.8% of band
earnings.
Between 6.4.93 and 5.4.97 an additional payment of 1% of band earnings was also paid to those over
30 who contracted out via an APP. This has now ceased.
This additional payment, sometimes termed 'incentive', was originally introduced to persuade people to
contract out (when the Government Actuary discovered that the State Scheme was in danger of being
underfunded).
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PENSIONS - Who Should Contract Out?
4.5.2 Who Should Contract Out?
The rationale behind contracting out hinges on whether the resultant benefit from the contracting out
vehicle will be better than that provided by SERPS, had the individual remained in SERPS. Where
GMP or requisite benefits are provided, the question is whether the cost of the benefit is covered by
the amount of the rebate. Additionally, independence from the State may be a deciding factor.
For those contracting out using products providing protected rights in the hope of better benefits from
the rebate contributions, the emphasis is in favour of contracting out at younger ages - because the
longer you invest, the greater the chance of higher investment returns. However, the member's total
SERPS entitlement is reduced by the 'notional GMP' equivalent to the period contracted-out in the
protected rights fund.
There reaches a stage, however, where potential benefit from the contracting out vehicle and that from
SERPS are very much the same Before April 1997 the relevant, or 'pivotal', ages were taken as late
40s for men, early 40s for women. The age related rebates to money purchase schemes is likely to
increase the pivotal age to 55 (males) and 45 (females).
These ages may change from time to time as various factors such as rebate and investment conditions
changes
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PENSIONS - Contracting Out Options
4.5.3 Contracting Out Options
Occupational Salary Related Schemes:
1. Contract out via GMP; since November 1986 there is no requirement for the
provision of reasonable or requisite benefits in addition to the GMP.
2. Full occupational scheme rules apply.
3. GMP's accrue in line with SERPS. Pre-6/4/88 GMPs are increased by the state
in full. Post 5/4/88 GMPs are increased by the scheme up to 3% (or RPI if less),
and the state pays any balance up to RPI.
4. Contracting out schemes have to give requisite benefits in line with the
reference scheme from 6th April 1997, and increases have to be in line with LPI,
i.e. at 5% or RPI if less.
5. Widow's/widower's GMP of 50% (100% widow benefit up to 05/04/88) of
scheme member's GMP payable; only post 05/04/88 service qualifies for
widower's GMP.
Contracted Out Money Purchase Scheme (COMPS)
1. Contracts out via protected rights. This is not a guarantee of equivalent benefit,
as with the GMP, but rather an individual's right to benefit resulting from the
investment of the re-directed 'rebate' sums. Protected rights do not include a
GMP or requisite benefits.
2. The employer must contribute
3. The NI rebate must be paid to the pension provider within 14 days of the end of
the tax month in which they were made.
4. Protected rights commence at state pension age or age 60 for men if NRA is 60,
and offer pension only, the pension to increase at 3% per annum or RPI rate if
less (prior to 6 April 1997) or 5% pa or RPI if less, on benefits secured after 6th
April 1997.
5. It is not possible to take early retirement protected rights, nor in the form of cash.
6. Usually, annuity rates vary between male and female to reflect life expectancy.
The protected rights element must purchase an annuity which has the same rate
for both sexes; and which increases by the lower of RPI or 3% pa.
7. From 6th April 1997 it will be possible to buy an annuity on single life rates, but
only in respect of service/benefits post that date. Benefits must increase at the
rate of LPI.
8. This route has been available since 6th April 1988.
Simplified Defined Contribution Scheme (SDCS)
PENSIONS - Contracting Out Options
1. Follows the same route and restrictions as COMPS via protected rights, with
additional restrictions if there is a self administered element.
2. Total contributions are limited to 17% of earnings, excluding the rebate.
3. Not linked to IR maximum approvable benefits.
Free Standing Additional Voluntary Contributions (FSAVC)
1. Very few providers offer contracting out as an option under FSAVC schemes,
because doing so through an APP is always better (see point 5). When offered
however, they are subject to similar conditions as COMPS.
2. Not available for employer additional contributions.
3. The eventual benefits produced will count towards Revenue maximum benefit
limits.
4. The rebate contributions, however, will be in addition to the otherwise maximum
personal contributions of 15% of earnings.
5. Unlike the APP, however, tax relief is not grossed up and added into the rebate.
6. Employee must be a member of an occupational pension scheme.
Appropriate Personal Pension (APP)
1.
2.
3.
4.
5.
Contracts out via protected rights

No need for employer or employee contribution
Benefits purchased by the rebates do not count towards Revenue benefit limits.
Rebate contributions may be in addition to normal maximum contributions.
At the end of the tax year (unlike the COMPS route) the DSS pays directly to the
pension provider the relevant rebate sums plus incentive where claimed.
6. 1% additional payment available for those age 30 or over up to 6 April 1997
only, when age related rebates started.
7. This route has been available since 1st July 1988.
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PENSIONS - Contracting In Again
4.5.4 Contracting In Again
Individuals at or approaching the pivotal ages need to reconsider the situation, and assess whether to
remain contracted out or to contract back in.
Once the decision has been made, the DSS will need to be notified, usually via the pension provider.
For occupational schemes operating the GMP or requisite benefits (i.e. reference scheme test), a
Contribution Equivalent Premium (CEP) may be paid to the State when an individual leaves contracted
out employment without the right to a preserved pension. The CEP effectively reinstates all SERPS
entitlement, and removes any GMP liability.
Where a scheme operating the GMP or requisite benefits test ceases to be contracted out, members
are reinstated into SERPS by payment of Accrued Rights Premiums (ARP). Where there are
pensioners under such a scheme, their SERPS entitlement to replace the entitlement will be purchased
by Pensioners Rights Premiums (PRP).
Where a COMP scheme winds up, or an individual leaves with protected rights, a Contracted Out
Protected Rights Premium will be paid to secure SERPS benefits but only so far as the protected rights
fund provides. An Appropriate Personal Pension scheme will fulfil the same function by paying a
Personal Pension Protected Rights Premium (PPPRP).
A Transfer Premium may be paid to the DSS to reinstate SERPS where an individual transfers from a
GMP/requisite benefits test based, contracted out scheme to one which is not contracted out.
An individual will not be able to buy benefits back into the state scheme from 6 April 1997, unless he
has less than two year's service, where contracting out is through an occupational pension scheme.
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PENSIONS - Transferability of Personal Pensions
4.6 Transferability of Personal Pensions
The Social Security Act 1986 made transferability of pension rights easier.
Thus, benefits under personal pension policies may be transferred between personal pension
schemes, and to and from occupational pension schemes.
The transfer payment will represent the cash value of the individual's fund at the time. Pension
providers, however, may impose a penalty on a transfer to recoup expenses. No transfer penalty can
be imposed on stakeholder personal pensions.
The pension provider making a transfer payment must be satisfied that the payment is being made to
an Inland Revenue approved personal or occupational pension arrangement
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PENSIONS - Benefit Options - Pension Benefit at Retirement
4.7 Benefit Options

4.7.1 Pension Benefit at Retirement
The amount of pension payable from a Personal Pension is determined by the amount of money
accumulated within the fund and annuity rate at the time.
Pension benefits must normally be taken between the ages of 50 and 75, but with the following
exceptions:-
1. Where the individual is in an occupation where an earlier retirement age has

been approved by the Inland Revenue, e.g. athletes at age 35, flat racing
jockeys at age 45.
2. On the grounds of serious ill health.
Pension benefits arising from the DSS payments may not be made before age 60, and must be paid as
pension only.
The pension must be payable for life, but may be set up with a guaranteed payment period of up to 10
years; the more usual period is 5 years.
Individuals may take a reduction in their pension in return for providing a spouse's or dependant's
pension payable following their death, but the level of the dependant's pension must not exceed the
member's own pension.
At retirement, the plan-holder may exercise an open market option. This allows individuals to transfer
the accumulated value of their pension fund to any life office or friendly society to purchase their
benefits. This enables the plan-holder to seek out the best annuity rates available on retirement.
Pension payments are taxed as earned income. Annuities paid under PPPs are taxed under PAYE and
this came into force on 6th April 1995. Prior to this income tax was deducted at the basic rate and any
balance due to or from the parties was dealt with by the Local Inspector of Taxes
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PENSIONS - Cash Sum at Retirement
4.7.2 Cash Sum at Retirement
At retirement, an individual may choose to exchange part of his pension for a tax free cash sum of up
to 25% of the fund value (excluding any element relating to the contracting out rebates).
Where money is transferred from an occupational scheme to a personal pension, it is necessary to
obtain a certificate from the trustees of the transferring scheme, indicating the maximum tax free cash
sum which would have applied had the transfer not taken place. Without such a certificate, tax free
cash from the transferred fund is not available.
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PENSIONS - Lump Sum Death Benefit
4.7.3 Lump Sum Death Benefit
A personal pension policy may provide a lump sum payment on the death of the policyholder before
the age of 75.
Pension policies providing a death benefit usually do so through a separate term assurance policy and
PPPs, providing life cover only were available until 6th April 2001. For policies taken out before 6th
April 2001, the life assurance premium is limited to 5% of NRE. For contracts made on or after 6th April
2001 up to 10% of the contribution being paid can be used to provide life cover. The premium paid in
respect of life assurance reduces the amount which can then be paid to pension on a for basis.
The death benefit under a pension policy, when issued separately, may be written under trust to reach
dependants free of inheritance tax.
Additionally, pension policies may be written so that, in the event of death before retirement,
contributions are returned. Generally one of the following bases is used:
1. Return of premiums without interest.

2. Return of premiums with interest.
3. Return of the accumulated value of the pension fund at the date of death.
Such an option may be used where a pension is not provided for a spouse or for dependants. This
additional lump sum may also be provided under trust arrangements, but if it relates to DSS
contributions, it must fall into the individual's estate by being paid to the legal personal representatives
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PENSIONS - Waiver of Premium Benefit
4.7.4 Waiver of Premium Benefit
This option is used to offset the problem of long term disability preventing payment of premiums.
When a claim is made, the life office will treat the policy as if the premiums are still being made. The
waiver option therefore is underwritten and an additional loading is imposed on the premium.
It is not possible to include waiver of premium benefit within personal pensions set up on or after 6th
April 2001. However, it is possible to arrange a separate non-pension contract. Tax relief will not be
give on the premiums but alternative benefits, e.g. unemployment cover, can be included. The waiver
benefit will not have to be paid directly into the contract, it will be paid to the member. The member
could then choose to pay the benefit into the pension plan and obtain tax relief on this contribution.
Personal pensions established before 6th April 2001 can include waiver of premium benefit. The
contributions used to fund the cost of the waiver of premium benefit attract tax relief. The benefit
arising from such policies must be paid directly into the pension plan by the provider
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PENSIONS - Writing Benefits Under Trust
4.8 Writing Benefits Under Trust
The benefits of using trusts in conjunction with PPPs relate to the freedom from inheritance tax by
ensuring that the benefits in the form of any death sum assured and fund values are not aggregated
with the estate of the deceased.
The death benefits under trust may be distributed at the discretion of the scheme trustees.
The member's pension benefits remain under the complete control of the member; it is not legally
possible for either the tax free cash sum or the member's pension to be assigned.
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http://www.financial-planning.uk.com/info-fp2/unit-c/4-8-1.htm
4.8.1 The Use of a Flexible Trust
By writing death benefits under a flexible trust, it is possible to make provision for:-
1. a specific beneficiary who will receive the death benefits on the member's death
after creating the trust.
2. a class of potential beneficiaries, with a power of appointment, so that the death
benefit may be re directed to any one or more of these, along with or instead of
the current immediate beneficiary.
A power of appointment within the trust's documentation enables the policyholder to change the
potential recipient of the policy proceeds.
On the death of the policyholder, payment will be made to the trustees who will apply the proceeds
according to the provisions of the trust. As the monies are being paid to the trustees and not to the
estate of the deceased there is no inheritance tax liability
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PENSIONS - Putting Existing Policies into Trust
4.8.2 Putting Existing Policies into Trust
Putting an existing policy in trust is considered to be a gift for inheritance tax purposes, the value
transferred being the market value of the policy
In reality, however, the value of the transfer is likely to be treated as negligible unless death from
natural causes occurs within two years of making the trust
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PENSIONS - Group Personal Pensions
4.9 Group Personal Pensions
Although such arrangements are offered by many providers the name is something of a misnomer.
A personal pension is by definition a personal arrangement, and group personal pensions are merely a
collection of such arrangements arranged largely for administrative convenience, where the employer
contributes to the arrangements through a single provider. Ownership and control of the arrangement
remain in the hands of the member.
The main features of group personal pensions are:-
1. Contributions will be dealt with centrally. The employer will collect any employee
contributions and remit them together with employer contributions (if any) to the
pension provider. Contributions may be fixed or earnings related.
2. The fact that the provider is operating a number of plans through the employer,
and the administrative savings made by the centralised collection of
contributions, may make it possible for more attractive terms to be offered than
would apply if the same individuals effected plans independently. Some degree
of investment restriction may be imposed; for example, under the scheme only
the with profits or managed fund may be available.
3. Death benefits may be provided under the scheme, or separately under an
employer sponsored death in service scheme, and a level of benefit, free of
medical evidence, may be available
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PENSIONS - Self Invested Personal Pensions
4.10 Self Invested Personal Pensions
This type of scheme offers similar advantages to partnerships as the SSAS does to groups of
shareholding directors within the same company i.e. control of investments and flexibility of
contribution.
The facility is, therefore, aimed at high earners and where perhaps a partnership or other group of
people with a common interest can pool their funds together for investment purposes. Taking into
account any unused relief from earlier years it may be possible for substantial amounts to be invested,
perhaps enabling the purchase of a property for the partnership to occupy, with rental income being
received by the fund.
The SIPP approach may be of particular interest to those with large transfer values which, through the
purchase of property, may assist in the setting up of another business. The fund must be able to
service and ultimately repay any such loan.
Prior to the advent of SIPPS, there did exist arrangements known as Self Administered Personal
Pensions (SAPPs) which remain available, so it is important to understand the difference between the
two.
In addition, there are so called 'hybrid' SIPPS which are a combination of a traditional insured personal
pension, with the addition of a separate self invested facility through the same or another provider.
There are often concessions on the charges that would apply if the SIPP were simply effected in
isolation.
A SIPP is written under a separate trust and whilst an insurance company or other approved provider
is needed to act as pension provider and trustee, other parts of the personal pensions package such
as advice, investment management and investment administration, can be arranged elsewhere as the
individual member requires.
The scheme assets are held by the scheme trustee on behalf of the member. Charges will be specific
and levied as fees, paid by the member direct or from his fund. Fees will usually be structured as initial
and annual, with additional charges in relation to specific transactions. Charges for significant work
such as that involved in the purchase of property will often be charged on a time cost basis.
With a SAPP the assets are managed by the provider (usually an insurance company) as an
'earmarked' fund in respect of each member or group of members. Generally a unit linked contract will
be used with the fund having its own unit price structure. Charges will be levied by the provider on the
fund, expressed as the usual bid/offer spread and annual management charge found with unit linked
funds generally. With a SAPP, permitted investments are also governed by insurance company
regulations which prohibit investment in the products of other insurance companies.
Most of the providers offering SIPPS do so on a hybrid basis. They require a minimum regular
premium to be invested into their own funds before any external investment is permitted. Typically a
minimum premium in excess of 5,000 per annum per scheme member will be required for this
purpose.
PENSIONS - Self Invested Personal Pensions
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PENSIONS - STAKEHOLDER PENSIONS - Introduction
5. STAKEHOLDER PENSIONS
5.1 Introduction
Stakeholder pensions became available from 6th April 2001. Stakeholder pensions are basically
money purchase arrangements, similar in many respects to current personal pension arrangements.
The Government's proposed aim is a pension arrangement that:
1. is simple to understand
2. with low charges, and
3. reduces the need for financial advice.
Schemes have to meet certain minimum standards to be granted stakeholder status. The minimum
standards relate to eligibility, contributions, charges, benefits and transfers and are explained in more
detail in later sections. As well as being offered by employers they can also be established by trade
unions, trade associations, local chambers of commerce and pension providers
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PENSIONS - Eligibility for Stakeholder Pensions
5.2 Eligibility for Stakeholder Pensions
1. Employed, self-employed and those without earned income (e.g. unemployed

and housewives).
2. Under age 75.
3. No lower entry age (can be set up for children).
4. Certain members of occupational pension schemes.
5. Members of personal pension arrangements and group personal pensions
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5.3 Contribution Limits
Minimum contribution 20, but with no requirement for regular contributions (may be a single payment).
Up to 3,600 per annum can be paid, without any earnings. Contributions in excess of 3,600 per
annum will be subject to personal pension scale contributions (i.e. 17.50% to 40.00% of Net Relevant
Earnings). Contributions are paid net of basic rate tax relief.
Can continue contributions in excess of 3,600 for up to 5 years after ceasing paid work.
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PENSIONS - Charges
5.4 Charges
Maximum 1% per annum of fund value.

The Government considers that stakeholder pensions will not require as great a degree of financial
advice as other pension arrangements. It feels that informed decisions can be made using published
"decision trees".
Additional services, such as individual financial advice may be offered for a separate fee
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PENSIONS - Terms
5.5 Terms
Schemes can be set up under trust or alternative approved governance structure based on contract
law.
Standard maximum 1% charge is to cover provision of annual fund statements, provision of basic
information, and explanatory material.
Retirement cash permitted of 25% of the fund (except protected rights fund).
Income withdrawal to be permitted.
Contributions can be stopped, without penalty.
Transfers in and out must be allowed, without charges.
Retirement age to be between 50 and 75.
Life cover to be restricted to that provided by 10% of the stakeholder premium
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PENSIONS - Contract out of SERPS
5.6 Contract out of SERPS
Stakeholder pensions can be used to contract out of SERPS, and the replacement arrangement - the
State Second Pension (to be introduced in 2002).
They will contract out on Protected Rights basis (same conditions as for personal pensions). For
individual policies the NI rebate will be the same as for personal pensions. For occupational
arrangements the NI rebate will be the much lower at the COMP rebate level
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PENSIONS - Employer's Obligations
5.7 Employer's Obligations
Employers with 5 or more staff must make available a stakeholder scheme for eligible employees:
earning in excess of the lower earnings limit,
aged at least 18 years but not within 5 years of retirement age.
In some circumstances employers are exempt from this requirement.
1. If the occupational pension scheme has a qualifying period in excess of one

year, the employer must offer access to a stakeholder arrangement.
2. If there is no existing pension arrangement, access to a stakeholder plan must
be made available, with the employer collecting the contributions and paying
them to the scheme.
3. Group personal pensions where the employer is contributing at least 3% of the
employee's basic pay is an acceptable alternative pension arrangement,
providing the waiting period does not exceed 3 months.
4. Employers required to set up a stakeholder arrangement must have done so by
October 2001.
5. Employers must deduct employee contributions from salary and remit to the
provider
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PENSIONS - Concurrency
5.8 Concurrency
The policy of concurrency means that from 6 April 2001 certain active members of occupational
pension schemes are able to also contribute to a personal pension, Stakeholder pension or money
purchase occupational pension scheme that has converted to the new defined contribution tax regime.
Concurrent membership will not be available if:
1. the employee is a controlling director (i.e. a director controlling directly or

indirectly at least 20% of company's share capital), or has been a controlling
director in any of the previous five tax years. For this purpose, years prior to
2000/01 will be ignored
or
2. the employee's "grossed-up remuneration" exceeds 30,000 pa in any one of
the previous five tax years. Again, no period before the 2000/01 tax year will be
taken into account.
Provided an employee does not fall within the two categories outlined above,
concurrent membership will be allowed.
The phrase "grossed-up remuneration" refers to a situation where an individual has been employed for
less than a full tax year. In such circumstances the figure is calculated by dividing the number of
months (including part months) in employment by twelve, and multiplying the resultant figure by
30,000. The 30,000 grossed-up remuneration threshold is officially called the "remuneration limit". It
may be amended by Treasury Order in the future.
Where concurrent membership is acceptable, contributions of up to 3,600 pa may be paid for at least
the next five years to a personal pension, Stakeholder pension or a money purchase pension scheme,
which is subject to the new defined contribution regime. These contributions may be made in addition
to personal contributions of up to 15% remuneration paid to the occupational scheme.
The limit of 3,600 on concurrent contributions includes basic rate tax relief. The 3,600 limit applies to
the total aggregate contribution made by, or on behalf of, the employee. Any contribution made directly
by the employer would therefore be included within the 3,600. The 3,600 limit is officially called the
"earnings threshold" and may be amended every year by a Treasury Order.
Benefits arising from concurrent contributions will not be taken into account by the Inland Revenue,
when assessing Inland Revenue maximum benefit limits under the occupational scheme, provided that
contributions cease due to retirement.
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PENSIONS - Concurrency

PENSIONS - Scheme Investments
5.9 Scheme Investments
The range of investments offered by stakeholder providers includes unit trusts, OEICs, traditional
pension products, shares transferred from employee share option schemes and individual pension
accounts.
Originally with profit investments were to be excluded but the position has changed. Stakeholder
schemes may offer with profit investment options but accounts relating to stakeholder contributions
must be "ring-fenced" in a sub fund separate from contributions received from contributions paid by
other with profit investors.
Each stakeholder provider must name of default investment option into which contributions will be
invested if the member does not specify a fund selection.
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PENSIONS - Individual Pension Accounts (IPAs)
5.9.1 Individual Pension Accounts (IPAs)
These were introduced at the same time as stakeholder pensions on 6th April 2001. Individual pension
accounts (IPAs) cannot be held by individuals as investments and are not a type of pension scheme.
IPAs are a form of investment in which all types of pension schemes can invest.
The IPA is a wrapper for underlying investments. The investments which can be included are:
1.
2.
3.
4.
units in authorised unit trusts;

shares or units in a fund subject to UCITS rules;
OEICs;
shares in an investment trust whose gearing does not exceed 50% of the fund.
IPAs are not collective investments for the purposes of the Financial Services and Markets Act 2000
but the underlying investments are regulated investments under the Act.
IPAs are portable and can be transferred between different pension schemes.
IPAs are not subject to CAT marking standards. However, if used within a stakeholder pension the 1%
stakeholder annual management charge limit will have to take into account the charges for the
stakeholder scheme, the IPA charges and the investment product charges.
IPA managers are exempt from the 0.5% stamp duty reserve tax that usually applies to funds dealing
collective investments.
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5.10 Interaction of stakeholder with other schemes
State pensions: no impact on basic state pension but can be used to contract-out of SERPS or State
Second Pension.
Retirement annuities: charges for stakeholder plans will tend to be lower. Clients may consider
redirecting contributions but different contribution limits apply.
Personal pensions (non-stakeholder): the greater contribution flexibility and transparency of the
charging structure may result in a reduction in personal pension charges.
Occupational pensions: employers who are not exempt had to designate a stakeholder scheme by
October 2001. Some employers have amended existing schemes which did not fulfil the exemption
requirements so initially they now meet the criteria.
AVC/FSAVCs: for scheme members who are not controlling directors and do not earn more than
30,000 pa stakeholder provides an alternative means of topping up benefits. An advantage of
stakeholder pensions is that unlike FSAVCs and post April 1987 AVCs part of the benefits can be
drawn as cash. The low charges offered by stakeholder plans may also cause members to use a
stakeholder plan rather than AVCs or FSAVCs.
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PENSIONS - USE OF PENSION PRODUCTS
6. USE OF PENSION PRODUCTS
Pension products must only be used for the accumulation of funds to provide an income on retirement.
Governing legislation does not provide the flexibility to enable the pension scheme to act as a savings
contract i.e. once contributions are paid in, they are inaccessible and may only be taken as pension (or
pension and cash) at retirement.
The most essential use of the products is to top up inadequate State Pensions.
The tax free cash element may provide cash at retirement to repay loans or any number of other uses.
Certain circumstances may prove problematical in pension planning terms:
Scheme members whose salaries exceed the earnings cap.

Scheme members who have only a short time to go before retirement.
In the above circumstances, planning will need to be supplemented by other investments
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PENSIONS - COMPARING PRODUCTS AND PROVIDERS
The legislation and regulations governing pension schemes, both PPP and occupational, apply to all
contracts offered by all providers.
The main differences will depend, therefore, on the way in which the individual providers operate their
companies, draw up their policies and target their market.
The deciding factors as far as the client is concerned will be financial status and employment status
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PENSIONS - Eligibility
7.1 Eligibility
If unemployed or on disability income of some sort, including that from an individual IPI policy, there is
no pension planning route available using pension products, as earned income is a prime requisite.
If self employed, the only route is the self employed version of the Personal Pension Plan.
The employed may have the widest choice:-
1.
2.
3.
4.
5.
6.
7.
Occupational scheme, including EPP.

Personal Pension.
APP to contract out.
AVC.
FSAVC.
S32.
Membership of SERPS
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PENSIONS - Minimum Contribution Levels
7.2 Minimum Contribution Levels
These will differ slightly from contract to contract, provider to provider. The minimum under a
stakeholder contract is 20.
There will be differences in minimum monthly, annual and single contribution which may be useful in
determining a suitable product. Paying too high a minimum may not be practical advice, so a lower
minimum may need to be investigated
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PENSIONS - Charging and Commission Structure
7.3 Charging and Commission Structure
Charges for unit linked policies are usually highly visible and, given the competitive market, very similar
between providers, along the lines of:
1. 5% initial charge (bid-offer).

2. 1% - 2% annual management charge.
3. Monthly flat rate policy fee.
Charges for with profit or deposit accounts tend to be hidden and difficult to compare.
Administration charges for the larger occupational schemes tend to be less per capita than for
individual schemes, whether PPP or EPP. It is usual for the charges under group occupational
schemes to be borne by the employer. Similarly, it is conventional for life cover, group IPI and other
related employee benefits to be borne by the employer.
With the advent of commission disclosure most insurance companies offer a menu of commission so
that the adviser can chose how much commission to take and possibly how much to rebate into a
clients contract. The advent of stakeholder pensions is giving this a higher profile.
Stakeholder pension charges are restricted to a 1% annual charge with no bid/offer spread or transfer
penalty
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PENSIONS - Transfer Values
7.4 Transfer Values
Transfer values from unit linked policies will generally reflect the bid value of the fund, although there
may be additional penalties in the early years. There must be no penalty for transferring a stakeholder
pension.
Transfer values from group occupational schemes will represent the equivalent fund value of accrued
benefit in a final salary scheme, rather than the value of contributions paid into the fund. Essentially,
the actuary recommends a sum which will grow, given assumed conditions, into enough cash to
purchase the benefit built up in the scheme to the date of leaving. This may or may not equate with any
valuation made by the accepting scheme as to how much benefit it will buy.
Because of all the variables, it is a complex subject, and will need to go through a proper analysis to
help determine whether the transfer is acceptable, and whether what it can buy is good value
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PENSIONS - Benefits Payable
7.5 Benefits Payable
Benefits payable from a final salary occupational scheme are out of the control of the potential
member, and in terms of value for money, the value of the employer's contribution should be taken into
account.
Additionally, it may be useful to know the percentage of final salary one might expect as benefit.
Similar considerations apply regarding money purchase schemes, except there is no benefit promise.
Low level formulae or low contribution rates, however, should also be taken into consideration,
because however tax efficient such schemes might be, if the return on investment is not sufficient,
alternatives must be sought
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PENSIONS - Tax Treatment
7.6 Tax Treatment
In the accumulation phase, approved pension schemes are probably the most tax efficient investment
available in that tax relief is available on input, and funds are taxed advantageously.
Once in payment, they are treated like any other earned income and taxed under the PAYE system.
A more tax efficient income may be obtained from the purchased life annuity, which pays out as part
taxable annuity, part non-taxed return of capital. It may be worth investing the tax free cash sum at
retirement in such an annuity, rather than having the whole pension paid from the fund and taxed at the
full rate
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PENSIONS - Waiver of Contributions
7.7 Waiver of Contributions
This is a useful option to a policy, as it effectively continues the payment of contributions in the event
that ill health prevents continuation of contribution from earned income.
Suitable where, for example, a pension is being used to support a mortgage. If the sickness is
prolonged to say, retirement, not only will the mortgage be paid off, but there will also be an income
available which otherwise may have been impossible to build up
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PENSIONS - Comparing Options
7.8 Comparing Options
Basic product selection must precede choice of options.

The cost of 'add on' options can generally be easily determined, either as part of the premium or as a
separate item.
This cost can help the client prioritise options because in addition to other 'needs' tests that might be
applied, it may help clarify matters simply to ask whether or not the client should pay extra money for
the option in question.
Once an option or set of options has been selected, final choice may be made on the basis of:
1. Cost e.g. addition to premium, cancellation of units.

2. Flexibility e.g. premium cessation, switching facilities.
3. Charges e.g. switching charges, activity charges or fees
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PENSIONS - Comparing Providers - Financial Strength

7.9.1 Financial Strength
Consideration should be given to:-
1. Press and company own reports on volume of business, and any

increases/decreases since last reported.
2. Make up of new business i.e. balance of single and regular premium, balance of
life and pension business.
3. Liquidity ratios, profit margins as revealed by company reports and statements.
4. Free Asset Ratio history, although neither this nor any other ratio should be
used on its own.
Additional consideration might perhaps be given to compliance history, including fines paid, systems
reorganised, training redone
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PENSIONS - Quality of Service
7.9.2 Quality of Service
This relates to a wide range of client contact, including:-
1.
2.
3.
4.
5.
6.
Answering of queries by telephone/letter.

Production of correct figures.
Correct processing of paperwork.
Preparation and delivery of policy within a reasonable period.
Correct and timely delivery of bonus notices, unit statements.
Correct and timely payment of annuities, or collection of premiums
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PENSIONS - Investment Choice and Performance
7.9.3 Investment Choice and Performance
Client perception of investment risk needs to be balanced with performance requirement to achieve the
task in hand.
Investment performance history should be considered, but along with changes in market conditions so
that there will be no automatic assumption that performance will be repeated.
It should be borne in mind that charges will have an effect on performance
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The Life of Brian Riley, Phase 4 Employment - a financial case study
The Life of Brian Riley, Phase 4 Employment

Despite a hectic social life, Brian graduated in engineering sciences with a 2.1
degree. He was lucky enough to find a job with his local council's waste control
department, where they had just started to investigate 'green' waste control.
To start with he was not on the permanent staff, which meant that his salary
(10,800) did not qualify for any benefits, such as pensions and life assurance.
He did qualify for accident insurance, but wasn't really concerned about any of
the benefits. "Too young for pension, anyway" he had said, when the
personnel officer had explained, apologising for the 'no benefits' policy. His
main concern was to juggle his social life and income. Sharing a flat; and
therefore the rent, with two university friends helped.
He wasn't totally without funds. His grandparents had given him 5000 as a
combined 21st birthday and graduation gift, which they insisted he 'put away'
until he needed to buy a house, or something similarly important. He had finally chosen to
invest the whole amount into a TESSA via a feeder fund to top up the five year contract each
year by an appropriate amount.
Shortly after joining the council his financial fortunes peaked briefly again, courtesy of the
National Lottery. Brian had been part of a work syndicate since joining the council, and six
months in to his employment the syndicate had won 108,000 with five numbers and the
bonus ball, Brian's share was 9000. After paying off debts of 3000 he put the balance into
a building society account; he didn't want to lock this money away.
Although Brian quite enjoyed investigating waste disposal from the point of view of green
issues, it hadn't been his intention to go down this work route. He felt the only way to get
back on track was to continue his studies and research for a doctorate. His current work and
research provided an excellent starting point.
During one of his research trips to university, he meets Judith, who is engaged in similar
research, and they start seeing each other regularly.
Around about this time Brian's grandfather, George, dies leaving his estate to his wife,
Mildred. Within nine months, alas, Mildred has also died, leaving the estate to be divided
equally between the children.
The Life of Brian Riley, Phase 4 Employment - a financial case study
Brian's 25th birthday sees him and Judith moving into a rented flat
together, where they stay for two years before buying a house, in Brian's
name, using his grandparent's gift to help with the deposit, and the
remainder of their savings to furnish and decorate.
Brian organises a capital and repayment mortgage of 50000 over. They
agree that Judith's contribution to the family finances will be 15% of the
repayments plus all the food and drink. Brian will cover the rest, which
amounts to 400 per month, including the balance of the mortgage
payment. Everything goes through smoothly, the only outstanding item
being the building society's recommendation
to establish a mortgage protection policy
which, quite frankly, they have forgotten
about, and filed the illustrations and
application forms away with the completed mortgage papers.
Brian is now a senior planning officer earning 25,000 and Judith
is lecturing at the university, earning 15000. They are both
members of non-contributory pension schemes which provide an
element of life assurance cover.
Seven years after leaving university he learns he is to become a
father, the baby being due on Judith's 26th birthday. Judith gives up work earlier than
expected due to medical complications, but still hopes to return to work as soon as possible
after the baby's birth. They marry just before the baby's birth.
Following George and Mildred's death
Pension provision for Brian and Judith
Protection requirements
What should they do now
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The Life of Brian Riley, Phase 4 Employment - a financial case study part 4

Given the recent history, what do you think of the advice that has been given in earlier episodes?
The advice to consider a TESSA seemed well founded.

If he had found it relevant to Contract Out of SERPS it would be important to review the position vis-avis his membership of his employer's scheme.
Similarly, if had set up any Personal Pensions arrangement this would now have to be discontinued if
on a regular basis.
At this stage it could be that the advice given to Brian's mother, Mavis, concerning Long Term Care is
now becoming a matter for Brian to consider.
What advice do you think would have been necessary following George and Mildred's
deaths?
George's estate is exempt from Inheritance Tax, as the entire amount has been passed to Mildred. In
'pure' planning terms they wasted this exemption; it may have been possible to pass on assets before
their deaths.
Mildred's estate of 390,000 is liable to Inheritance Tax, as the beneficiaries are not receiving an
exempt transfer.
Quick Succession Relief is not relevant as this applies only where IHT had been charged on the first
transfer.
Under 1997/98 tax rates IHT due on the estate amounts to:
390,00 less 215,000 (nil band)
175,000 at 40%
70,000
This is due within 6 months of death.
Now that they are married and with a baby on the way, Brian and Judith have a lot to
consider. What are their primary considerations?
i. Pension Provision for Brian and Judith
Judith seems to have ceased to receive pensionable income and should, therefore,
review her position in respect of:
a. Preserved benefits.
b. When will she return to work (month or years)?

c. Will she be able to rejoin her old employer's scheme?
d. If she returns on a part-time basis will different pension arrangements apply?
e. Does she intend to 'return to work' on a freelance basis thereby generating self-
employed earnings?
Brian's Pension arrangements could be reviewed in respect of the following:

a. If the life cover provided is below the 4 x salary Revenue limit he could
consider AVCs as a life assurance vehicle (see 'protection' below).

b. The family income/expenditure ratio indicates the likelihood of some surplus
which could be used to increase pension entitlement, as Brian will possibly not
achieve maximum benefits.
c. Although his employers scheme is probably Contracted Out of SERPS Brian
should check and if it is not use an APPP to obtain benefits over those allowed
by Occupational Scheme Limits.
d. If he wishes to take action to increase pension entitlement the choice between
AVCs and FSAVCs will depend on:

i. Confidentiality (FSAVCs are private).
ii. Tax relief (immediate through AVCs and the net pay system as
opposed to FSAVCs and the net premium system).

iii. Investment Risk Profile (FSAVCs have wider choice - AVCs are
controlled by scheme Trustees).

ii. Protection Needs
Both need to consider the situation, which may occur on the death of, either or both.
Life cover for Judith would take account of her pregnancy and the 'complications' and
special terms would probably be offered.
The amount of life cover should take account of:
a. The mortgage (and in whose name).
b. Any other debts.
c. The income that each would need in the event of the death of the other.
d. The length of time for which the income would be needed.
e. Anticipated investment returns if the income is to be provided from a capital
sum (say 5%).

f. Do they intend to increase their family?
g. The possible impact of inflation.
h. Would they be entitled to any State Benefits?
i. The use of Joint Life Policies, first or second death, should relate to the need
and in particular when a cash sum would be needed. In certain cases single
life on each could be preferable.
j. Trusts could be used to add to the speed of payment in the event of a claim
and IHT efficiency.

What else could they discuss?
Other protection needs to be considered:

a. Critical Illness Cover (esp. for mortgage).
b. Income Replacement for Brian (PHI).
c. Accident Sickness and Unemployment cover for Brian (esp. for mortgage).
d. In view of Judith's 'complications' and the growing family they could consider Private Medical
Insurance unless Brian has family cover through work.
e. They are possibly a little young to look at Long Term Care but it could be a subject worth
investigating for the future.
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The Life of Brian Riley, Phase 5 Re-employment - a financial case study part 3
The Life of Brian Riley, Phase 5 Re-employment

Just before baby Andrew's 5th birthday, Brian is made redundant from the
council, the same day that Judith is confirmed pregnant with twins. It takes
eight months before he is earning again. In the meantime they live on the
redundancy money as well as their savings, investments and earnings from
Judith's part-time tutoring and coaching from home.
Whilst looking for employment, Brian is also pitching for self-employed
consultancy work. A research project undertaken for a client six months after
redundancy (paid almost three months later) reveals a gap in the market for
certain types of pumps, filters and piping for use in the waste disposal industry.
He contacts a number of ex-colleagues, and eventually Brian and two others,
Simon (aged 35) and Jack (aged 52), decide to go into business together to
manufacture these items. Brian has 60% of the business, the others with 20%
each.
They have to put up a total of 50,000 to start the business and each take out business loans
secured on their own properties. All three are in good health, although Jack smokes 60
cigarettes a day.
a. Given this sudden change in direction, how do you think the advice/actions in
previous phases stands up? Should anything have been done differently, with
hindsight?
b. Do you know what Brian's likely redundancy entitlement would be? How do you think
he should approach his investments and protection arrangements in the short-term,

while he is looking for a job?
c. What would you say could be the advantages and disadvantages of Brian going self-
employed?
d. What practical steps should Brian and his partners take in the areas of:
i. Tax and National Insurance?
ii. Protection?
e. Taking account of the fact that Brian is now self-employed and Judith's changed
circumstance, do you think that they should review their insurances? In what ways?
The Life of Brian Riley, Phase 5 Re-employment - a financial case study part 3

The advantages and disadvantages of self employment
Business advice
Considerations
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A.
Review of previous advice.
i. The need for and benefits provided by Redundancy Insurance have been highlighted by Brian's current
situation.
ii. The safety net which could be provided by a well structured emergency fund is also apparent.
iii. Less seriously, but nevertheless a consideration, it may have been prudent to have insured against
producing twins if this ran in the family!
B.
i. The Statutory Redundancy payment is made by the Employer, unless in liquidation when the DSS will
pay; not a consideration in Brian's case as he was employed by the local authority.
ii. Minimum payments under current rules are dependent on age as follows:
18-21 0.5 weeks pay for each year employed
Maximum allowable wage is 210 per week.
As Brian is 33 he should get at least one week's pay for each year of service and as he has been with
the Council for 12 years at a salary in excess of the maximum he will be entitled to approximately
2,520. However a Council is likely to be more generous and his payment (if within that allowed by the
Employment Protection Consolidation Act 1978) will be free of tax.
iii. His investments during his period of searching for new employment should take account of his need for
low/no risk and should be reasonably accessible. The favoured home under such circumstances will
probably be Deposit based; a 60 or 90 day account could be used bearing in mind the loss of interest
that would happen if withdrawals were made. He could look to using some of his existing investments to
top-up his earnings/State Benefits. The interest on his TESSA can be withdrawn (net of 20% tax)
without losing the tax free status of the capital. Switching the investments within his PEP(s) to an
income producing profile might be an attractive idea. He would need to take care that the switch did not
incur any excessive charges and was not to the detriment of the new risk profile.
iv. His pension with the local authority will now need to be considered. If no action is taken; it will be
preserved; a transfer may be possible when he restarts work; he will be able to take advantage of the
Transfer Club if he returns to a similar occupation; he could also use a PPP of a Section 32 buy out. It is
too soon to take final decisions and retaining the preserved pension will probably be the most sensible
option. The "Wait and See" theory holds water even though Brian eventually opts for self employment.
C.
The advantages and disadvantages of self employment are summarised below:
Advantages
Disadvantages
Independence
No income guarantees
Income Tax Allowances
No future redundancy payments
Availability of PPP
No employer contributions to pension
Control of business
Responsible for business
Flexibility of working hours
All hours are working hours
Less NIC to pay
No entitlement to SERPS or equivalent
Balancing the pros and cons of self employment must be a combination of the practical and the emotional. Many
who are capable of dealing with the administrative work do not relish the comparative insecurity; many who can
deal with the 'ups and downs' do not have the discipline to keep the paperwork up to date. How do you think they
will cope with the inevitable pressures whilst trying to raise a young family?
D.
Business advice re:
i. National Insurance and Tax
retain all receipts and proof of expenditure.
keep bank statements safe and in page order
appoint a qualified Accountant with experience of the type of business you are setting up;
interview a number and choose the best for you.
put money in a separate bank account in anticipation of future tax and NI bills
check Jack's NIC record as he is nearest to State Pension Age and therefore has less time to
make up any shortfall
Brian, Simon and Jack have formed a partnership and must give immediate attention to
drawing up a Partnership Agreement detailing drawings, profit sharing percentages,

arrangements on the death, withdrawal or retirement of any one of them and the requirements
for the appointment of any additional partners.
ii. Protection
They may consider using Pension Term Assurance in a Flexible Trust to ensure that, in the
event of the death of any one of them (or any new Partner), there will be sufficient funds
available to fulfil the obligations imposed by the Partnership Agreement.
As an alternative to Pension Term Assurance they may consider the use of a Universal Life
Policy in order to provide benefits other than simply life assurance e.g. Critical Illness
The ability to plan time will be of particular importance during the early years so they may be
prudent to effect Private Medical Insurance to ensure that any urgent or necessary treatment
can be carried out at a time convenient to them.
To ensure that, in the event of illness or accident, the Partnership does not have to provide an
income for a non-producer the individuals could effect Permanent Health Insurance.
They will also need some form of Professional Indemnity Insurance.
E.
i. As he is now self-employed his Redundancy Insurance will be invalid
ii. If he has opted for Private Medical Insurance as part of his business protection he may wish to extend
this to cover his family as well.
iii. The adequacy of his current plans in respect of the following should be considered to take account of
his new liabilities and responsibilities.
Life Assurance
Critical Illness Cover
Pension provision
Emergency fund levels
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The Life of Brian Riley, Phase 6 Self Employment - a financial case study
The Life of Brian Riley, Phase 6 Self Employment

It is now six years since Brian set up the business with his partners. In the
intervening period he taken advise from a number of advisers, and has
changed some of the arrangements we know about.
A week after Brian's 40th birthday his mother died, leaving Brian and his eldest sister as
executors. He inherits the house to the value of 180,000 whilst his sisters inherit the rest of
the estate. The total value is approximately 240,000. Brian does not need the house as they
only moved 2-3 years ago to their current family home.
Andrew is now 11 and the twins, Stephen and Phylis, are 6. Judith is back at work full time as
a lecturer earning 16,000. The children go to a local school and are looked after each day by
a nanny.
The original partnership set up by Brian, Simon and Jack is now a limited company,
Greenpipes Ltd. All three are Directors and take a salary of 50,000. Their shareholding is in
the same proportions as their original investments. The company is growing and they now
have a work force of eighty, with work orders at home and abroad which should cover them for the next three
years.
This year's total dividends are likely to be in the order of 40,000, split between the three of them in proportion
to their share holding. Brian intends to invest his share in his new "hobby" - long term saving for retirement. He
hasn't previously considered retirement seriously. Judith plans to retire from the University in 10 years time,
when she will be 47, so that she can write full time. She believes that with a pension from the University, plus
some part-time tutoring from home, she will have sufficient income.
As Brian and his family are going through a period of comparative stability, now would be a good time to look at
their financial situation as laid out in a typical financial advisers confidential fact find report.
Task:
a. How do you think previous advice is holding up?
b. It is easy to make errors on forms, but this particular form is quite vital if correct advice is to be offered.
i. What errors or inconsistencies can you spot in the fact find?
ii. What questions would you ask to clarify these areas?
c. Do you think Brian needs to do anything about his pension? If so, what?
d. Do you think Judith needs to do anything about her pension? If so, what?

Errors and Inconsistencies (Actual and Potential)
Questions to Clarify
Considerations
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A
i. Previous advice (not including that given by the other advisers) contained enough flexibility to cope with
the changes in Brian's lifestyle.
ii. Brian's life cover is far less than that which could have been recommended and only represents 3 years
salary (or 1 years total income). No use has been made of Pension Term Assurance.
iii. Advice to contract-out of SERPS has not been followed, or possibly not given. Brian and his colleagues
pay income tax under Schedule E and have middle band earnings on which National Insurance
Contributions are due. Brian is within the Pivotal Age, i.e.
B
i. Errors and Inconsistencies (Actual and Potential)
a. Mortgage is given as 75,000 but Endowment life cover is only 60,000.
b. Last house move is given as 2/3 years ago but the Endowment has been in force for 11 years.
c. Company shareholdings are not given but dividend income is shown as 66,000 from a total
investment portfolio of 136,000. A rate of nearly 50% is unlikely.
d. National Savings Certificate holdings are shown as 15,000. This may be over a number of
Issues but the maximum holding per Issue per person is 10,000.
e. Additional income of 700 is shown but there is no source given.
f. Some pension provision has been made through RACs but the selected retirement date is
given as 50 and under RAC rules the minimum is 60 unless in a special occupation or in
serious ill health.
g. The potential estates shown do not match the division of assets or the joint ownership of the
home (joint tenancy or tenants in common ?)
h. Judith's proposed retirement date is earlier than would normally be allowed.
i. Only Judith appears to have effected a will, although they have the same solicitor.
j. There is a conflict of opinion on the question of ethical investment.
k. The TESSA holding needs to be checked as the amount may be split between Brian and
Judith.
ii. Questions to Clarify
Brian, when do you anticipate retirement? Do you plan to gradually retire or take all your
benefits at once?
Could you please confirm your individual shareholdings in Greenpipes Ltd?
Where does the extra 700 additional income come from?
Did you increase your mortgage when you moved house 3 years ago?
Do you have any other life assurance to cover the difference between your mortgage of
75,000 and the endowment Sum Assured of 60,000?
National Savings Certificates are held individually; please let me know how the 15,000 is
divided.
Is your house held in joint names?
Have you both made wills?
What are the basic bequests in each will?
When were the wills last updated?
Of the 250,000 in pension funds, how much is in RACs and how much in PPPs?
Have you made any arrangements to contract out of SERPS?
From which of the investments does the investment income relate to?
Why did you invest in an offshore investment?
Was the Bank loan/overdraft taken out for a specific purpose?
Judith, can you let me know the source and reason for the liability of 3,000?
Brian, how is the 18,000 invested in TESSAs split between yourself and Judith?
Judith, was there a specific reason for taking out the Endowment with Jersey Life?
Is the West Country Mutual whole life policy assigned against your mortgage loan?
Brian, if you retire at 50 what level of income would you consider sufficient?
Judith, have you got a copy of your Pension Scheme booklet so that I can check the early
retirement provisions?
The above are only examples of the types of further questions which would need to be clarified. There
are many other equally valid questions which could be asked.
C
i. The current Fund of 250,000 with growth between now and age 50 could provide a reasonable income
providing Annuity rates at the time are fairly high. However the income is unlikely to be close to the level
of salary being drawn.
ii. Brian, with his fellow Directors, could set up an Occupational Pension Scheme or Group Personal
Pension for the entire work force. To contain costs this would probably be on a Money Purchase basis.
iii. Alternatively, the Directors could set up individual Executive Pension Plans for themselves or either
leave the OPS regime to make individual provision through PPPs or set up a Group PPP making a
minimal contribution.
iv. Any Occupational arrangement for Brian should be written to allow Accelerated Accrual although this
will only result in a final fraction of 9/30 if he really intends to retire at age 50.
v. At this stage, Brian would receive no advantage from transferring his PPP and RAC holdings into an
Occupational Scheme. He should consider the choice of investment fund with a view to consolidating
gains already made.
vi. He should investigate Phased Retirement and/or Drawdown facilities under his current arrangements
and, possibly, consider combining holdings.
D
i. Based on the information given, Judith will receive a pension worth less than 1/3 of her final salary. Also
she will not be able to take her pension benefits at 47, as seems to be intimated.
ii. If she considers this inadequate she will need to effect an AVC and/or FSAVC in order to boost her
pension. The limit is 15% of remuneration including any main scheme employee contributions; details of
the latter will need to be confirmed.
iii. Her investment income is non-pensionable but could be used to produce investments to subsidise
income in the future.
index |

The Life of Brian Riley, Phase 7 Retirement - a financial case study
The Life of Brian Riley, Phase 7 Retirement

Brian has recently suffered a heart attack. Although not debilitating, it was a
warning that he needs to change his lifestyle. So, at the age of 60 he is
considering retiring from the business. Jack retired a number of years ago but
keeps an active interest in the firm and retains his original shareholding. Simon
does not wish to retire yet at the age of 61. They have had an approach from
their biggest rival to buy them all out for the price of 2 million. Brians share
will come to 1,200,000. They accept the offer.
Brian has built up a considerable pension portfolio over the years and the
valuation last month was as follows: -
Retirement Annuity Contracts
Fund Value 150,000
Personal Pension Policies
Fund Value 290,000
Executive Pension
Plan Fund Value 560,000
His earnings over the last 3 years were as follows:
Salary
Dividend
P11D
Last 12 months
91,000
91,000
8,500
Previous 12 months
80,000
40,000
7,000
Previous 12 months
70,000
35,000
6,000
Even before adding the proceeds from the sale of the business, Brian had built up a fair sized investment
portfolio, a summary of which is:
Cash
Yield
Brian
Joint
Judith
1.5%
5,000
18,000
35,000
National Savings Certificates
35,000
20,000
Capital Bonds
45,000
20,000
Tessa
9,000
9,000
14,000
9,000
Peps (wide range of unit trusts)
50.000
15,000
Unit Trusts (wide range all UK based)
235,000
15,000
200,000
15,000
Gilt's
Investment trusts
TOTAL
4%
2.5%
719,000
18,000
99,000
Judith is still lecturing at the university and is due to retire in 3 years time at the age of 60. Her earnings are
27,000pa, but she intends to continue to work for as long as she can.
All three of their children Andrew (31), Stephen & Phyllis (26) are independent, living away
from home. Both Brian and Judith gave each of them 10,000 when they reached age 25.
The family home is currently worth 270,000 and Brian and Judith have no mortgage or other
debts.
As for Life Assurance Policies, they only have the whole of life policy with the West Country
mutual, which pays out whichever of them dies first. The sum assured payable on death is
150,000. As it is unit linked policy, it also has a fund value. Currently, it is 112,000. This
monthly premium is still 350.
Both Brian and Judith have wills leaving their estate to each other on death.
1. Do you think you would have suggested anything different, had you known what was
going to happen?
2. Do you know what would be the taxation position on the sale of Brian's shares? Could
you suggest a course of action for him?

3. What pension options are open to Brian?
4. Suppose Brian wanted annual income of 15,000 pa. Given his financial situation as
described above, do you think you could find a way to produce this figure.
5. If Brian were to die today, what would be the IHT position and how much tax would be
paid?
Is it possible to reduce the tax bill?
Brian's pension options
Considerations
index |


1
i. The advice to include Critical Illness Cover has been highlighted by Brian's heart attack.
ii. The level of life cover has not been maintained at a level appropriate to the life style which Brian has
provided.
iii. Prior planning for the potential Inheritance Tax liability would have been preferable to the current
situation.
2
The Sale of Brian's shares presents a potential Capital Gains Tax liability.The amount of the
liability depends on whether we are considering the disposal to the 'biggest rival' or the
subsequent disposal of the new shares.Any potential liability could be mitigated by electing to
claim Retirement Relief. The 1998 Budget changed the precise rules but Brian should be able
to arrange his affairs in a way which eliminates any liability to CGT.
3
Brian's pension options are:

i. Transfer all accrued benefits to his Executive Pension Plan and accept the limit on
benefits
ii. Transfer all accrued benefits to a Personal Pension Plan arrangement (current or new)
subject to the restrictions on the input.

iii. Use the Open Market Option on the RAC and the Personal Pension Plan to combine
benefits.
iv. The availability of Contracted Out benefits needs to be addressed.
Restrictions:
Aggregation of benefits. Restriction of Tax Free Cash if Open Market Option is used.
Consideration should be given to taking the maximum tax free cash in order to
increase flexibility, accessibility and to benefit from having only part of the income
payments subject to income tax.
Brian can have his maximum pension benefits calculated as the greater of:
1/30th of final salary for each year of service from his Occupational Scheme including
any other previously
i.e. 1/30 x Final Salary (capped at 87600) x Years of service (max. 20)
2/3 x 87600 = 58400
OR
1/60 of final salary (capped at 87600) x years of service plus any other preserved or
accrued benefits
v. i.e.20/60 x 87600 = 29200
plus
150,000 + 290,000 x 11% = 48,400
Total = 77600
The above calculations are to determine maximum benefits and do not affect the right
to take tax free cash and a reduced pension.
For example:
EPP Fund of 560,000 could provide a Joint Life pension with a 2/3 widow's pension of:
44,800 pa
PLUS
He could use the Open Market Option on the RAC to produce a total fund of 444,000,
which could produce a tax free cash sum of 110,000 and an escalating single life
pension of 29,700 pa
Other combinations could be produced dependant on Brian's personal requirements.
NB. Rates used for above calculations are:
Single Life 11% Joint Life & 2/3 widows pension 8% To have pensions increasing by
5% pa would reduce each rate by 2%, to 9% pa and 6% pa respectively.
4
Brian's pensions, based on the figures in Q 3, total 74,500 pa
His investments should therefore be used to fund the balance of 75,500 pa

The total capital available is:
719,000
(Brian's name)
18,000
(Joint names)
99,000
(Judith's name)
Total
836,000
Plus the tax free pension cash
110,000
Grand Total
946,000
Emergency Fund and amounts for Day to Day use

deducted
47,300
Emergency Fund at, say, 6%
47,300
National Savings Pensioners Bond
250,000
Range of Unit Trusts (10) High Yielding
260,000
Corporate Bond PEPs (each)
12,000
Single company PEPs (each)
6,000
High Yielding Investment Trusts (4)
260,000
TESSA (as held)

Gilts (mixture of dates)
3,000
60,400
898,700
As currently arranged there would be no liability to Inheritance Tax on Brian's estate as his will
leaves the entire amount to Judith and the Potentially Exempt Transfers made to the children
would fall within the Nil band.
Brian and Judith could reduce their ultimate IHT liability by changing their wills and leaving an
amount equivalent to the nil band (223,000 in 1998/9) to their children (or any other nonexempt beneficiary) and leaving the balance to the surviving spouse.
Brian and /or Judith could consider using their annual allowance of 3,000 now to reduce their
overall estate.
The West Country Mutual Joint Life First Death Whole Life Policy will currently exacerbate
their IHT position and consideration should be given to approaching the provider with a view
to making it paid up and converting to Joint Life Second Death. This would also increase their
spendable income by 4,200.
index |

The Life of Brian Riley, Epilogue - a financial case study
The Life of Brian Riley, Epilogue

Brian's Life is finally over. He has died suddenly, age 76, a frail man finally exhausted from
looking after Judith, who has been ill from various complaints over the last few years. He died
shortly after receiving the news that his beloved Judith, 73, had terminal cancer. Before he
died he confided to his son Andrew that the care she needed, practically 24 hours a day, was
wearing him out, and he worried about what would happen to her should he die.
Andrew is married to Laura, 36 and they have three children, Arthur 15, Brian 9 and Ellen 2.
His brother Stephen lives with his wife Catherine and they have a son James aged 7. Their
sister Phylis moved to Australia and is married to Bruce. They have four children aged 14,
12, 9 and 2. Andrew has kept in contact with his brother and sister, but the family apparently
distrust Bruce, and so
Brian's death has caused some consternation because he was just about to change his will to
ensure that the money went directly to the grandchildren.
His gross estate has been valued at 1.8 million made up of investments and a surprise find
of two valuable paintings found in the attic. Judith's estate is worth 100,000; they took
professional advice about estate planning but failed to do anything about it. The will currently
leaves everything to Judith.
1. What do you think of the huge imbalance in Brian's and Judith's estates - purely from
the planning point of view?

2. Is the IHT position on Brian's death complicated?
3. What post death planning could be done to mitigate the tax position now and on
Judith's death?
4. What arrangements could be made to ensure that Brian's estate is passed on to the
grandchildren, as he had wished?

index |

The Life of Brian Riley, Epilogue

1. Brian and Judith should really have taken steps to divest themselves of some of their estate much
earlier than this, by equalising the amounts held between them.Although Brian's death does not in itself
cause an IHT problem (transfers between spouses being exempt) it has exacerbated the prospective
IHT liability on Judith's death.Brian and Judith could also have taken steps to reduce their prospective
IHT liability by divesting themselves of some of their estate and taking advantage of the annual IHT
exemption/potentially exempt transfer provisions.
2. As mentioned above transfers between spouses are exempt, so there is no IHT liability in this
situation.As a minimum it would have been (and still is) possible to use the nil rate band allowance
223,000 by passing this to beneficiaries other than Judith and ensuring that the allowance is not lost
completely.
3. As Judith is the only beneficiary of Brian's estate she may decide to make use of a Deed of Variation. If
completed within two years of Brian's death, this will allow (at least a portion of) the estate to be passed
to the grandchildren as if Judith had not been the only beneficiary. This procedure avoids a double IHT
charge having to be paid before the grandchildren would receive any benefit (40% makes a significant
inroad into any balance!) Her current condition places some urgency on taking some sort of action. The
question of how much of Brian's estate Judith needs to retain is important to consider. Whilst her age
and condition may mean that she does not live an active lifestyle, the family will wish to ensure that
she's well cared for and that her remaining time comfortable.Judith may decide to retain, say, a further
300,000 to cover these aspects. This amount would not be chargeable to IHT. The remaining balance
of 1,500,000 would be taxable on the excess over 223,000, leaving a tax bill of 510,800 and the
balance of 989,200 to the grandchildren.Alternatively, if the cancer were to enter remission, Judith may
decide to keep a greater portion and divest herself of her extra estate gradually, although this action will
not necessarily reduce the overall IHT liability unless she survives for more than three years after the
gift (preferably seven years to be fully exempt). Quick succession relief may however help reduce any
liability if Judith were to die within a short time of Brian's death. Given her current condition this is likely.
4. Clearly, as the grandchildren are all below the age of 18, they will not be able to look after their
inheritance individually and a trust should be set up.
It may be that the trustees decide to pay each grandchild's portion out when they reach age 18 or some
time later.
Regarding the appointment of trustees to deal with the trust, there are a number of considerations to be
taken into account:
i. Judith is in poor heath and in need of constant medical care.
ii. The family does not trust Bruce.
iii. There will be signatory problems if Phylis is appointed as Trustee.
iv. What will happen if any more grandchildren are subsequently born?
Concerning points i. and ii. Clearly they should not be trustees. The logistical problems mentioned in iii.
above may be overcome if either Phylis is willing to let say Steven and Andrew be trustees or perhaps
the family solicitor acts as a trustee (assuming costs are not prohibitive). This will ensure that all the
beneficiaries are represented and acts as a safeguard to ensure that the trustees act fairly and
responsibly (which they are obliged to do anyway).
Point iv. is a tricky area but if all were agreed that future grandchildren should be provided for, it may be
that no capital is paid out, immediately the trustees using their discretion to provide for
education/maintenance as appropriate.
The situation outlined does depend on Judith consenting to the deed of variation, and the proposed way
forward as regards the grandchildren.
index |
page back

Life of Brian Phase - 1, (just born), case study

Sickness Protection - In the event of Arthur suffering prolonged sickness
Current Situation
Salary will continue for a year (6 months at

half pay) but will not normally continue
indefinitely.
Continuation of life cover. This will continue
as long as Arthur remains on the payroll.
Mortgage and other outgoings still must be
paid. Some outgoings could increase, others
reduce or disappear.
POSSIBLE REMEDIES
Permanent Health Insurance (PHI) contract on
Arthur. s life, to replace at least some of the

lost income with a deferred period being set
as the period when his salary on sickness
(from the Civil Service) would reduce/cease
6 months and 1 year respectively.
Personal Accident & Sickness to provide a cash
sum in the event of accident and/or an

income for up to 2 years in the event of
sickness.
In the event of Mavis. prolonged illness
Current Situation
POSSIBLE REMEDIES
No PHI cover, so no protection for income.
PHI contract on Mavis. life with a shorter
Loss of 16,000 income.
deferred period in view of her self employed

status (i.e. no sickness cover provided)
Personal Accident & Sickness a possibility, as
for Brian..
http://www.financial-planning.uk.com/consumer/casestdy/brian/brian1b.htm (1 of 2) [4/20/2002 5:57:32 PM]
Life of Brian Phase - 1, (just born), case study
index |

http://www.financial-planning.uk.com/consumer/casestdy/brian/brian1b.htm (2 of 2) [4/20/2002 5:57:32 PM]
PROTECTION - Personal Accident Insurance
2.2.7 Personal Accident Insurance
Personal Accident policies are not life assurance contracts, but as they are concerned with bodily injury
caused by accident, or inability to work due to sickness, such protection should not be overlooked.
Benefits are on a fixed scale, with a fixed benefit payable in the event of accidental death or Total and
Permanent Disability with proportionate sums payable in the event of loss of limbs, for example.
Exclusions may apply. For example, benefits may not be payable in respect of bodily injury as a result
of:
1.
2.
3.
4.
Suicide or self inflicted injury.

War and kindred risks.
Full time military service.
Flying as a pilot or aircrew
It is usual for cover to be provided without restriction i.e. 24 hours a day and worldwide. But it must be
borne in mind that the policy is renewable annually at the insurer's option; thus if there has been some
event which impacts on the risk of a possible future claim, the premium may increase, or may not be
renewed.
Policies may be individual or group based.
index |
back page

http://www.financial-planning.uk.com/info-fp2/unit-a/2-2-7.htm [4/20/2002 5:57:33 PM]
Starting A Family, savings for children - FSEC information help files
STARTING A FAMILY
Savings for children:
Children, like adults, have the benefit of a personal tax allowance.

This means they can earn 4,195 tax free a year. Children can
receive interest on their savings before tax if they complete an R85
form which is available from most banks and building societies. The
Sunday Times suggests that an alternative is to save in a National
Savings account - a number of these accounts pay interest gross.
However, if children receive money to save from either parent, they
can only earn 100 of interest free of tax in any year.
Most banks and building societies offer competitive children's accounts - some provide free gifts. The
accounts offering the highest rates of interest do not normally offer free gimmicks. The Sunday Times
reports that the top four children's accounts (as at 7/2/99) are:
Birmingham Midshires - 6.75% gross
Britannia - 6.75% gross
Nationwide - 6.6% gross
Woolwich - 5% gross.
Friendly societies (Link to Glossary Definition) offer tax free savings plans for children. They normally
last for 10 years and are similar to endowment policies. The maximum investment is relatively small 25 a month or 270 a year. Charges can be very high particularly in the first year.
index |

http://www.financial-planning.uk.com/consumer/start-family/sfam4.htm [4/20/2002 5:57:35 PM]
Starting A Family, protection issues - FSEC information help files
STARTING A FAMILY
Protection issues:
Once you have a family, you also have additional responsibilities.

What would happen to your child if either you or your partner
were to die or become incapacitated. What would happen if you
were both to die in a car accident? There are a number of issues
to consider. Things which you may not have thought a great deal
about - such as making a will - suddenly become very important.
FSEC have provided comprehensive notes on protection (and
other issues) within the Married plus Young Children Lifestages
Section of this Site - please click on this link to read that
information.
REMEMBER You should not use any information contained in this

article as the basis of any action until you have discussed matters
with your financial adviser.
index |

Lifestages married + children - loss of a second income and expenditure on maintaining the children
MARRIED WITH YOUNG CHILDREN

Major changes may include loss of a second income as one parent remains at
home with young children, and expenditure on maintaining the children.
You may wish to consider the following as preparation for discussing the matter
with your financial adviser:
1. Protection of income becomes even more important now that there are more
dependants.
2. Similarly, life assurance, as protection of living standards in the event of the
death of the main income earner, will become more important than previously.
3. Wills should be updated in line with new circumstances.
4. Personal tax matters should be reviewed so that available allowances are used most favourably.
5. School fees are expensive. The ealier planning starts, the easier it is likely to be effective in defraying
the costs in the long term.
6. Pension planning should not be relegated in importance or deferred
because of other expenditure; it may be worth investigating the life
assurance options under Personal Pensions (tax relief available).
7. Moving house will mean careful investigation of mortgage options.
NOTE Do not take any action without first consulting your financial adviser.
This information and that of the other linked pages is not intended to suggest any particular course
of action.
http://www.financial-planning.uk.com/consumer/lifestgs/life4.htm (1 of 2) [4/20/2002 5:57:39 PM]
Lifestages married + children - loss of a second income and expenditure on maintaining the children
Introduction | Minors | Young Adult | Students | Early Married Life | Married + Young Children | Middle Aged +
Older Children | Pre-Retirement | Retirement
index |

FSEC Special Reports on Occupational Pension
SPECIAL REPORT: OCCUPATIONAL PENSIONS

Over the last five years the face of pensions has changed considerably, even before
taking into account the emotive subject of supposed pensions mis-selling.
One thing remains constant, however; there is still much that is misunderstood regarding
the basics of the subject. The technical phraseology and jargon used by the drafting
legislators and Inland Revenue Pension Schemes Office is, inevitably, adopted by the
pensions adviser. All parties, occasionally, forget to use plain English when talking with
the lay public. It is easy to see why misconceptions occur and 'popular myth' takes over.
We hope, therefore, that this brief question and answer session will confirm what you
already know, and clarify some of those hazy areas of knowledge.
If you have a general query which you think may be of interest to other visitors to the site
please email your query to us (Please note that whilst we can attempt an explanation, we
cannot offer advice).
Questions you may have on Occupational Pensions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
Is there any difference between an occupational pension scheme, a

superannuation scheme, a company scheme and a personal pension?
What is the difference between a pension scheme, a pension plan and a pension
fund?
Can anyone set up a pension?
What is meant by the 'earnings cap'?
What is the 'married women's stamp'?
What is an 'insured pension scheme'?
If I leave work temporarily on maternity leave, will my pension entitlement suffer?
Articles about pension which appear in the press use phrases like 'remuneration',
'final pensionable salary', 'scheme earnings', 'P60 earnings', and similar phrases.
Are they all talking about the same thing? Why can't there be standard definitions
to make things easier to follow?
What is a 'final salary' scheme?
What is a 'formula based' scheme?
What is a 'money purchase' pension?
What is a defined benefit scheme?
What is a defined contribution scheme?
What is the maximum pension I can take?
How much can I contribute towards my pension?
What is the difference between an AVC and an FSAVC contract?
What is the difference between a Top Hat scheme and an Executive Pension
Plan?
If I want to leave the company, I suppose that all of may contributions and all of
http://www.financial-planning.uk.com/consumer/info/reports/occ_pensions.htm (1 of 3) [4/20/2002 5:57:42 PM]
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
the company's contributions can be transferred to the scheme my new employer

runs?
Is a transfer as described in Q18 a right?
I've heard colleagues referring to their pension rights being 'frozen' and even
'pupped'! I have a deferred pension. What is the difference between them?
What is a 'Section 32 buyout'?
Can a pension be joint life, or life of another, like life assurance?
Does my employer have to contribute to the occupational scheme I belong to?
Does he have to contribute for each member?
How do I get income tax relief on my pension scheme contributions when I join?
If a member leaves the scheme that I belong to with less than two years' scheme
membership, they are entitled to a refund of their contributions. If they were to
"opt out" of the scheme but still work for the company, can they receive a refund
of their contributions as well?
When averaging salaries to calculate final remuneration, is the earnings cap
applied before or after averaging?
I joined my current company in 1982, but didn't join the company's occupational
pension scheme until 1992. Does pensionable service for Inland Revenue
maximum benefits start from 1982 or 1992?
Can I take a tax-free cash sum but defer taking the pension from my company
scheme?
What is the maximum rate by which a pension in payment can increase?
Can dividends be included in pensionable salary?
Can an employee pay for the life cover under an occupational pension scheme?
Is it possible to retire on a "2/3 pension" before Normal Retirement Date (NRD)?
What legal documents govern a pension scheme?
What sort of powers do the Trustees of an occupational pension scheme
possess?
What does the Term "Free Cover Level" mean in respect of an Occupational
Pension Scheme?
I have been told by a friend that the State Pension Age for women is now 65. I
am now 56 and was looking forward to retirement in 4 years time. Is this
information correct?
Download the questions above and the answers
Download the Acrobat Version
Download the MsWord Version
Other reports
More Special Reports will be available soon - the newsletter will keep you informed.

SPECIAL REPORT: OCCUPATIONAL PENSIONS
Over the last five years the face of pensions has changed considerably, even before taking into
account the emotive subject of supposed pensions mis-selling.
One thing remains constant, however; there is still much that is misunderstood regarding the
basics of the subject. The technical phraseology and jargon used by the drafting legislators and
Inland Revenue Savings, Pensions and Share Scheme section is, inevitably, adopted by the
pensions adviser. All parties, occasionally, forget to use plain English when talking with the lay
public. It is easy to see why misconceptions occur and popular myth takes over.
We hope, therefore, that this brief question and answer session will confirm what you already
know, and clarify some of those hazy areas of knowledge.
If you have a general query which you think may be of interest to other visitors to the site please
email your query to us at info@financial-planning.uk.com . (Please note that whilst we can
attempt an explanation, we cannot offer advice).
COPYRIGHT 08.01 Financial Services Education for Consumers Limited 2001
Please feel free to share this document with your friends, but it must be copied in
its entirety, unedited.
For any other use please contact:
Financial Services Education for Consumers Limited
Huddersfield, HD1 2NU, United Kingdom
Tel +44 (0)1484 452020 Fax +44 (0)1484 420027 Email info@financial-planning.uk.com
Other reports can be obtained from:
http://www.financial-planning.uk.com
08.01/ Financial Services Education for Consumers Limited
Q1
A.
Is there any difference between an occupational pension scheme, a

superannuation scheme, a company scheme and a personal pension?
They are all means to the same end, namely, income in retirement, but there are
minor differences.
An occupational pension scheme is generally taken to be one which has Inland
Revenue approval, and so has a particular legal basis governed by the Income and
Corporation Taxes Act 1988
A superannuation scheme is generally taken to be a pension scheme operated by a
large corporation, or an industry sector (e.g. such as for teachers or doctors) or for
government employees. Both may be referred to as a group scheme.
A company scheme may be the same as both of the above, but could also refer to a
collection of personal pensions administered by the company for the convenience of
employees. Both may be referred to as a group scheme.
A personal pension is generally taken to be a pension arranged by an individual
(either employed or self employed) on their own account without the involvement of
an employer.
Q2.
A.
What is the difference between a pension scheme, a pension plan and a

pension fund?
A pension scheme is generally taken to refer to a situation where more than one
scheme member is involved.
A pension plan generally refers to a pension scheme for one person.
A pension fund is the underlying investment fund which provides the money to
generate the pension payments.
Q3.
A.
Can anyone set up a pension?

Generally, anyone with a source of earned income can set up a pension relating to
that source of income. A doctor with earnings from the NHS and from private
practice can set up separate pension arrangements for each income source.
Directors of investment companies, on the other hand, can set up pension
arrangements only under very stringent rules. With effect from 6 April 2001 people
without earned income have been able to contribute to stakeholder pensions.
Q4.
A.
What is meant by the earnings cap?

It is the maximum salary which can be used to calculate pension benefit, pension
contribution and certain other benefits. It changes each year, and for tax year
2001/02 is 95,400.
Q5.
A.
What is the married womens stamp?

For a period up to April 1977 married women and widows were given an option to pay
reduced NI contributions. Unfortunately, this meant that those who chose the option
have no right to a state pension in their own name. By claiming on their husbands
NIC payments they can claim a Category B pension worth about 60% of the full
single persons pension.
If you pay this reduced rate ask the local DSS office if it is worth reverting to the full
payment. Completion of form BR19 will enable you to receive a forecast from the
DSS of the benefits which will become payable from the state when you reach State
Retirement Age.
Q6.
A.
What is an insured pension scheme?

Unfortunately, it is not quite what it sounds like i.e. some sort of insured or protected
pension. It is essentially a pension arrangement run by an insurance company using
insurance policies to build up the pension fund.
Q7.
If I leave work temporarily on maternity leave, will my pension entitlement

suffer?
If you are a member of an occupational (but not personal pension) scheme then
during your absence your benefits will continue to accrue as though you were still in
full time employment, even where your income during this period was reduced. This
would apply to any period of paid leave where an employer continues to pay the
contractual remuneration.
A.
Q8.
A.
Articles about pension which appear in the press use phrases like
remuneration, final pensionable salary, scheme earnings, P60 earnings,
and similar phrases. Are they all talking about the same thing? Why cant
there be standard definitions to make things easier to follow?
On the whole the pensions industry does use standard definitions, but from time to
time the odd phrase is used incorrectly.
It all comes down to the definitions used within the particular pension scheme.
Remuneration is generally taken to mean all forms of income from employment,
including those taxable, non-pay benefits that are shown on the P11D form.
Final pensionable salary in all cases will mean the salary on which your pension will
be based. The actual definition will differ from scheme to scheme. One scheme may
have a deduction to take into account state pension benefits; another may take the
last years income; another may average the last three years income, including or
excluding overtime and bonuses. A careful reading of the scheme details (the Rules
or explanatory booklet) should reveal all.
Scheme earnings, like final salary above, will depend on the definition used by the
scheme, but is generally used to refer to the earnings which determine personal
contributions, if any.
P60 earnings are total PAYE earnings which appear on the tax-year end P60 form
issued by the tax office.
Q9.
A.
What is a final salary scheme?

A pension scheme where the pension is based on final salary. (See Q8)
Q10.
A.
What is a formula based scheme?

Many occupational schemes are based on a formula to calculate your pension
entitlement. The formula is not standard, but those most often encountered are
th
th
th
1/60 , 1/80 or 1/100 of final pensionable salary (See Q8) multiplied by the number
of years of scheme membership.
Q11.
A.
What is a money purchase pension?

This is simply a type of pension arrangement which produces a pension at retirement
totally dependent on money invested in the pension fund, pension fund investment
performance and annuity rates at retirement.
So, if you invest enough, and
investment performance of the fund is good enough, and annuity rates are good at
retirement, you should be reasonably pleased with your pension.
This is unlike the final salary or formula based scheme pension, where you know
from the day of joining the scheme exactly how much income you will have at
retirement, at least as a percentage of income, if not the exact pounds and pence.
Q12.
A.
What is a defined benefit scheme?

This is a pension arrangement where you can predict from the start what level of
pension you will receive at retirement. Final salary and formula based schemes are
defined benefit schemes.
Q13.
A.
What is a defined contribution scheme?

This is a type of pension arrangement where scheme members are asked to
contribute a fixed amount of salary, either alone or along with an employers
contribution, to invest in the pension fund. At retirement their portion of the pension
fund is used to purchase an annuity to provide their pension. It is only at this point
that you know what your pension will be.
Essentially, it is another name for a money purchase scheme.
Q14.
A.
What is the maximum pension I can take?

The general rule of thumb is two thirds of total earnings in the year prior to retirement
date.
BUT
This figure is limited by the earnings cap. In certain circumstances, where you have
worked for 40 years and you retire after normal retirement date and so earn
additional years service, up to another 5/60ths of earnings can be added to your
pension.
Q15.
A.
How much can I contribute towards my pension?

As a member of an occupational pension scheme you will need to abide by the
schemes rules as to what you can actually contribute to the company scheme.
Provided your contributions dont lead to overprovision of pension you are, under
existing legislation, permitted to contribute up to 15% of total taxable earnings
towards pension provision. If your scheme is non-contributory, or if you cannot
contribute above a specified limit, you will need to look at other contracts which can
accept them, (such as AVC or FSAVC contracts).
Q16.
A.
What is the difference between an AVC and an FSAVC contract?

AVC is short for additional voluntary contribution and is an arrangement operated by
an employer so that its pension scheme members can make additional contributions
and so build up additional pension benefit.
and so build up additional pension benefit.

FSAVC is short for free standing additional voluntary contribution, an alternative to
using the arrangement made available by the employer. FSAVCs are offered to
individuals by pension providers and operate effectively as stand alone, single person
pension arrangements.
Q17.
A.
What is the difference between a Top Hat scheme and an Executive Pension
Plan?
These are generic titles given to single person pension arrangements, and the main
difference is one of fashion and era. Top Hat arrangements became popular in the
1960s and 1970s but the term was gradually replaced by the less (only just) elitist
phrase Executive Pension Plan or Scheme.
Essentially, both are aimed at the higher paid employee, and as such had higher
minimum contributions. Both were governed by the same legislation that governed
group occupational pension schemes.
Q18.
A.
If I want to leave the company, I suppose that all of may contributions and all of
the companys contributions can be transferred to the scheme my new
employer runs?
Your entitlement will depend on a number of things, in particular whether the scheme
you are leaving is defined benefit or defined contribution.
Broadly speaking, if you leave your company with less than two years membership
of the pension scheme, all you may be offered is a refund of your own contribution.
(See Q25). Your options may differ if you have already transferred previous pension
entitlement into the scheme, or you have a personal pension.
If you are leaving a defined benefit scheme, your transferable entitlement will be the
current cost of providing the pension entitlement you have earned to date, when it
becomes payable at the scheme retirement age. If you are leaving a defined
contribution scheme, you will be able to transfer your own and the companys
contributions, plus accrued investment returns.
Q19
A.
Is a transfer as described in Q18 a right?

Until April 1997, the right to a trans fer was available as of right only to those who left
st
their employers pension schemes on or after 1 January 1986. Since April 1997,
however, this right has been extended to those who left before January 1986.
Q20.
Ive heard colleagues referring to their pension rights being frozen and even
pupped! I have a deferred pension. What is the difference between them?
They are all ways of saying that when you left an employer you left your pension
entitlement behind, to be paid out when you retire. Pupped, by the way, is short for
paid-up pension
A.
Q21.
A.
What is a Section 32 buyout?

This is an option open to someone transferring pension entitlement, where the
pension scheme of the new employer will not accept the transfer; or where the new
employer does not have an appropriate pension arrangement in place; or where the
person leaving is become self employed or redundant.
Q22.
A.
Can a pension be joint life, or life of another, like life assurance?

No, although in some circumstances, at retirement it may be possible to reduce the
main benefit so that in the event of death, an element of benefit may continue for a
dependant. Most defined benefit schemes permit such as option.
Q23.
A.
Q24.
A.
Q25.
A.
Q26.
A.
Q27.
Q28.
A.
Does my employer have to contribute to the occupational scheme I belong to?

Does he have to contribute for each member?
Yes. A minimum of 10% of the contribution in respect of each member.
How do I get income tax relief on my pension scheme contributions when I join
my employers scheme?
Normally a scheme member obtains tax relief on contributions via the net pay
arrangement operated by your employer through the PAYE system. This means that
your contributions will be deducted from your pay before income tax is worked out.
I f a member leaves the scheme that I belong to with less than two years
scheme membership, they are entitled to a refund of their contributions. If they
were to opt out of the scheme but still work for the company, can they
receive a refund of their contributions as well?
Yes. The refund is subject to a 20% stand alone tax charge. The gross refund is
paid to the scheme, trustees of who then pay the net amount to the employee. The
trustees then pay the tax deducted to the Revenue. The employer receives the
refund of their contributions less a 40% tax deduction, unless the refund remains
within the scheme in which case there is no tax charge. The 20% tax charge cannot
be reclaimed by the member, even if he is a non taxpayer.
When averaging salaries to calculate final remuneration, is the earnings cap
applied before or after averaging?
After
I joined my current company in 1982, but didnt join the companys
occupational pension scheme until 1992. Does pensionable service for Inland
Revenue maximum benefits start from 1982 or 1992?
1982, although it is likely that benefits under the scheme itself will only be granted in
respect of service from 1992.
Can I take a tax-free cash sum but defer taking the pension from my company
scheme?
st
Yes; provided you joined the scheme before 1 June 1989. However, the cash can
be taken on or after your normal retirement date, and the pension can only be
deferred if you continue to work. It is also possible to take the pension on or after
normal retirement date and defer taking your cash. If you joined after the above date,
both the cash and the pension must be taken TOGETHER when you actually retire,
or when you attain age 75 if earlier.
Q29.
A.
What is the maximum rate by which a pension in payment can increase?

The Inland Revenue maximum pension can be increased in payment by 5% per
annum compound or the rise in the Retail Prices Index (RPI) if greater. Where a
pension in payment is less than the Inland Revenue maximum, it can be increased at
any rate until it reaches the IR maximum increased by RPI.
Q30.
A
Can dividends be included in pensionable salary?

No
Q31.
Can an employee pay for the life cover under an occupational pension
scheme?
No.
In most circumstances, the cost must be met by the employer, but
AVCs/FSAVCs/ can be utilised to increase an individuals life cover up to the
maximum of 4 times salary.
A.
Q32.
A.
Is it possible to retire on a 2/3 pension before Normal Retirement Date (NRD)?

th
Yes, under the 1989 Finance Act Regime, an accrual rate of 1/30 of Final
Remuneration for each year of service can be provided, on retirement at any age
between 50 & 75, irrespective of normal retirement date, subject to the earnings cap.
Under previous Regimes, you can have only a proportion of the maximum 2/3 if you
retire early but the earnings cap does not apply.
Q33.
A.
What legal documents govern a pension scheme?

A pension scheme is established and governed by one or more of the following
documents;
a.
b.
c.
d.
e.
Q34.
A.
Interim Trust Deed

Trust Deed. The first Trust Deed following the interim Trust Deed is
generally referred to as the Definitive Trust Deed.
Declaration of Trust
Rules
Letters of Exchange.
What sort of powers do the Trustees of an occupational pension scheme

possess?
1.
Power to augment members benefits with the employers consent.
2.
Power to borrow money
3.
Power to amend the Trust Deed
4.
Power to extend the scheme to associated employers
5.
Wider power regarding investments than those granted under the Trustee
Act 1925
6.
Power to reinsure benefits with an assurance company (e.g. death-inservice benefits)
7.
Power to buy annuities and deferred annuities
The powers are conferred on the Trustees by statute and by the schemes Trust
Deed. Some of the powers may involve the employer but this does not reduce the
Trustees responsibility to ensure their actions are carried out with the utmost good
faith for the members benefit. Under general law Trustees must act unanimously.
However, the Trust Deed normally makes provisions for a majority decision of the
Trustees to prevail. The power to appoint and/or remove Trustees may lie with the
employer.
Trustees have a responsibility to whistle blow if they become aware of any
inappropriate dealings. This responsibility also extends to the Pension Scheme
Auditors and Actuary (if applicable).
Q35.
A.
What does the Term Free Cover Level mean in respect of an Occupational
Pension Scheme?
Where the death-in-service cash and spouses pension available under the
Occupational Pension Scheme are insured, most insurers allow a substantial amount
of life cover to be provided without the need for evidence of health. This is because
the majority of lives to be covered will be good lives and any under-average live s
will not necessarily affect the insurance terms.
NB: Free cover does not mean that members get life cover at no charge.
Q36.
A.
I have been told by a friend that the State Pension Age for women is now 65. I
am now 56 and was looking forward to retirement in 4 years time. Is this
information correct?
th
The state retirement age for women born prior to 6 April 1950 will remain 60. Those
th
th
born between 6 April 1950 and 6 April 1955 have a retirement date between 60
and 65, the actual date depending on their date of birth.
th
Women who have a date of birth of 6 April 1955 or later will have 65 as their State
Retirement Age.
Q37.
A.
What are stakeholder pensions and who can contribute to them?

th
Stakeholder pensions were introduced on 6 April 2001. They are money purchase
type schemes and can be either personal or occupational schemes.
They are available to most people aged under 75, even children. There is no need to
have earned income to be able to contribute to a stakeholder scheme.
Q38.
A.
How much can be paid into a stakeholder pension each year?

Up to 3,600 p.a. can be contributed to a stakeholder pension regardless of earnings.
Higher amounts can be contributed based on earnings and personal pension
contribution limits.
Q39.
A.
Q40.
A.
I am a member of my employers group money purchae scheme, can I

contribute to a stakeholder scheme?
Yes. The rules are complex but in simple terms if you are not a controlling director
and do not earn more than 30,000 p.a. you can contibute to a stakeholder scheme
as well as being in your employers scheme. The contributions to the stakeholder
scheme are limited to 3,600 p.a.
What is the State Second Pension?
th
The State Second Pension, often called 52P, is to be introduced from 6 April 2002.
It will replace the existing State Earnings Related Pension Scheme (SERPS).
FSEC Special Reports on Personal Financial Situations
Special Reports
The Special Reports can be downloaded by clicking on the subject headings.

Occupational Pensions
Redundancy

http://www.financial-planning.uk.com/consumer/info/reports/index.htm [4/20/2002 5:57:47 PM]
FSEC Special Reports on Redundancy
SPECIAL REPORT: REDUNDANCY

Redundancy can tap you on the shoulder for any number of reasons, including
restructuring, downsizing, sale of the business, your work area is no longer relevant,
your skills set is no longer appropriate, and so on.
We all know these things happen but we don't like to think about the possibility of losing
our job, not to mention what will happen to our lifestyle if the awful possibility becomes
reality.
Although we subscribe to some forms of planning - redundancy cover when taking out a
mortgage, or similar cover for other loans and credit card repayments - we don't, as a
whole, organise our planning.
Tim Atterton, director of the small business centre at Durham University, compares the
UK with the USA, where middle managers in particular seem better prepared.
"Downsizing has been around longer in the US and people prepare for it. They save
money as a precaution and develop networks of contacts so that if the axe falls they are ready".
Recruitment policy highlights the other side of the problem, where age is often the unspoken barrier. How
easy is it to get another job after 40 or 45?
We can't offer advice, but we can present you with some of the basic questions that need answers to help
you plan more effectively. Job security is already a thing of the past, so make sure you put into place
some sort of safety net.
Questions you may have on Redundancy
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Is everyone working for the company entitled to a redundancy payment?

Does every employee, then, qualify for a payment?
What warning does an employer have to give?
How is the payment calculated?
So, what will the employee be paid?
Is the payment made automatically?
Is tax deducted from payments?
I'm only five years away from retirement. Would this make any difference to any
redundancy?
What if I take voluntary redundancy?
I suppose I lose all my employee benefits?
Can I continue my occupational pension?
Will I qualify for any State benefits?
I thought mortgage interest was paid separately?
What can I do to plan ahead?
http://www.financial-planning.uk.com/consumer/info/reports/redundancy.htm (1 of 2) [4/20/2002 5:57:49 PM]
FSEC Special Reports on Redundancy
Download the questions above and the answers

Download the Acrobat Version
Download the MsWord Version
other reports
More Special Reports will be available soon - the newsletter will keep you informed.

http://www.financial-planning.uk.com/consumer/info/reports/redundancy.htm (2 of 2) [4/20/2002 5:57:49 PM]
SPECIAL REPORT: REDUNDANCY
Redundancy can tap you on the shoulder for any number of reasons, including restructuring,
downsizing, sale of the business, your work area is no longer relevant, your skills set is no longer
appropriate, and so on.
We all know these things happen but we dont like to think about the possibility of losing our job,
not to mention what will happen to our lifestyle if the awful possibility becomes reality.
Although we subscribe to some forms of planning redundancy cover when taking out a
mortgage, or similar cover for other loans and credit card repayments we dont, as a whole,
organise our planning.
Tim Atterton, director of the small business centre at Durham University, compares the UK with
the USA, where middle managers in particular seem better prepared.
Downsizing has been around longer in the US and people prepare for it. They save money as a
precaution and develop networks of contacts so that if the axe falls they are ready.
Recruitment policy highlights the other side of the problem, where age is often the unspoken
barrier. How easy is it to get another job after 40 or 45?
We cant offer advice, but we can present you with some of the basic questions that need
answers to help you plan more effectively. Job security is already a thing of the past, so make
sure you put into place some sort of safety net.
COPYRIGHT 11.98 Financial Services Education for Consumers Limited 1998
Please feel free to share this document with your friends, but it must be copied in
its entirety, unedited.
For any other use please contact:
Financial Services Education for Consumers Limited
Huddersfield, HD1 2NU, United Kingdom
Tel +44 (0)1484 452020 Fax +44 (0)1484 420027 Email info@financial-planning.uk.com
Other reports can be obtained from:
http://www.financial-planning.uk.com
Q1.
A.
Is everyone working for the company entitled to a redundancy payment?

Only employees, those with contracts of employment, are entitled to redundancy
payments i.e. casual workers, self employed service providers and free-lance
workers are unlikely to qualify. Some groups are specifically excluded, broadly
speaking those already retired, who are normally employed outside the UK, or who
have been offered suitable alternative employment. Consult your adviser for the full
breakdown.
Q2.
A.
Does every employee, then, qualify for a payment?

In addition to being an employee, there are other conditions which must be met.
Simply stated, these are:
a.
b.
c.
The employee must have been employed continuously for a period of two
years as at the date of termination of employment (although service under
the age of 18 is not counted).
The employee must have been dismissed i.e. an employee cant presume
dismissal just because others have been made redundant.
The dismissal was by reason of redundancy
Q3.
A.
What warning does an employer have to give?

In practice this will depend on the numbers involved in the redundancy. For 20 or
more, there will be consultations beforehand, so some foreknowledge and warning is
inevitable.
Otherwise, the minimum time will be the usual notice period for
termination of employment.
Q4.
A.
How is the payment calculated?

Not everyone will receive the same sum. The exact amount will depend on:
a.
b.
c.
Q5.
A.
age
length of employment (maximum 20 years)
gross average weekly earnings (maximum 240)
So, what will the employee be paid?

This sum is calculated in line with the following statutory minimum limits:
a.
1 weeks pay per year of employment in which the employee was aged
between 41 and 65;
b.
1 weeks pay per year of employment in which the employee was between
ages 22 and 40;
c.
weeks pay for each year of employment between 18 and 21
th
Where the employee is over 64, the calculated payment is reduced by 1/12 for each
month by which age exceeds 64.
Remember, these are minimum figures. Companies may be more generous.
Q6.
A.
Is the payment made automatically?

In many cases the situation will be clear cut and handled efficiently by the employer,
but it doesnt necessarily follow that all cases will go smoothly. Employees are not
entitled to a payment unless, within 6 months of the initial notification, the payment
has been agreed, or they have made a claim in writing
Q7.
A.
Is tax deducted from payments?

The first 30,000 is generally free of tax. Your adviser may be able to suggest ways
of limiting tax on any excess
Q8.
Im only five years away from retirement. Would this make any difference to
any redundancy?
If you are over 50 the company could offer early retirement, and perhaps top up the
pension with some of the money that would have made up your redundancy
payment. Your adviser can give you details of the pros and cons of this option.
A.
Q9.
A.
What if I take voluntary redundancy?

Unless the employer pays compensation for the voluntary action, you may be worse
off by invalidating any policies you have that come into effect in the event of
redundancy. It might also mean you do not qualify for certain state benefits such as
the jobseekers allowance.
Q10.
A.
I suppose I lose all my employee benefits?

Yes, but some of the benefits, such as life cover, PHI and medical insurance may
have continuation options available for people who leave service. Ask your adviser if
these are worth investigating.
Q11.
A.
Can I continue my occupational pension?

You will probably have three options as far as your pension is concerned, and you
should ask your financial adviser for guidance before making a decision:
a.
Leave it where it is
b.
Transfer it to a new employer
c.
Transfer it to a personal pension/stakeholder pension.
Dont rush this decision, whether you have a new job to go to or not.
Q12.
A.
Will I qualify for any State benefits?

For the first six months the flat rate job-seekers allowance should be available. After
that time the allowance will be means tested. Broadly speaking this means they give
you more if you have dependants, but reduce the allowance if you have capital in
excess of 8,000 or other sources of income.
Q13.
A.
I thought mortgage interest was paid separately?

If your mortgage started before October 1995 you will get payments after 8 weeks to
cover half your main mortgage interest (but not linked policies); this continues for 18
weeks. After this time, housing benefits start which should cover all interest, except
interest on arrears.
If your mortgage started after October 1995 you will have to wait 39 weeks for help.
From week 40, all allowable interest costs will be covered.
Q14.
A.
What can I do to plan ahead?

Whatever you do, dont take action in the heat of the moment. Antagonism towards
your erstwhile employer should not influence any decisions you are making which will
affect your future finances. For example, dont rush to take your pension entitlement
out of the fund unless there are really compelling reasons to do so.
Before the awful thing happens, though, do what all the large companies do draw
up a crisis plan. As far as the individual is concerned, this means analysing your
cash flow to determine what outgoings can be controlled, and what can be the first to
be stopped, either temporarily or permanently.
Part of this exercise will be to determine your cash reserves and savings, and the
order in which to draw on them. And also, will you need to ask family/friends for
help?
You should also list the phone calls you will need to make to your mortgage lender,
other suppliers with whom you have direct debits, insurance companies with whom
you have redundancy cover and so on.
Dont delay with any of these calls; if you need their help and support, the sooner you
tell them what is happening the better.
One of these calls should be to the Job Centre, where you can get initial guidance
about benefit entitlements.
Anything to do with life assurance or pensions should be discussed with a financial
adviser, because stopping or suspending premiums could have adverse effects if
done in the wrong way.
Finally, dont overlook continuing National Insurance contributions on a voluntary
basis to safeguard your State pension entitlement. Again, your financial adviser
should be able to help you on this subject.
The Department of Trade and Industry produces a redundancy payments guide (ref.
PL808). It can be obtained from the DTI Publications Orderline on 0870 1502 500.
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http://www.financial-planning.uk.com/consumer/newsletter/newsletter.htm [4/20/2002 5:57:52 PM]
MORTGAGES - INDEX
Mortgages
Arranging a Mortgage
Basics
Borrowing Capacity
Income
Liabilities
Amount of Deposit
Credit History
Employment Status
Arrangement Costs
Arrangement Fees
Legal Fees
Indemnity Guarantee Premium
Survey Fees
Mortgage Products
http://www.financial-planning.uk.com/info-fp2/index-d.htm (1 of 3) [4/20/2002 5:57:53 PM]
MORTGAGES - INDEX
Types of Mortgage
Repayment Mortgage
Interest Only Mortgage
Interest Options
MIRAS
Related Products
Use of Mortgage Products

Which Type of Mortgage?
Which Interest Option?
Which Repayment Method?
Related Products

Different Mortgage Types
Comparing Different Providers
MORTGAGES - INDEX
main index |
back page

MORTGAGES - Basics
1. ARRANGING A MORTGAGE
1.1 Basics
The term "mortgage" is often loosely applied and is usually understood to mean the loan itself; it is in
fact the assignment of Freehold or Leasehold Estate (most commonly a house or business premises)
from the mortgagor (the borrower) to the mortgagee (the lender) as a security for the loan. Thus, in the
event of default, the mortgagee has the right to take possession of the property and sell it to regain the
debt.
A domestic mortgage is an assignment of a dwelling place e.g. house, bungalow, or flat by an intended
or current owner occupier intended for his/her own occupation.
A commercial mortgage is an assignment of business property e.g. shop, professional office, factory,
form of tenanted dwelling or one intended for tenancy.
The terms, conditions and evidence of the assignment are in a deed of mortgage which is agreed by
both borrower and lender. The deed duly executed (signed) is lodged with the deeds of the property
and safely kept and stored by the lender.
Both the purchase of a property and a deed of mortgage are contracts and as such are governed by
the general law of contract
index |
back page

http://www.financial-planning.uk.com/info-fp2/unit-d/1-1.htm [4/20/2002 5:57:54 PM]
MORTGAGES - Borrowing Capacity - Income
1.2 Borrowing Capacity

1.2.1 Income
The basic requirement is that income is sufficient to service the loan and associated costs.
The borrowing level is generally worked out as a multiple of income, with a wide range of definitions in
what makes up qualifying income, to the actual multiplier.
Proof of income may be required, and this may range from actual salary slips to employer's letters.
Where the applicant is self employed, proof will generally be accounts for two or three years, or
perhaps an accountant's letter or even correspondence with the Inland Revenue
index |
back page

http://www.financial-planning.uk.com/info-fp2/unit-d/1-2-1.htm [4/20/2002 5:57:55 PM]
MORTGAGES - Liabilities
1.2.2 Liabilities
A high gross income may look attractive, but for the ability to service the loan the lender is looking for
unallocated 'free' income.
Similarly, the lender may be looking for a history of stable credit repayments.
Generally, the point of investigation is to review the overall financial stability, and so the lender will
need full disclosure of:-
1.
2.
3.
4.
5.
6.
Outstanding balances on overdrafts, credit cards, etc.

Unpaid bills.
Loans - amounts outstanding, term, purpose, payments.
Hire purchase agreements.
Maintenance payments.
Any other regular commitments on incom
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MORTGAGES - Amount of Deposit
1.2.3 Amount of Deposit
It is not always possible to find a loan which covers the full cost of a new house, and so a deposit will
generally be required, usually between 5% and 10% of the purchase price.
The greater the deposit, the greater the equity interest in the property, and the greater the cushion
against the danger of 'negative equity'.
'Equity' means the value which would be left on sale when the mortgage had been repaid and all costs
covered.
'Negative equity' refers to the amount of mortgage which would remain to be paid off after the sale of
the house
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MORTGAGES - Credit History
1.2.4 Credit History
The lender will need to know how financially secure their loan is going to be, and so will check with a
number of sources the borrower's financial status.
Each lender will have their own checking system, which is likely to include the following information
sources:-
1. Existing lenders.
2. Credit check, which will show County Court Judgements (CCJs) and any 'letters
of satisfaction'.
3. Bank references.
Having gone through an initial interview with the potential borrower, the lender can corroborate the
information provided at interview and on any completed application with the above.
A bankruptcy search will also be made
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MORTGAGES - Employment Status
1.2.5 Employment Status
Lenders' criteria differ, and may be 'open' or 'restricted' depending on the economic climate. In general,
however, a stable employment history is likely to be treated more favourably than someone who has
job 'hopped'
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MORTGAGES - Arrangement Costs - Arrangement Fees
1.3 Arrangement Costs

1.3.1 Arrangement Fees
This is an up-front, once only charge of up to perhaps 300, usually non-refundable.
The purpose of the fee is to:-
1. Deter 'browsers' and time wasters.

2. To cover some of the initial organisation expenses
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MORTGAGES - Legal Fees
1.3.2 Legal Fees
The transfer of land, or conveyancing, involves a number of steps incurring different charges.
The actual conveyance is usually undertaken by a single party, the solicitor or licensed conveyancer,
and the single fee payable will be broken down into the following elements:-
1.
2.
3.
4.
Professional services of the solicitor/conveyancer.

Local search to reveal any planning affecting the property.
Land Registry fees incurred in registering the transfer of land.
Stamp Duty, which is a property sale tax of 1% on the value of a property
costing 60,001 to 250,000, 3% between 250,001 and 500,000, and 4% on
properties over 500,000
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http://www.financial-planning.uk.com/info-fp2/unit-d/1-3-3.htm
1.3.3 Indemnity Guarantee Premium
Insurance is generally required by the lender where a high proportion of the purchase price is funded
by a loan e.g. 75% or more.
The insurance is to safeguard the lender (only) against all possibility of loss if the borrower defaults
and the property needs to be repossessed and sold.
The premium is usually a single payment, and can often be added to the loan.
Rates vary, but have increased over recent years owing to the increased number of repossessions. It
is likely, also, that the rate will increase, the higher the loan amount.
A number of lenders now only charge such premiums where loans exceed say 90% of valuation
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MORTGAGES - Survey Fees
1.3.4 Survey Fees
The Building Societies Act 1986 requires building societies (but not other lenders) to carry out a
valuation of all properties on which new loans are advanced.
The surveyor will provide different levels of valuation and report:-
1. Mortgage valuation; a limited inspection merely to determine the suitability of the

property as security for the level of loan requested.
2. Buyer's report; a survey reporting on the condition and state of repair of the
property, generally giving recommendations of repairs needed and sale
potential.
3. Structural survey; a full and detailed survey of structure, not merely state of
obvious repair, and full valuation
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MORTGAGES - Types of Mortgage - Repayment Mortgage
2. MORTGAGE PRODUCTS
2.1 Types of Mortgage
2.1.1 Repayment Mortgage
Also referred to as 'capital and interest' mortgages.

Monthly repayments composed of part capital, part interest. As the amount of capital is repaid over the
period, the portion representing interest reduces. The overall payment figure remains the same.
Advantages of this method would be:-
1. Guaranteed repayment of loan at end of period.

2. More and more capital is repaid as the period advances.
3. Because it is not linked to investment products with a finite term, restructuring
the loan on a different basis e.g. longer term, is more easily accomplished.
Disadvantages would be:-
1. The whole process must be repeated, and a new repayment term started, with
each house move.
2. The terms of the loan may be varied at the discretion of the lender.
3. There is no surplus cash at the end of the term.
4. Separate life assurance is required to cover the loan.
5. There is no investment product to produce 'excess' growth, so there is no
chance of early repayment except by injection of an outside source of capital
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MORTGAGES - Interest Only Mortgage
2.1.2 Interest Only Mortgage
Unlike the repayment mortgage, only interest is paid to the lender with this method.
The loan is repaid at the end of the term by cash taken from a suitable product which has run
alongside the loan from commencement.
Consideration needs to be given to adequate provision of life assurance.
The repayment vehicle, depending on the type, may offer the opportunity of early repayment if growth
of the investment element reaches the loan value before the end of the term.
A suitable repayment vehicle may be one of the following:-
1. Endowment policy, where repayment is guaranteed on death provided the

guaranteed sum assured matches the outstanding debt. For the full endowment,
repayment is guaranteed also at maturity, but for with profits, low cost and low
start endowments there is no additional guarantee, as growth depends on non
guaranteed bonuses. Details of these policies can be found in Savings and
Investment .
2. Pension policy, where repayment is from the tax free retirement cash sum.
Repayment on death is from a life assurance policy linked to the pension, whilst
repayment at the end of the term relies on investment performance. The main
disadvantage with this method is that repayment from the policy can take place
only on retirement, which at its earliest is 50, and cash and pension must be
taken together in most circumstances. Additionally such a policy is only suitable
for those who qualify for an EPP or PPP, as group occupational schemes are
not usually linked to such loans. More details of pension policies can be found in
Pensions.
3. Collective Investments, where unit trusts, investment trusts and similar
vehicles can be utilised as a method of providing funds at a future date to repay
a mortgage. It would be prudent to take a conservative view in terms of potential
growth assumptions as of course there are no guarantees regarding the
eventual return or when the investment would equate to the amount borrowed.
Choice of fund(s) similarly would need careful consideration. Given that the
purpose of such an arrangement is redemption of a mortgage (and therefore
home ownership) it is essential that prospective borrowers understand and
accept fully the associated risks. Appropriate life cover would be an additional
consideration and cost. Ultimately it is for the lender to decide if such a method
of repayment is acceptable or otherwise. PEPs proved to be a popular method
of mortgage repayment because of their tax free status (despite the investment
risks). However, since 6 April 1999 borrowers have needed to turn to an
alternative investment (or mortgage) as no new monies could be invested in
PEPs since that date.
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MORTGAGES - Interest Only Mortgage
4. ISAs may prove attractive to some borrowers but as with PEPs they need to
be aware of the inherent investment risks (non cash ISA) and the maximum
contribution limit may be a detriment to very large amounts loaned or short term
mortgages. Also, the government has stated that the continuance of ISAs will be
reviewed in 2009 - what of the future? Again, appropriate life assurance will
need to be considered
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http://www.financial-planning.uk.com/info-fp2/unit-d/2-1-2.htm (2 of 2) [4/20/2002 5:58:08 PM]
MORTGAGES - Interest Options
2.2 Interest Options
Whichever type of mortgage is selected the lender will charge interest, and there will be an overall cost
to the borrower associated with the loan.
Mortgages with fixed rates of interest tend to have larger "up front" fees than other mortgages.
As the mortgage market changes, interest rate packages have gone through significant changes, for
example, fixed rate, "cap" and "collar", variable, plus combinations to add to the attraction. It is
advisable to clarify any such terms with particular lenders, as definitions are not necessarily standard.
Fixed rates are generally offered for a fixed term and at the expiry of that term they will usually revert
to a variable rate decided by the lender.
Capped rates are those which represent maximum rates which will be charged by a lender. Therefore,
rates may drop below the 'capped' rate but will not exceed it. Rates may be described as capped for
either a part or the whole of the term of the loan.
A collar is sometimes used in conjunction with capped rates, and operates to prevent rates dropping
too low, setting a minimum rate which it will not go below.
Interest rates vary from time to time and from lender to lender, but they normally follow interest rate
trends in general. The way that the interest rate is calculated can vary with the type of lender; for
example, building societies charge interest on the balance of the loan outstanding at the start of each
year, to which is added the amount due for the next twelve months. Other types of lenders, such as
banks, may calculate interest due on the reducing balance on a daily basis. Because of the different
methods used, it can be difficult to make a direct comparison between the rates for different lenders
and the only real measure of any accuracy is by the use of the Annual Percentage Rate (APR) which is
an approved method of calculation and which takes into account the lender's charges, practices, and
the precise circumstances of the loan.
A borrower who has a mortgage on variable rates will receive notification of rate changes, often
through a press advertisement. In past years notification was given individually through the post and
some lenders maintain this practice.
Many mortgages are now arranged on an Annual Instalment Review basis which means that a change
in interest rates does not necessitate an immediate change in monthly payment. At an agreed date the
repayment is recalculated considering all changes which have occurred during the previous year. Thus
payments alter once a year and the borrower's annual budgeting becomes easier.
Fixed rates have the advantage of offering effective rate reductions when general rates rise, and also
the ability to plan budgets because of the fixed cost. The obvious disadvantage would arise if market
rates fell below the payment rate for any significant period. There could also be a problem when
reverting to market rate if the rate was significantly higher.
Variable rates have the advantage of benefiting borrowers from rate reductions, but with the obvious
disadvantage of volatility of rates over a period and the consequent difficulty in budgeting.
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MORTGAGES - Interest Options
Deferred interest loans offer the chance to defer payment of an element of interest due for an agreed
period. The deferred amount is then added to the outstanding capital, thus increasing the capital owed.
This offers an initial advantage of lower expenditure, with the linked disadvantage of higher payment at
a later stage.
Discounted interest loans are similar to the above except the unpaid interest over the short-term is
not added to the outstanding loan.
Flexible mortgages allow a flexible approach to payments and particularly suit the self employed who
may have irregular income. They allow over payments and payment holidays with interest calculated
daily. Some also provide a cheque book, so that further borrowing, within pre agreed limits, can occur
without the need for a further application.
Cashback mortgages are offered by some lenders who, on completion of the loan, provide a cash
payment to the borrower. The amount is usually hundreds of pounds. The cost of the cashback is
generally recouped via the interest rate structure and/or early redemption penalties applying to the
mortgage.
Current account mortgages allow borrowers to link their mortgage debt with their current account
balance. The cash held in the account is offset against the debt, thus temporarily reducing the debt and
the amount of interest due. There are two principal methods of operating current account mortgages.
One is to hold separate accounts for each part of the finances e.g. mortgage, saving, cash balance and
apply a separate rate of interest to each part. Alternatively, each element can be combined in a single
account to which one rate of interest applies.
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MORTGAGES - MIRAS
2.3 MIRAS
MIRAS relief has been abolished for 2000/2001 onwards.

Special provisions apply to those with home income plans effected prior to 10th March 1999. Those
effecting such plans from that date do not enjoy any MIRAS at all. Qualifying loans continue to receive
MIRAS at 23% for the first 30,000
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MORTGAGES - Related Products
2.4 Related Products
Mortgage Protection Policy is a decreasing term assurance, designed to decrease in value in line
with the outstanding loan of a repayment mortgage.
Redundancy Protection is designed to continue the mortgage repayment for a fixed period in the
event of unemployment and the consequent cessation of income. Usually available from the lender,
and generally to employed borrowers only, at commencement of a new loan. Payments will stop before
the end of the agreed term if the policy holder finds another job.
Sickness and Accident Protection will provide capital sums in the event of certain injuries, and may
also pay out in the event of total and permanent disablement. This latter is generally an income benefit
paid for up to two years.
Income Protection Insurance provides a better long term benefit in the event of long term illness,
paying out a regular income until retirement age or prior recovery or death.
Critical Illness Insurance offers a way of paying off outstanding debts whilst still alive, albeit for a
limited number of diagnosable illnesses.
More can be found concerning these policies in the Protection Section
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MORTGAGES - Which Type of Mortgage?
3. USE OF MORTGAGE PRODUCTS

3.1 Which Type of Mortgage?
Some basic questions need to be asked:-
1. What is the client's viewpoint, and has good or poor past experience formed
such an opinion. Is the preferred choice suitable?
2. Can the client afford the preferred choice? Will an increase in the interest rate
make payment difficult?
3. Is the preferred choice flexible enough to cope with changes in the borrower's
situation i.e. could the term be extended or payments reduced?
4. How often is the borrower likely to move house? Would they want to maintain
the same term, or would they accept taking on a new, perhaps extended, term of
repayment
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MORTGAGES - Which Interest Option?
3.2 Which Interest Option?
Based on the notes, the following queries should be raised:-
1. What will be the cost of the preferred option in terms of setting up fees and
discounts?
2. Is the ability to have a fixed budget important?
3. Could the borrower accept the potential volatility of variable rates?
4. Do repayments need to be as low as possible initially to be accommodated
within a tight budget
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MORTGAGES - Which Repayment Method?
3.3 Which Repayment Method?
The following queries should be raised:-
1. What is the client's attitude towards investment? Is the with profits or unit linked
option more attractive. Is the tax efficiency of the ISA or pension preferred? Is
the early repayment potential of the endowment favoured. Are guarantees
essential?
2. The cost of the chosen method should be borne in mind. For example, although
a pension mortgage offers several advantages - tax relief on premium, tax
efficient investments, a life time pension - it should be remembered that the
client is effectively paying too much for the product. This is the case because
only part of the cash fund will be used to repay the loan, but it is necessary to
accumulate the whole of the fund to be able to do this. The argument is different,
of course, if the pension already exists, or needs to be established to top up
existing provision.
3. How relevant is the term of repayment period? For example, linking to a pension
product means looking forward to the loan being paid off at say, age 60 or 65. Is
this acceptable, or is the potential to repay earlier more attractive.
4. Is tax efficiency the most important criterion, in which case would the pension or
ISA mortgage be acceptable
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MORTGAGES - Related Products
3.4 Related Products
Is the cost of these within the budget, and would any additional underwriting costs impose difficulties?
Which, if any, of the related products, will be a requirement of the lender
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MORTGAGES - Different Mortgage Types

4.1 Different Mortgage Types
Redemption Penalties are additional fees charged on repayment of the loan, and will depend on the
interest option:-
1. Variable Rate - generally no penalty.

2. Fixed Rate - will depend on the initial term, the longer the term, the higher the
penalty, perhaps up to six months' interest.
3. Deferred Interest - potentially a higher rate (because of the interest forgone) plus
full repayment of the accumulated deferred interest.
4. Any penalty imposed will be a one off payment by the borrower.
Flexibility of payment term may be a useful short-term safety net when income is reduced, as it will be
appreciated that the term can be stretched only so far. The option has little if any value where the
repayment vehicle is a pension plan.
Arrangement Fees need to be clarified before any commitment is made, as some may be refundable
up to a certain stage, others may not. Additionally, although it may seem attractive to 'lose' the fee by
adding it to the loan, in the long run it could be expensive because of the interest charged over the loan
period.
Overall Annual Percentage Rate (APR), as defined by the calculation laid down in the Consumer Credit
Act 1974, should be easy to compare between providers. Calculations should be checked, however, to
make sure they are correct
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MORTGAGES - Comparing Different Providers
4.2 Comparing Different Providers
Annual Payment Reviews are important planning dates, as these are the dates at which any changes
of interest rate take place. If the date is after a reduction in the rate, there may be a short-term 'loss'
and vice versa. It may be worth investigating the advantages of switching to the 'immediate' change
system; any charges imposed for the switch may make the exercise too expensive.
Portability, or the potential to transfer an existing loan to a new house for the remainder of the existing
term, could save money in rearrangement fees. It could also save expense where an existing loan is at
a low fixed rate of interest.
Quality of Service is of particular importance in terms of decision making and processing the
paperwork. This also includes how flexible the lender's systems are in being able to accommodate less
favourable surveys than expected, for example. Similarly, staff attitude is important e.g. are they helpful
in terms of suggesting solutions to problems, or do they merely fulfil their basic processing roles.
Ancillary products may be compulsory with some providers, especially where the loan is based on
some sort of special deal. Such products may be household insurance, or additional personal
insurances such as IPI.
Further Advances and ease of availability may be a consideration, especially where the property is to
be subject to a programme of renovation or alteration. Planning may be difficult, because markets
change, but it may be possible to arrange for provisional undertakings to provide additional advances
at the outset of the loan. It may be necessary to ensure completion of a project
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Lifestages and financial security from infancy through to retirement
LIFE STAGES
Although the requirements of each person will differ, certain Lifestages can be
identified where general needs and wants will be similar. These Lifestages are
shown below.
LIFE STAGES
Minors
Young Adult
Students
Early Married Life
Married + Young Children
Middle Aged + Older Children
Pre-Retirement
Retirement
Financial Events
Financial Events
main index |
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Lifestages and financial security from infancy through to retirement
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Lifestages minors - Making use of the child's personal allowance
MINORS
Minors themselves have limited scope for planning, so much of this
stage is reliant on parents and other family members, both for protection
and planning for the future.
You may wish to consider the following as preparation for discussing the
matter with your financial adviser:
1. Money for the kids

2. Making use of the child's personal allowance
3. If school fees are needed, gifts from grandparents may be a useful estate reduction exercise for them.
4. Income arising from gifts from parents; consider tax-exempt or non-income producing investments e.g.
National Savings product.
5. Trusts may be a suitable method of passing on assets to the younger family members.
of action.
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Lifestages young adult - post-secondary school, college, first job, to marriage
YOUNG ADULT
This period covers post-secondary school, through college perhaps, first job and
up to marriage. Essentially, the foundations of adult life.
You may wish to consider the following as preparation for discussing the matter
with your financial adviser:
1. There will usually be little need for protection policies, but regular savings
make sense as a basis for future investments.
2. Savings products which may be considered could be PEPs, building societies,
some National Savings accounts; perhaps TESSAs, unit trust, investment trusts as income increases.
3. If trusts are to be considered for passing on assets from older generations, the decision should be
made before age 25, as at this age, income must be taken even though capital may remain tied up.
4. Although most protection may not be relevant, protection of income by a Permanent Health Policy
(PHI) policy may be necessary.
5. If a bank account is to be opened now is the time to investigate the options.
6. If gifts of value are to be considered for marriage, ample time should be allowed to investigate the
source of the gift, and what is to be done with it after receipt, especially if cash or other liquid asset.
of action.
Lifestages young adult - post-secondary school, college, first job, to marriage
index |

Students financial planning help
Student Section
Don't forget the insurance
How to avoid or manage debt
Starting work
Money and Bank Accounts
(Occupational
pensions,
redundancy....)
Useful links
index |
back page |
lifestages

http://www.financial-planning.uk.com/consumer/noticeboard/students/index.htm [4/20/2002 5:58:28 PM]
Students financial planning help - Avoiding Debt, managing debt, contacts
Insurance
My two daughters are preparing themselves for university at the moment, one of them for
her final year, the other for her first. Both are well organised with bank accounts, student loan forms, mobile
telephones, friends' addresses and all the other paraphernalia that seems to be part of student life now. One
thing that has not appeared on their 'to do' lists is the matter of insurance.
Insurance is not a fun subject, but it could be even less fun trying to replace treasured possessions that have
been stolen.
Fortunately, as far as my daughters are concerned, there was no need for them to consider, because my own
insurance will cover their goodies when living away from home as students. Many of the larger insurers will offer
this cover, some with no limit, others up to a given percentage of the sum insured under the policy. We are lucky
in that our insurer will offer the same amount of cover to them both, but other companies insist that the cover be
shared, although it may be possible to top up any shortfall.
Check with your insurer, though. Don't assume that cover will be granted without notification by you and
confirmation from the insurer, particularly where there are high value possessions such as computers to be
taken into account.
There are dedicated insurance policies available from most insurance brokers, or you can contact specialist
such as Endsleigh Insurance, Saxon and Harrison-Beaumont.
Whether living in halls of residence or shared houses, insurance needs shouldn't be relegated to the last
minute. Costs are not excessive, and can save a lot of grief if essential items have to be replaced. Meeting the
conditions of insurance, such as keeping items in a secure place, are usually no more than common sense, so
shouldn't prove a burden for even the most pleasure loving of students.
noticeboard |
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http://www.financial-planning.uk.com/consumer/noticeboard/students/student3.htm (1 of 2) [4/20/2002 5:58:29 PM]
5/12/98: How to avoid or manage debt: The following is an extract published in The
Times on 5/12/98.
Avoiding Debt:
Limit your borrowing to a few sources. Spreading debts around too much makes it difficult
to keep track of them and can only create more problems later on. Do not borrow to pay off existing
debts.
Draw up a budget plan and stick to it
Try to limit your trips to the cash machine to once a week- it is too easy to lose track of
how much you are spending
Be cautious about how much you borrow on your overdraft - even if it is interest free
If you are taking out a student loan, you will find it easier to budget if you take the loan in 3
instalments.
Managing Debt:
Work out your income and expenditure. List your debts in order of priority and when they
are due:
First - Rent - you must have shelter
Second - Council Tax arrears - or you will be taken to court
Third - Electricity and gas
Fourth - Water
Fifth - Hire Purchase
When looking at expenditure don't forget occasional payments - such as for haircuts.
Contact your creditors and let them know you are having problems. Present them
with a statement of your income and expenditure and explain how you intend to pay off your debt.
Don't forget that regularity and frequency will be more important than quantity.
Respond to all letters and demands - try to keep on good terms with your creditors. Keep
copies of all correspondence and note down any phone calls with dates and the name of the person
you spoke to.
Useful Contacts:
Your bank branch student officer
The University welfare officer
Your local Citizens Advice Bureau
National Debt Line - 0121 359 8501

Consumer Credit Counselling Service - 0800 1381111
If you feel you can contribute material for this Section of our Site please let us know. Your views on the most
helpful format for a student section would be very valuable, for example.
noticeboard |
page back

Starting Work, first taste of financial responsibility - FSEC help files
STARTING WORK
Having a regular income for the very first time is very exciting. However, one of the problems is that it can be a
double edged sword. For many it is also their first taste of financial responsibility and that can be a daunting
and complicated experience. FSEC feel that the stage of your life when you start work for the first time should
be exciting and we have created this new section of our website to try to ease the way for you and keep things
buzzing.
The importance of a simple

budget
Should I borrow money?
Saving Money
Do I need a Bank Account?
Pensions
Tax
National Insurance
Insurance
index |

http://www.financial-planning.uk.com/consumer/start-work/index.htm [4/20/2002 5:58:32 PM]
Starting Work - the importance of a simple budget
STARTING WORK
The importance of a simple budget
Often one of the problems of having a regular income

for the first time is the feeling that from now on you will
be well off.
Unfortunately, it doesnt often work like that and you
may soon come to realise that your money is much
tighter than you thought it would be. How can you
avoid this sort of pitfall?
It sounds boring, but the best way of starting is to draw
up a budget.
It is probably best to list your known and expected expenditure over a period of 12 months use the
months of the year as column headings. Click here for an expenditure form you can download. We
have provided a number of items of expenditure for guidance.
Expenditure is often irregular. If you travel by train to work, you may have to buy a season ticket for
example, which you may buy quarterly or even annually. Also dont forget holidays (if you can afford
one) and that unexpected repair bill.
Allow for heavy expenditure months by trying to save in lighter months to try to balance your income
and expenditure over a full year.
Try to build a cash reserve for those unexpected items
Dont forget to allow for haircuts etc and laundry bills items which can easily be forgotten.
index |

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Starting Work - the importance of a simple budget
FREE Financial Planning Information - Newsletter request
It is not necessary to provide any details

to download the form, but if you do we will
keep you informed when we update this
site. (We do not pass details on to ANY
third parties.)
To download the expenses file, click on
the button at the end of the form
Your Name
Email Address
Country
DOWNLOAD the expenses speadsheet
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http://www.financial-planning.uk.com/consumer/start-work/newsletter.htm [4/20/2002 5:58:35 PM]
Starting Work - should I borrow money?
STARTING WORK
Should I borrow money?
Borrowing money is expensive.

If you have a credit card, remember that monthly interest payments on outstanding
balances are very high.
If you have a bank account, some banks give a free overdraft cushion. If you go
beyond the limit set for such an overdraft, arrange the overdraft limit with the bank unauthorized borrowing can be very expensive.
Remember that if your budget was tight before you took out the loan/overdraft, it will be tighter still
when you have to start making the repayments (which will be immediately).
If used wisely, credit cards can give you 51-56 days of interest free credit (depending on the time of the
month the purchase was made).
If you can't pay the full outstanding balance on your credit card in a month, pay the minimum
repayment shown - interest is normally charged on the whole amount - even the amount you repay!
Store cards are generally more expensive than bank credit cards - however, you may find it easier to
qualify for a store card. Some store cards give immediate discounts. The discount may be worth taking
up - even if you repay the first month's outstanding balance in full, then cut up the card.
If you already have a student loan, or taking out a new one, you must start repaying the loan if you are
earning 10,000 a year or more. Interest is charged in line with the rate of inflation and between 1/9/99
and 31/8/2000 it is 2.1% APR.
index |

Starting Work - should I borrow money?
Starting Work - saving Money
STARTING WORK
Saving Money
Try to put some money aside in case you are faced with unexpected
expenditure.
Interest is paid after tax is deducted.
Your savings are sheltered from tax if you opened a TESSA account before 5th April 1999. Although
no longer available, contributions can still be made to existing TESSA's. However, to enjoy full tax free
status, you must leave a TESSA untouched for 5 years.
In April 1999, TESSAs were replaced by Individual Savings Accounts (ISAs). These enable you to
save tax free and make withdrawals without being locked into a time period.
index |

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Starting Work - do I need a Bank Account?
STARTING WORK
Do I need a Bank Account?
Most banks offer free basic services if you are in credit - including cashcard,
chequebook, cheque-guarantee card, credit card and paying-in facilities.
Most employers will only pay your wage or salary direct into a bank
account.
You may need direct debits or standing orders to pay regular bills.
Some banks offer telephone or Internet facilities - so you may not even have to visit a bank branch.
index |

Starting Work - pensions
STARTING WORK
Pensions
You are never too young to consider a pension.

Always join a company scheme if
there is one
If your employer does not have a company pension scheme seek

advice on whether a personal pension scheme is suitable for you:
The younger you are when you start to save for a pension, the more time there is for your pension fund
to grow.
Ask your financial adviser about the tax benefits of taking out a personal pension.
Pension reforms
index |

The History of Pensions and Pension Reforms - information from FSEC
Pensions Timeline
Select a topic
noticeboard |
page back

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Starting Work - tax
STARTING WORK
Tax
When you start work you need to understand tax.
Ask your employer for a P46 form. Both you and your employer complete this, and your
employer then sends it to the tax office.
Until this is done you will be given a temporary tax code - which means you might not
benefit from the full personal allowance for the year.
Check your code when you receive it. A single person with no expenses will currently (1/99)
be coded 419L. Any overpaid tax during the time you had a temporary code, should be
refunded through your pay.
You can earn 4,195 (1/99) before paying tax - this is the amount of your personal allowance.
You then pay 20% tax on the next 4,300 and 23% up to 27,100. After that the tax rate jumps to 40%.
index |

Starting Work - National Insurance
STARTING WORK
National Insurance
You will need a National Insurance number.

This qualifies you for sick pay, maternity and disability benefits and a state pension.
(Depending on your record of contributions).
If you earn less than 3,328 you do not pay contributions.
If you earn more than 3,328, you pay 2% on the first 3,328, then 10% up to 25,220
(1/99).
index |

Starting Work - insurance
STARTING WORK
Insurance
Young people are seen as a high risk for most general insurances.
Life insurance is the exception - but you will only need life Insurance if you
have dependents.
Car insurance can be extremely expensive. If you are lucky enough to be able
to buy a new car, some manufacturers offer free car insurance for the first year - for a
young driver this can mean a big saving. Another option is to buy a cheap car for the
first year or so, and just cover it against third party fire and theft while you build up a
no-claims bonus. However, be wary that no claims bonuses are applied to the car
and not to the individual. However, if you have built up a reasonable no-claims
discount on a fire policy you may stand a better chance of getting an introductory discount if you
change your car.
It is illegal to insure your car under the name of your parents, with you as the named driver. Restrict
your insurance to named driver only - you.
Always take out travel insurance if you go abroad for a holiday. It is much too risky to
go away without insurance. If you like dangerous activities on holiday - mountain climbing, skiing,
paragliding etc, make sure you are covered by your policy.
index |
back page

Financial Events - starting work, self employment, family, retirement and other financial planning
FINANCIAL EVENTS
Starting Work
Buying your Home
Motgage Interest Charges
Starting a Family
Planning for Retirement
Elderly People
Death of a Partner
Self Employed
Termination of Employment
Windfall
Life Stages
Life Stages
main index |
back page
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Financial Events - starting work, self employment, family, retirement and other financial planning
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Buying your home - information from FSEC
Buying your Home

Buying your home is one of the most exciting experiences of your life. There are so many things to think about
that sometimes the financial aspects get a little tedious and decisions can easily be made without considering all
of the facts. FPH have provided this Section on buying your home to try to help you through the financial
complexities by highlighting some of the facts you may need to consider. We hope that you find the material
useful.
Saving for a Deposit

Tax on savings
Mortgage Providers (how much?)
Mortgage Types
FSA Factsheet on Endowment Mortgages
Repaying the loan
Insurance
Pension
index |

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Buying your home - information from FSEC
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Buying your home - saving for a deposit
Buying your Home

Saving for a Deposit: Some banks let you borrow the full price of the property but you may not get such an
attractive mortgage deal compared with someone who has saved a deposit. It is probably advisable to save
your money in a savings account which gives you a good interest rate and ease of access. This means that you
can also pay for emergencies such as that annoying car repair.
On 31/1/99, the Sunday Times cited the following as examples of organisations
providing accounts with competitive interest rates with ease of access: the Egg account
(from the Prudential), Virgin Direct and Standard Life. However rates need to be checked and compared with
other banks/building societies. The Sunday Times adds that if you manage to save a large amount , you could
transfer some of the money to a notice account to earn more interest - you must typically allow 50 days,
however, before you can access your money.
index |

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Buying your home - tax on savings
Buying your Home

Tax on savings: Interest on savings is normally paid after the deduction of 20% tax. If your partner does not
work, you can avoid this tax by transferring the account to their name. They can then apply to receive the
interest gross.
Your bank or building society will provide the appropriate forms. If either you or your partner pays higher rate
tax, similar steps can be taken - this time the savings account should be put in the name of the person paying
tax at a lower rate. Interest will not then attract higher rate taxation.
index |

Buying your home - mortgage providers
Buying your Home

Mortgage Providers: A number of providers will give you a mortgage of 100% of the property price, but
there are often stipulations:
some allow 100% mortgages - but only to people in the professions (e.g. Scottish Widows Bank).
you may have to pay a mortgage indemnity guarantee premium (Mig) which protects the lender in case
you default on payments. A Mig can cost up to 12% of the property price.
The Sunday Times reports (31/1/99) that the following are among the lenders who DO NOT insist on
Mig cover: Bradford & Bingley, Cheltenham & Gloucester, Direct Line and Lloyds TSB.
most lenders levy a fee if you borrow more than 90% or 95% of the property value
You can usually borrow three times your annual salary, plus one times that of your partner's (spouse or
cohabitant) salary. Alternatively you may be able to borrow 2.75 times your joint income. Some lenders are
more generous than this. As at 31/1/99, the Sunday Times reports that
the Woolwich and Woolwich Direct lend four times the first income and still take the second income
into account.
the Alliance & Leicester allow three times joint income.
Further reading - The Need to Plan
index |

The Need to Plan - Planning a mortgage
Planning a mortgage
Requirements
Your income must be sufficient to service the loan and associated
costs. The amount you can borrow is based on your income and is normally calculated
as income multiplied by a set figure - but taking into account any existing loans and
other unusually large items of expenditure.
Proof of income may be required, and this may range from actual salary slips
to employer's letters.
If you are self employed, you may need to provide your business accounts for a
2/3 year period as proof of income or perhaps an accountant's letter or even
correspondence with the Inland Revenue.
Click to see "The Mortgage Code"
Points to note:
A high gross income may look attractive, but for the ability to service the loan the lender is looking
for unallocated 'free' income.
the lender may be looking for a history of stable credit repayments.
the lender will need full disclosure of:-
1.
2.
3.
4.
5.
6.
Outstanding balances on overdrafts, credit cards, etc.

Unpaid bills.
Loans - amounts outstanding, term, purpose, payments.
Hire purchase agreements.
Maintenance payments.
Any other regular commitments on income
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You will probably have to find a deposit on the house from your savings:
1. It is not always possible to find a loan which covers the full cost of a new house the deposit will usually be between 5% and 10% of the purchase price.
2. The greater the deposit, the greater the equity interest in the property, and the
greater the cushion you will have against the danger of 'negative equity'
3. 'Equity' means the value which would be left on the sale of your house after the
mortgage has been repaid and all costs covered.
4. 'Negative equity' is the amount of mortgage which would remain to be paid off
after the sale of the house.
The lender will need to know how financially secure their loan is going to be, and so will
check with a number of sources the borrower's financial status.
Each lender will have their own checking system, which is likely to include the
following information sources:-
1. Existing lenders.
2. Credit check, which will show County Court Judgements (CCJs) and any 'letters of
satisfaction'.
3. Bank references.
Having gone through an initial interview with the potential borrower, the lender can
corroborate the information provided at interview and on any completed application with the above.
A bankruptcy search will also be made.
Lenders' criteria differ, and may be 'open' or 'restricted' depending on the economic climate. In general,
however, a stable employment history is likely to be treated more favorably than someone who has job 'hopped'.
Some lenders charge arrangement fees. This is an up-front, once only charge of up to perhaps 200,
and is usually non-refundable. Lenders have always claimed that the purpose of the fee is to:-
1. deter 'browsers' and time wasters.

2. to cover some of the initial organisation expenses.
There are also legal fees to pay. The transfer of land, or conveyancing, involves a number of steps
incurring different charges. The actual conveyance is usually undertaken by a single party, the solicitor or
licensed conveyancer, and the single fee payable will be broken down into the following elements:-
1.
2.
3.
4.
Professional services of the solicitor/conveyancer.

Local search to reveal any planning affecting the property.
Land Registry fees incurred in registering the transfer of land.
Stamp Duty, which is a property sale tax of 1% on all properties costing 60,001 or
more.
Insurance is generally required by the lender where a high proportion of the purchase
price is funded by a loan e.g. 75% or more.
1. The insurance is to safeguard against all possibility of loss if the borrower defaults
and the property needs to be repossessed and sold.
2. The premium is usually a single payment, and can often be added to the loan.
3. Rates vary, but have increased over recent years owing to the increased number
of repossessions. It is likely, also, that the rate will increase, the higher the loan
amount.
You will also need to arrange buildings insurance (against fire etc)
The Building Societies Act 1986 requires building societies (but not other lenders) to carry out a
valuation of all properties on which new loans are advanced. The surveyor will provide different
levels of valuation and report:-
1. Mortgage valuation; a limited inspection merely to determine the suitability of

the property as security for the level of loan requested.
2. Buyer's report; a survey reporting on the condition and state of repair of the
property, generally giving recommendations of repairs needed and sale potential.
3. Structural survey; a full and detailed survey of structure, not merely state of
obvious repair, and full valuation.
planning for protection | savings & investment | retirement | mortgage products | intro
Copyright Financial Services Education for Consumers Limited 1998

The Need to Plan - protection
Planning for Protection

Dying too soon:
Where the death is that of the main income provider, the greater the reliance on that income for
everyday living purposes, the greater the need for protection for its replacement.
Loss of income could produce a number of problems and needs such as:
1. Reduction in standard of living

2. Need to keep up with increasing cost of living
3. Need to repay loans
4. Possible loss of possessions if unable to repay loans or keep up repayments
5. The problem of adult dependants and their continuing care
6. The need to pay inheritance tax.
Living too long

This is not just a problem of ensuring that income continues in retirement. The likelihood of
living longer is greater today than in most of our history.
Old age brings its own protection requirements:
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1. There is still the need for life cover to provide for family and payment of tax and
outstanding debt.
2. Physical infirmity is an increasing possibility, so care and protection will need to be
catered for.
3. Ill health is also increasingly likely as we get older, and so medical care becomes
of greater importance.
Loss of income
Loss of income can come about through:
1. Redundancy
2. Dismissal
3. Enforced early retirement e.g. ill health
4. Sickness or injury
The consequences of loss of income are similar to those given above, with the additional
problems that might be caused by long term sickness or disability:
1. Special nursing/medical facilities might be a costly requirement

2. Special tools or facilities might be required
3. Alterations might be required for comfortable living
4. The practical strain on the health and time resources of the family of a sick or
disabled person.

The Need to Plan - saving
Planning savings and investment

Look at your financial situation in some detail
It is very important to look at your financial situation in some detail so that you
understand your needs and understand what you can and cannot afford.
When you see a financial adviser, the first thing they will do is carry out something
called a "Fact Find". The financial adviser will ask a lot of questions about your financial
and personal circumstances so that they understand your needs more clearly.
You will be in a much better position if you are able to do some preparation before you
see the financial adviser - such preparation will give you a much better understanding of
the financial planning process. It is possible that when you look at your financial
situation you may feel more committed to planning for the future.
Commit yourself to a financial plan
Many people find it difficult to commit themselves to a financial plan
and this is often because of:
1. lack of knowledge of the planning possibilities.

2. lack of knowledge of potential financial problems.
3. lack of awareness of existing financial problems.
4. lack of knowledge to be able to establish types of savings and investments to
choose, what can be afforded and where priorities should lie.
The art of the planning process

The art of the planning process is to clarify potential shortfalls in your existing financial situation, to look at ways
to get to where you would like to be in the future and to understand whether those plans are practical given all
the circumstances.
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The Need to Plan - saving
When you see your financial adviser, he/she will provide general advice and guidance on prioritising and
balancing the proposed plan or plans i.e. spread of investment types, getting the timing right, major expenditure,
ongoing savings and establishing an emergency fund. Once general plans have been laid, specific actions can
then be taken to select the right products and providers.

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The Need to Plan - retirement
Planning for retirement

Introduction
Retirement often means that earned income ceases, which is likely to
mean a reduction in overall income. This may affect your standard of living - but you
may have income from other sources, perhaps as a consequence of inheriting money.
The circumstances of most people, combined sometimes with the fact that
many people give pensions low priority in their younger and middle years, means that
few retire on the maximum pension benefits permitted by the Inland Revenue - either
from an occupational pension scheme or from a personal pension.
The combination of the above points could lead to an uncomfortable
retirement for many people through insufficient income.
Clearly long-term pensions planning is, therefore, very important.
Planning should aim to bridge the gap between pre-retirement income and the required
level of income in retirement. Bearing in mind that the maximum from an occupational
scheme will be no more that 2/3rds of pre-retirement earnings, some careful planning is
required if retirement income is to be anything like the income you enjoy whilst working.
Factors to take into account when planning a minimum pension requirement:
1.
2.
3.
4.
regular expenditure: what is your expenditure likely to be in retirement

the need to build reserves to meet any unexpected expenditure
allowances for care in old age
inflation
The following also need to be taken into account in your pension planning:
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1. Age: the older you are the less time your retirement fund will have to grow. The
younger you are at retirement your fund is likely to be smaller and annuity rates will
be lower - annuity rates get higher with age. (If you are not in an occupational
pension scheme, the most common option to provide you with income in retirement
is to buy an annuity with your pension fund).
2. Income: will directly affect your pension income in an occupational pension
scheme. Income will also determine what your maximum contribution can be into a
personal pension scheme. Generally, you are allowed to make higher percentage
contributions from your income the older you are. With an occupational scheme, it
may also be possible to top up your pension by making voluntary contributions.
The more you earn, the more you can invest in your pension.
3. Dependants: will affect your decisions both during working life and in retirement.
Both before and after retirement you have to consider the cost of providing
protection for dependents in case of your early death (indeed before you retire
protection will be necessary if you are ill or have an accident and can no longer
work). After retirement, providing protection (or even providing a pension for
dependents) will be a drain on your own pension income.
In planning your retirement arrangements the following are important considerations:
1. Pension products must only be used for the accumulation of funds to provide an
income on retirement.
Governing legislation does not provide the flexibility to enable the pension scheme
to act as a savings contract i.e. once contributions are paid in, they are
inaccessible and may only be taken as pension (or pension and cash) at
retirement.
2. The most essential use of the products is to top up inadequate State Pensions.
3. The tax free cash element (which the Inland Revenue allow on most pension
schemes) may provide cash at retirement to repay loans or any number of other
uses.
Certain circumstances may prove problematical in pension planning terms:
1. Scheme members whose salaries exceed the earnings cap laid down by the Inland
Revenue. This will limit the amount which can be paid into your pension scheme.
2. Scheme members who have only a short time to go before retirement as the
pension fund will not have time to grow.
3. In the above circumstances, planning will need to be supplemented by other
investments.

The Need to Plan, Protection, Savings and investment, Retirement, Mortgage
The need to Plan

Introduction
There are a variety of reasons for wanting to plan for our financial future. The following
are the most common:
Protection: Protecting the financial future of our families
Savings and investment: Saving and investing for the future - either for that holiday or
for a rainy day
Retirement: Providing ourselves with a reasonable income either when we retire or
when we have to retire
Mortgage: Buying that roof over our heads
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The Need to Plan, Protection, Savings and investment, Retirement, Mortgage
The statistics are compelling

There are a great number of areas of our lives that warrant our particular attention. These are just some of the
more important:
1. A third of employed people spend less that three years with an employer.
2. Six percent of the working population is working on short term contract, rather than part of the
permanent workforce; the number is growing.
3. More than a fifth of the working population have part time employment, either as their only or main
source of income.
4. More than 50% of women with a child under the age of five are not employed, not always voluntarily.
5. About 12% of men aged 25 to 49 are made redundant each year.
6. More than a third of marriages end in divorce.
7. In any one year, more than a million people aged 20 to 64 are off work for six months or more.
8. Nearly 50% of men and 30% of women retire early, not always voluntarily.
9. About 17% of adult deaths occur before retirement.
10. Illness, too, has a great effect on our lives. For example: 25% of men and 20% of women suffer a
serious illness before age 65. Who do you know with a long term illness? How would you cope?
Copyright Financial Services Education for Consumers Limited 1998/99/00

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Buying your home - mortgage types
Buying your Home

Mortgage Types:
Fixed rate mortgages: There are some attractive fixed rate mortgages around as at 31/1/99. The Sunday
Times quotes the example of the Staffordshire Building Society which currently offers 4.95% fixed for five years.
Discounted mortgage: If you think that interest rates are likely to fall you may prefer a discounted
mortgage. Your mortgage rate moves in line with interest rates, but always at a discount to the lender's standard
variable rate.
Capped-rate mortgage: These mortgages are appropriate if you think that interest rates will rise. If they
rise, you will never pay more than the cap. You may also pay less if the standard variable rate falls below the
cap.
Cash-back deals: Some lenders offer cash-back deals. The Sunday Times as at 31/1/99 quoted the
example of Abbey National who will currently give you up to 5% of your mortgage as a cash lump sum with
some of its fixed rate deals.
Further reading
Different Mortgage Types

Which Type of Mortgage
Which Interest Option
Which Repayment Method
FSA Factsheet on Endowment Mortgages
index |

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Buying your home - mortgage types
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Buying your home - Your endowment mortgage, what you need to know
The following is reproduced by kind permission of the FSA. This document was originally in Acrobat format, see
the Acrobat version of this document.
Financial Services Authority January 2000
Your endowment mortgage what you need to know
You may already have received this factsheet direct from your endowment company. They are sending
copies automatically to people who have mortgage endowment policies, with a letter explaining what they
are planning to do to review your policy.
The letter will also give you their helpline number to call if, after reading the letter and factsheet, you have
further questions.
If you haven't had a letter from your endowment company by the end of February, contact them and they
will send you one. Financial Services Authority Factsheet January 2000
Your endowment mortgage what you need to know
This factsheet has been sent to you because you have an endowment mortgage (an interest-only
mortgage, backed by an endowment policy). Many people who have taken out an endowment mortgage
have found it does the job perfectly well. However, over recent years, expected investment returns have
fallen because of lower inflation, so some endowment policies might not grow fast enough in future to pay
off the mortgage in full. This factsheet sets out:
how endowment mortgages work;

what to do if you are worried that your endowment mortgage is no longer on target to repay your
loan in full (see page 4); and
what to do if you think you were wrongly advised to buy an endowment mortgage (see page 6).
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If you are worried about your endowment mortgage - don't make any hasty
decisions. Check the facts first. Never cash in your policy, or stop your payments,
without taking proper advice. You could lose out if you do.
The FSA (Financial Services Authority) is an independent body set up by government to

regulate financial services and protect consumers.
Our Consumer Helpline can answer general queries about financial products and services,
tell you if a firm or adviser is authorised and help you if you have a complaint and dont
know who to contact.
We also produce a range of user-friendly factsheets and booklets available from our
leafletline, our website and from our offices.
We cant recommend firms or advisers or tell you whether a particular investment is right
for you. But if, after reading this factsheet, youre still not sure what to do, please give us a
call and well try to help.
The Financial Services

Authority
FSA Consumer
Helpline:
0845 606 1234

(calls charged at local rate)
25 The North
Colonnade
Leafletline:
0800 917 3311 (freephone)
Canary Wharf
Main switchboard:
0207 676 1000
London
Fax:
0207 676 9713
E14 5HS
Website:
http://www.fsa.gov.uk
What is an endowment mortgage?

You may see mortgages being offered under many different names, but they are always one of two basic
types, depending on how you choose to repay what you borrow:
you can have a repayment mortgage; or
you can have an interest-only mortgage (all endowment mortgages are interest-only mortgages).
Repayment mortgage
With this, you make monthly payments to the lender over a certain number of years (called the
mortgage term). Many mortgages last for 25 years but they can be for shorter periods. Your
payments cover the interest on the loan and also gradually repay the whole of the amount you
have borrowed. If you keep up the payments on a repayment mortgage, the whole loan will
definitely be repaid by the end of the term. If you need life insurance to cover a repayment
mortgage, you can buy a form of life insurance called term insurance.
Interest-only mortgage
With an interest-only mortgage, your monthly payments to the lender only cover the interest on
the loan. They do not repay any of the amount you have borrowed (sometimes called the capital
or principal). This is why you make separate payments into a savings scheme to build up a lump
sum which you can use at the end of the mortgage term to repay the amount you borrowed. The
type of savings scheme many people use with an interest-only mortgage is an endowment policy
with an insurance company or friendly society (so the arrangement is often called an endowment
mortgage). This factsheet only deals in detail with endowment mortgages. For information about
other types of mortgage, call the FSA leafletline on 0800 917 3311 for your free copy of the FSA
guide to repaying your mortgage.
How do endowment policies work?

The money you pay into an endowment policy builds up over a set period of years (the policy term). At
the end of this term, your policy matures and you get a lump sum, which you can use to repay your
mortgage loan. An endowment policy provides life insurance and sometimes other insurance benefits too.
If you die before the end of the policy term, the life insurance should pay out a lump sum which is
guaranteed to repay the amount you originally borrowed. However, the amount you get when your
endowment policy matures is generally not guaranteed. It depends on investment returns and on how the
endowment company has invested your savings. The company usually puts most of your savings into
investments linked to stocks and shares. Over the longer term, these tend to provide good returns but, like
all stock market investments, they do involve some risk.
Why might some endowments not repay mortgage loans?
At the time you take out an endowment mortgage, the company whose name is on the endowment policy
(the endowment company) must give you written examples of the amount you might get back if your
contributions were to grow at different rates. The projection rates used for this purpose are based on how
well the economy is doing and the level of inflation, and they are changed from time to time to reflect
current conditions. In recent years there have been big falls in inflation and interest rates, and in July 1999
the projection rates were reduced to 4%, 6% and 8% a year. The rates are laid down by the regulators
and all firms must use them. They show how your endowment would grow if the projection comes true.
The projection rates are designed to show you a reasonable range of possible outcomes, but there is no
guarantee that any of them will prove right.
Endowment companies can also tell you the target growth rate they use to set your premiums. If this
target is hit, your policy should produce the money you need to pay off your mortgage at the end of the
term. This rate will often be clear from the paperwork, but if not you can ask the company to tell you. Many
firms now use 6%, the middle of the three rates. Remember, the figures are not guaranteed, they
are only possibilities.
The fall in inflation and in projected rates of return means that some endowment policies, particularly low
cost or low start endowments, might no longer be on track to pay out a big enough sum at the end to
repay the mortgage in full. You might need to look at ways of topping up your savings see page 4. (This
might also be the case if you have an interest-only loan backed by other forms of investment such as a
PEP, ISA or pension. Contact the firm or adviser who sold you the investment product if you want to check
this out.)
Remember: because interest rates have fallen, the amount you have to pay out to cover interest on your
mortgage loan has also come down (unless you have a fixed rate loan). This saves you some money.
How do I know if my policy is on target to repay my loan?
Providers of endowment policies that are used to repay mortgage loans have agreed to reassess them
regularly, to check they are still on target to pay out the expected lump sums at the end. Most endowment
companies have agreed to carry out reviews:
no later than 10 years after the policy started, or half-way through the policy term (whichever
date is earlier); and
to review things again at least every five years after that for the rest of the policy term.
In practice, many companies will be carrying out reassessments sooner than this, and a high proportion of
policyholders can expect to receive a re-projection of their policy by the end of 2000. The only type of
policy which does not have to be reassessed is one which guarantees to pay off the amount of the
mortgage loan at the end of the term. Such policies are uncommon.
If your policy is no longer on target to repay your mortgage, your endowment company may already have
contacted you to discuss what action you should take. There are different ways of topping up your
savings, so dont make any hasty decisions.
I am worried that my mortgage endowment policy may not be on target to pay off my loan what can I
do?
If you are worried that your endowment policy may not pay off your mortgage, you
may be tempted to cash it in. Never do this, or stop making your payments,
without taking proper advice. There are often high charges in the early years. If
your endowment policy is only a few years old, the amount you would get back will
probably be less than the payments you have made. You will also have to find
another way of repaying your mortgage, and you may also need to pay for life
insurance, which is included in the endowment policy.
There are a number of things you can do, so dont panic.
Follow these steps:
Step one
find all the paperwork. Check how long both the loan and the endowment policy
have left to run. If you need to repay the mortgage before the endowment pays out
and you are expecting to use the endowment to pay off the loan, you may have a
problem. You need to speak to the firm or adviser who sold you the policy and ask
them why the end dates are different. You can ask your mortgage company to
extend the term (the length of time the loan runs for). But make sure that, if this
takes you beyond retirement age, you can afford to keep up the payments.
Step two
contact your endowment company. Ask them to work out whether your policy is
still on target to repay your mortgage. You may be told you have to wait if there is
a heavy demand for re-projections all at once. People whose policies are near
their pay-out date (called maturity) will get priority as they have less time to deal
with any shortfall before they have to repay their loan.
Step three
if it seems that the lump sum you will get from the endowment might fall short of
the amount you need when your mortgage term ends, look at ways of topping up
your savings see below.
How can I top up my savings to make sure I can repay my mortgage - if I need to do this?
The endowment firm or your adviser may suggest that you:
increase your monthly payments into your existing policy, but check whether youll have to pay
extra costs or charges. Note: If you are a higher-rate taxpayer and you increase payments into
your policy less than 10 years before its maturity date, you may have to pay tax when the policy
pays out; or
arrange for the policy term to be extended (if your mortgage lender agrees). This is not likely to
be a good idea if the policy will continue after you have retired, unless you are sure you will still
be able to afford the payments; or
take out an additional top-up policy (again check out any extra costs or charges).
However, these may not be the cheapest options for you because of the costs and charges you pay on
endowment policies. Other options, which could be better value, are:
contacting your lender and arranging to change part of your mortgage to a repayment loan. For
example, your mortgage is 60,000 and the endowment company tells you the possible shortfall
is 10,000. You could arrange your mortgage so that 50,000 continues on an interest-only basis
(repaid by your endowment policy) and 10,000 (the amount of the shortfall) is converted to a
repayment loan; or
starting an additional savings scheme, such as an ISA, to build up a further lump sum that you
can put towards paying off your mortgage; or
if you have a spare lump sum, making extra capital repayments to your lender to reduce the
amount you owe on the mortgage loan. But check first whether you will have to pay any penalties
for paying back part or all of the loan early (redemption penalties). Check too when the capital
repayment is credited to your account, so you know when you will benefit from lower payments.
If youre not sure which option is best for you, an authorised financial adviser can explain your choices in
more detail.
What advice should I have been given when I was sold an endowment mortgage policy?
The FSA sets standards which companies selling investment products, including all forms of endowment
policies, must follow. Companies giving you advice must:
tell you how your savings will be invested and explain the risks involved;
explain that most endowment policies do not guarantee to repay your mortgage loan;
explain that an endowment is a long-term commitment which usually gives you a poor return if
you cash it in early;
make sure that an endowment is suitable for example, that you are likely to be able to keep up
the payments throughout the term of the policy; and
explain any fees and charges. If you bought an endowment on or after 1 January 1995, your
adviser should have given you a Key Features document setting out the fees and charges. The
adviser should have explained to you how these fees and charges affect the return you get on
your savings.
The regulators check firms to make sure they are meeting these standards.
The company that sold me my endowment didn't explain all these points and I am unhappy with the
advice I was given. What should I do?
If you were given investment advice, the adviser should first have asked you a number of questions about
your finances, personal circumstances and future prospects. The adviser should only have recommended
an endowment policy because it seemed suitable for you. If you think the adviser didnt do this and, as a
result, you were sold the wrong product and suffered financially, there are ways to get things put right. But
you may only get help if you took out the endowment policy on or after 29 April 1988. (This is the date
when the system of financial services regulation came into force to protect investors, though some firms
have voluntarily agreed to look at cases before this date.)
The regulators cant help if the firm gave you sound advice at the time and you are simply unhappy about
how your endowment has performed. This is because it is part of the regulators job to make sure people
get suitable advice, but investment performance cannot be guaranteed.
Follow these steps:
Step one
first contact the firm (or adviser) that sold you the endowment policy. The firm
should have a proper complaints procedure and tell you how to use it.
Step two
if the firm does not put matters right to your satisfaction, you can take your
complaint to the relevant independent complaints scheme. The firm should tell you
which one to contact.
But remember, compensation will be due only if you have lost out financially as a result of poor advice.
If, after reading this factsheet, you have further questions, go back to your endowment company. Details
of who to contact will be on the letter which came with this factsheet. If, after contacting you endowment
company, you still need help, call the FSA Consumer Helpline on 0845 606 1234. You can also
call the FSA leafletline on 0800 917 3311 for a free copy of the FSA guide to making a complaint.
I am thinking of taking out a mortgage or switching to a different sort of mortgage. What do I
need to know?
Read the FSA guide to repaying your mortgage, which sets out your choices in detail, and is also
available free from the FSA leafletline. If you are worried that your endowment policy may
not pay off your mortgage, you may be tempted to cash it in. Never do this, or stop
making your payments, without taking proper advice.
The Financial Services Authority CR377
index |

Financial Services Authority

January 2000
Your endowment mortgage

what you need to know
You may already have received this factsheet direct from your
endowment company. They are sending copies automatically to
people who have mortgage endowment policies, with a letter
explaining what they are planning to do to review your policy.
The letter will also give you their helpline number to call if, after
reading the letter and factsheet, you have further questions.
If you havent had a letter from your endowment company by the
end of Februar y, contact them and they will send you one.
Financial Services Authority
Factsheet
January 2000
your endowment mortgage

what you need to know
This factsheet has been sent to you because you have an endowment mortgage (an interestonly mortgage, backed by an endowment policy). Many people who have taken out an
endowment mortgage have found it does the job perfectly well. However, over recent years,
expected investment returns have fallen because of lower inflation, so some endowment
policies might not grow fast enough in future to pay off the mortgage in full.
This factsheet sets out:
how endowment mortgages work;
what to do if you are worried that your endowment mortgage is no longer on target
to repay your loan in full (see page 4); and
what to do if you think you were wrongly advised to buy an endowment mortgage
(see page 6).
If you are worried about your endowment mortgage - don't make any hasty decisions.
Check the facts first. Never cash in your policy, or stop your payments, without taking
proper advice. You could lose out if you do.
The FSA (Financial Services Authority) is an independent body set up by government to regulate financial services and
protect consumers.
Our Consumer Helpline can answer general queries about financial products and services, tell you if a firm or adviser is
authorised and help you if you have a complaint and dont know who to contact.
We also produce a range of user-friendly factsheets and booklets available from our leafletline, our website and from our offices.
We cant recommend firms or advisers or tell you whether a particular investment is right for you. But if, after reading this
factsheet, youre still not sure what to do, please give us a call and well try to help.
The Financial Services Authority

25 The North Colonnade
Canary Wharf
London
E14 5HS
FSA Consumer Helpline:

Leafletline:
Main switchboard:
Fax:
Website:
0845 606 1234 (calls charged at local rate)

0800 917 3311 (freephone)
0207 676 1000
0207 676 9713
http://www.fsa.gov.uk
What is an endowment mortgage?

You may see mortgages being offered under many different names, but they are always one
of two basic types, depending on how you choose to repay what you borrow:
you can have a repayment mortgage; or
you can have an interest-only mortgage (all endowment mortgages are interest-only
mortgages).
Repayment mortgage
With this, you make monthly payments to the lender over a certain number of years
(called the mortgage term). Many mortgages last for 25 years but they can be for
shorter periods. Your payments cover the interest on the loan and also gradually repay
the whole of the amount you have borrowed. If you keep up the payments on a
repayment mortgage, the whole loan will definitely be repaid by the end of the term. If
you need life insurance to cover a repayment mortgage, you can buy a form of life
insurance called term insurance.
Interest-only mortgage
With an interest-only mortgage, your monthly payments to the lender only cover the
interest on the loan. They do not repay any of the amount you have borrowed
(sometimes called the capital or principal). This is why you make separate payments
into a savings scheme to build up a lump sum which you can use at the end of the
mortgage term to repay the amount you borrowed.
The type of savings scheme many people use with an interest-only mortgage is an
endowment policy with an insurance company or friendly society (so the arrangement
is often called an endowment mortgage). This factsheet only deals in detail with
endowment mortgages. For information about other types of mortgage, call the FSA
leafletline on 0800 917 3311 for your free copy of the FSA guide to repaying your
mortgage.
How do endowment policies work?

The money you pay into an endowment policy builds up over a set period of years (the
policy term). At the end of this term, your policy matures and you get a lump sum, which
you can use to repay your mortgage loan. An endowment policy provides life insurance and
sometimes other insurance benefits too. If you die before the end of the policy term, the life
insurance should pay out a lump sum which is guaranteed to repay the amount you
originally borrowed.
However, the amount you get when your endowment policy matures is generally not
guaranteed. It depends on investment returns and on how the endowment company has
invested your savings. The company usually puts most of your savings into investments
linked to stocks and shares. Over the longer term, these tend to provide good returns but,
like all stock market investments, they do involve some risk.
Why might some endowments not repay mortgage loans?

At the time you take out an endowment mortgage, the company whose name is on the
endowment policy (the endowment company) must give you written examples of the amount
you might get back if your contributions were to grow at different rates. The projection rates
used for this purpose are based on how well the economy is doing and the level of inflation,
and they are changed from time to time to reflect current conditions. In recent years there
have been big falls in inflation and interest rates, and in July 1999 the projection rates were
reduced to 4%, 6% and 8% a year. The rates are laid down by the regulators and all firms
must use them. They show how your endowment would grow if the projection comes true.
The projection rates are designed to show you a reasonable range of possible outcomes, but
there is no guarantee that any of them will prove right.
Endowment companies can also tell you the target growth rate they use to set your
premiums. If this target is hit, your policy should produce the money you need to pay off
your mortgage at the end of the term. This rate will often be clear from the paperwork, but if
not you can ask the company to tell you. Many firms now use 6%, the middle of the three
rates. Remember, the figures are not guaranteed, they are only possibilities.
The fall in inflation and in projected rates of return means that some endowment policies,
particularly low cost or low start endowments, might no longer be on track to pay out a
big enough sum at the end to repay the mortgage in full. You might need to look at ways of
topping up your savings see page 4. (This might also be the case if you have an interestonly loan backed by other forms of investment such as a PEP, ISA or pension. Contact the
firm or adviser who sold you the investment product if you want to check this out.)
Remember: because interest rates have fallen, the amount you have to pay out to cover
interest on your mortgage loan has also come down (unless you have a fixed rate loan). This
saves you some money.
How do I know if my policy is on target to repay my loan?

Providers of endowment policies that are used to repay mortgage loans have agreed to
reassess them regularly, to check they are still on target to pay out the expected lump sums at
the end. Most endowment companies have agreed to carry out reviews:
no later than 10 years after the policy started, or half-way through the policy term
(whichever date is earlier); and
to review things again at least every five years after that for the rest of the policy term.
In practice, many companies will be carrying out reassessments sooner than this, and a high
proportion of policyholders can expect to receive a re-projection of their policy by the end of
2000. The only type of policy which does not have to be reassessed is one which guarantees
to pay off the amount of the mortgage loan at the end of the term. Such policies are
uncommon.
If your policy is no longer on target to repay your mortgage, your endowment company may
already have contacted you to discuss what action you should take. There are different ways
of topping up your savings, so dont make any hasty decisions.
I am worried that my mortgage endowment policy may not be on target to pay

off my loan what can I do?
If you are worried that your endowment policy may not pay off your mortgage, you may be
tempted to cash it in. Never do this, or stop making your payments, without taking proper
advice. There are often high charges in the early years. If your endowment policy is only a
few years old, the amount you would get back will probably be less than the payments you
have made. You will also have to find another way of repaying your mortgage, and you may
also need to pay for life insurance, which is included in the endowment policy.
There are a number of things you can do, so dont panic.
Follow these steps:
Step one find all the paperwork. Check how long both the loan and the endowment
policy have left to run. If you need to repay the mortgage before the endowment
pays out and you are expecting to use the endowment to pay off the loan, you
may have a problem. You need to speak to the firm or adviser who sold you the
policy and ask them why the end dates are different. You can ask your mortgage
company to extend the term (the length of time the loan runs for). But make
sure that, if this takes you beyond retirement age, you can afford to keep up the
payments.
Step two contact your endowment company. Ask them to work out whether your policy is
still on target to repay your mortgage. You may be told you have to wait if there
is a heavy demand for re-projections all at once. People whose policies are near
their pay-out date (called maturity) will get priority as they have less time to
deal with any shortfall before they have to repay their loan.
Step three if it seems that the lump sum you will get from the endowment might fall short
of the amount you need when your mortgage term ends, look at ways of topping
up your savings see below.
How can I top up my savings to make sure I can repay my mortgage - if I need
to do this?
The endowment firm or your adviser may suggest that you:
increase your monthly payments into your existing policy, but check whether youll
have to pay extra costs or charges. Note: If you are a higher-rate taxpayer and you
increase payments into your policy less than 10 years before its maturity date, you may
have to pay tax when the policy pays out; or
arrange for the policy term to be extended (if your mortgage lender agrees). This is not
likely to be a good idea if the policy will continue after you have retired, unless you are
sure you will still be able to afford the payments; or
take out an additional top-up policy (again check out any extra costs or charges).
However, these may not be the cheapest options for you because of the costs and charges you
pay on endowment policies. Other options, which could be better value, are:
contacting your lender and arranging to change part of your mortgage to a repayment
loan. For example, your mortgage is 60,000 and the endowment company tells you
the possible shortfall is 10,000. You could arrange your mortgage so that 50,000
continues on an interest-only basis (repaid by your endowment policy) and 10,000
(the amount of the shortfall) is converted to a repayment loan; or
starting an additional savings scheme, such as an ISA, to build up a further lump sum
that you can put towards paying off your mortgage; or
if you have a spare lump sum, making extra capital repayments to your lender to
reduce the amount you owe on the mortgage loan. But check first whether you will
have to pay any penalties for paying back part or all of the loan early (redemption
penalties). Check too when the capital repayment is credited to your account, so you
know when you will benefit from lower payments.
If youre not sure which option is best for you, an authorised financial adviser can explain
your choices in more detail.
What advice should I have been given when I was sold an endowment
mortgage policy?
The FSA sets standards which companies selling investment products, including all forms of
endowment policies, must follow. Companies giving you advice must:
tell you how your savings will be invested and explain the risks involved;
explain that most endowment policies do not guarantee to repay your mortgage loan;
explain that an endowment is a long-term commitment which usually gives you a poor
return if you cash it in early;
make sure that an endowment is suitable for example, that you are likely to be able
to keep up the payments throughout the term of the policy; and
explain any fees and charges. If you bought an endowment on or after 1 January 1995,
your adviser should have given you a Key Features document setting out the fees and
charges. The adviser should have explained to you how these fees and charges affect the
return you get on your savings.
The regulators check firms to make sure they are meeting these standards.
The company that sold me my endowment didn't explain all these points and I
am unhappy with the advice I was given. What should I do?
If you were given investment advice, the adviser should first have asked you a number of
questions about your finances, personal circumstances and future prospects. The adviser
should only have recommended an endowment policy because it seemed suitable for you. If
you think the adviser didnt do this and, as a result, you were sold the wrong product and
suffered financially, there are ways to get things put right. But you may only get help if you
took out the endowment policy on or after 29 April 1988. (This is the date when the system
of financial services regulation came into force to protect investors, though some firms have
voluntarily agreed to look at cases before this date.)
The regulators cant help if the firm gave you sound advice at the time and you are simply
unhappy about how your endowment has performed. This is because it is part of the
regulators job to make sure people get suitable advice, but investment performance cannot
be guaranteed.
Follow these steps:
Step one first contact the firm (or adviser) that sold you the endowment policy. The firm
should have a proper complaints procedure and tell you how to use it.
Step two if the firm does not put matters right to your satisfaction, you can take your
complaint to the relevant independent complaints scheme. The firm should tell
you which one to contact.
But remember, compensation will be due only if you have lost out financially as a result of
poor advice.
If, after reading this factsheet, you have further questions, go back to your endowment
company. Details of who to contact will be on the letter which came with this factsheet.
If, after contacting you endowment company, you still need help, call the FSA Consumer
Helpline on 0845 606 1234. You can also call the FSA leafletline on 0800 917 3311 for a
free copy of the FSA guide to making a complaint.
I am thinking of taking out a mortgage or switching to a different sort of

mortgage. What do I need to know?
Read the FSA guide to repaying your mortgage, which sets out your choices in detail, and is
also available free from the FSA leafletline.
If you are worried that your endowment policy may not pay off your mortgage, you may
be tempted to cash it in. Never do this, or stop making your payments, without taking
proper advice.
The Financial Services Authority
CR377
Buying your home - repaying the loan
Buying your Home

Repaying the loan: There are basically two types of mortgages:
.Interest only: You do not actually repay any of the capital debt to the lender. Your monthly payments are
just interest on the capital sum. In order to accumulate enough money to pay off the debt at the end of the
mortgage term you are required to set up a separate savings scheme. This may be an endowment policy, a
pension or a PEP.
Repayment mortgage: Your monthly payments include an amount to pay off the capital sum as well as
interest.
The Sunday Times expresses the opinion that as at 31/1/99 for most people, a straightforward repayment
mortgage is probably the best option.
Further reading
interest only and repayment

Mortgage Case Studies
All about mortgages and related information
index |

Comparing Product and Provides for mortgages - building societies, banks, insurance companies
Comparing Mortgages
Comparing products & providers
The main providers are:
building societies
banks
insurance companies.
Different mortgage types
Redemption Penalties are additional fees charged on repayment of the loan, and
will depend on the interest option:-
1. Variable Rate - generally no penalty.

2. Fixed Rate - will depend on the initial term, the longer the term, the higher the
penalty, perhaps up to six months' interest.
3. Deferred Interest - potentially a higher rate (because of the interest
forgone) plus full repayment of the accumulated deferred interest.
4. Any penalty imposed will be a one off payment by the borrower
Flexibility of payment term may be a useful short-term safety net when income
is reduced, as it will be appreciated that the term can be stretched only so far. The option has little if
any value where the repayment vehicle is a pension plan.
http://www.financial-planning.uk.com/consumer/info/prod-provider/mortgage.htm (1 of 3) [4/20/2002 5:59:20 PM]
Arrangement Fees need to be clarified before any commitment is made, as some

may be refundable up to a certain stage, others may not. Additionally, although it may seem attractive
to 'lose' the fee by adding it to the loan, in the long run it could be expensive because of the interest
charged over the loan period.
Overall Annual Percentage Rate (APR), as defined by the calculation laid down in the
Consumer Credit Act 1984, should be easy to compare between providers. Calculations should be
checked, however, to make sure they are correct.
Comparing different providers

Annual Payment Reviews
Annual payment reviews are important planning dates, as these are the dates at which
any changes of interest rate take place. If the date is after a reduction in the rate, there may be a shortterm 'loss' and vice versa. It may be worth investigating the advantages of switching to the 'immediate'
change system; any charges imposed for the switch may make the exercise too expensive.
Portability
Portability or the potential to transfer an existing loan to a new house for the
remainder of the existing term, could save money in rearrangement fees. It could also save
expense where an existing loan is at a low fixed rate of interest.
Quality of Service
Quality of service is of particular importance in terms of decision making and

processing the paperwork. This also includes how flexible the lender's systems are in being
able to accommodate less favourable surveys than expected, for example. Similarly, staff attitude is
important e.g. are they helpful in terms of suggesting solutions to problems, or do they merely fulfil their
basic processing roles.
Ancillary products
Ancillary products may be compulsory with some providers, especially where the loan
is based on some sort of special deal. Such products may be household insurance, or additional
personal insurances such as Permanent Health Insurance (PHI).
Further Advances
Further advances and ease of availability may be a consideration, especially where

the property is to be subject to a programme of renovation or alteration. Planning may be difficult,
because markets change, but it may be possible to arrange for provisional undertakings to provide
additional advances at the outset of the loan. It may be necessary to ensure completion of a project.
comparing protection | savings & investment | pensions | mortgage products | intro
index |
back page

Comparing Product and Provides- Protection
Comparing Protection
Providers tend to be:
Insurance companies, both proprietary and mutual
Friendly societies
Lloyds underwriting syndicates, in particular for very short

periods not usually available from the above.
Private Medical Insurance is offered by insurance companies, and
also by certain Provident Associations e.g. BUPA, Private Patients Plan
(PPP), Western Provident Association (WPA) and similar.
What should be compared between providers?
Surrender Values:
Only products with an investment element acquire a surrender value.

This means that policies such as term assurance, PHI (Permanent Health Insurance - nonunit linked) and personal accident do not acquire surrender values.
Those policies that do have an investment element will only acquire a surrender value
once premiums paid exceed the setting up expenses.
Even when expenses have been covered, any surrender value will be low initially
because of:
http://www.financial-planning.uk.com/consumer/info/prod-provider/protection.htm (1 of 4) [4/20/2002 5:59:22 PM]
1. Ongoing policy expenses

2. The need for the investment element to grow
3. Ongoing expenses such as the cost of the insurance. This would be particularly
noticeable under a unit linked whole of life policy, where the life
cover/investment balance might be changed. The higher the life cover, the lower
the investment element, and the slower the surrender value builds up.
The essential point to bear in mind is that early surrender could mean little or no
return of premiums. The longer the investment element has to grow, the greater the figure is
likely to be.
Any comparison, therefore, must take into account general management expenses, policy
expenses and investment performance of providers.
Premium Levels:
Generally speaking, level term assurance premiums are easier to compare because it is a
comparatively simple contract offering a fixed death benefit for a fixed premium.
Comparing different types of term assurance is usually quite straight forward.
Using level term assurance as a basis for comparison, for the same person, with the same sum
assured:
1. Decreasing term will be cheaper

2. Convertible term will be more expensive
3. Renewable term will be more expensive for the same reason as convertible termthere is an increased risk owing to the non-medical, no underwriting element
relating to the built in option.
4. Whatever type is chosen, the longer the term the more expensive the premium
because of the increasing period of risk.
Comparing 'the same' term policy amongst providers will show differences,
generally relating to:
1. Underwriting experience.
2. Intrinsic expenses.
Comparing whole life policies may not be so straight forward, as unit linked and
universal policies may have different options available. Additionally, the investment element will not be
comparable on the some basis as the life assurance element.
Product providers are in business to make a profit as well as to provide the

various policies. Consequently, an element of profit earning will be in the make up of the charging
structure.
The level of profit will depend on:
1. The cost of running the operation and of paying out benefits, and
2. The volume of premiums input.
This is a simplification of a complex business, but it serves to illustrate that the more
efficient business has the choice of:
1. Allocating higher profits, or

2. Paying out more to claimants, or
3. Offering lower premiums
As different products will have different expenses and costs relating to them, it is
difficult to compare relative profitability.
Consequently, other than for, say, level term assurance, lower premiums do not necessarily mean a
better policy.
The picture is further complicated by the providers own:
1. Policy wordings and general conditions e.g. definitions.

2. Specific underwriting exclusions and limitations
index |
back page

Comparing Product and Provides - Savings
Comparing Savings and Investment

Main Providers
Banks, building societies and the Government are generally seen as

secure repositories for deposit-type savings and investments.
Although some National Savings products offer market rates of
return, the general return is low. However, the risk with such
investments is also low.
It should not be overlooked that banks and building societies
are commercial organisations open to market forces, and so can
flourish or fail as can any other trading organisation. Generally, the greater risk is
with the 'newer' companies who may over extend themselves, perhaps being
swallowed up by larger concerns or even ceasing involvement in certain sectors.
The other side of the coin is the greater freedom now available
to building societies and friendly societies to offer a wider
range of products, where both product and performance may attract interest
away from the traditional sources
Comparing products and providers

Investment objectives:
Product investment objectives should match your financial goals as closely as

possible.
Factors to be considered:-
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1. Are your needs savings, investment and/or protection?

2. Are your goals short, medium or long term.
3. How much do you wish to invest?
4. Will the investment need to be accessible quickly - or can the money be tied up
for a long period?
5. What is the tax situation?
Surrender values
It should be appreciated that 'surrender value' for one product will not
necessarily mean the same as it will for another - terminology can be confusing
With profits products have an 'unknown' surrender value because of the nature
of the investment.
Unit linked products will have a clear surrender value because it is calculated on
the bid value of quoted unit prices.
Deposit based products will fall somewhere between the above two in terms of
ease of calculation, as the surrender value will depend on interest earned to date, less any
penalties for early surrender.
Charges and commission
All products will have a charging structure depending on some or all of the
following factors:-
1. Amount and frequency of contribution or involvement.

2. Term of the contract.
3. Ease of access or notice period required.
4. Type of contracts i.e. investment, savings, and protection.
5. Unit linked products generally have explicit charges built into the contract and
calculated as a percentage of the value of units.
6. The exception to this rule is the unitised with profit fund which generally allows
the actuary to control the unit price in certain circumstances to inhibit the
withdrawal of funds.
7. With profits products have implicit charges, taken into account in the calculation
of bonuses.
8. Deposit accounts and National Savings products also work on an implicit charge
basis.
9. Shares and gilts generally have dealing charges calculated by a combination of
flat rate and percentage charges relative to the scale of the purchase or sale.
Commission payments are one of the reasons charges are incurred on products,
as they increase the cost of selling the product. Where commission is paid on up-front indemnity terms
in particular, the cost is heavy, and will usually be funded by reduced allocation of contribution over the
first few years.
Risk and accessibility
Risk needs to be viewed in terms of:-
1. Comparative product investment risk.

2. Your perception of risk
3. The size of the portfolio and its capacity to accept different levels of risk in its
balanced spread i.e. how much loss of capital is acceptable, will such a loss
affect anything else, such as spending plans.
4. Specific factors such as loss on surrender, investment sector risks, opportunity
cost of different choices.
Accessibility is to a certain extent a factor in risk assessment in that the easier

the access, the lower the return, and vice versa.
Accessibility must also be differentiated in terms of time scale in that an
emergency fund should have instant access whereas this is not necessary for
long term accumulation. Consequently, product accessibility needs to match your plans closely.
Tax treatment
Does the product pay out:-
1. Gross of tax
2. Net of tax.
3. Tax free.
You should take into account your current tax rate - will the income tax liability or capital
gains tax liability which could arise from the investment take you into the next tax band or over the
allowance limits. If this is the case, alternative products may need to be investigated and compared
with the key requirements for the product.
It should be made clear that decisions should not be taken solely for tax
efficiency. The tax element should be merely one of the underlying factors which needs to be
considered.
Comparing similar products from different providers
Assuming that a number of providers supply the 'same' product which will fit
your circumstances, a number of factors will need to be considered:-
1. Charges, including surrender value performance

2. Consistency of investment performance, including bonuses
3. Policy options, and whether they are any additional charges
4. Product guarantees.
5. Flexibility e.g. stopping and re-starting premiums, investment funds available,
switching facilities, changing the amount of regular premium.
The final decision will depend on the prioritising of needs for particular features
i.e. those that do not appear as a specific 'need' should not have any weight in the decision making
process. Your financial adviser will be able to help you by providing information on all these aspects as
well as advice.
Comparing Providers
The Notes given under Protection also apply here
In addition, specific attention should be paid to:-
1. Consistency of fund performance

2. Consistency of the fund manager's ability to react to the various investment
pressures
3. Size of the fund
4. The underlying investment base i.e. where shares are held, size of individual
holdings, how active is the management.
5. With investment performance in particular sector funds may be compared
against relevant indicators and indices to measure performance.
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Comparing Product and Provides - Pensions
Comparing Pensions
The main providers
Specific pension provision can come from the following sources:-
1. State Schemes - Basic and State Earnings Related Pensions Scheme (SERPS).
2. Occupational Schemes - Private sector and public sector.
3. Personal Pension Schemes - Personal contribution only or personal plus
employer contribution.
Occupational schemes may be:-
1. Funded, as with most private sector schemes, or

2. Unfunded as with many public sector schemes, where pensions are paid out of
current revenue on a pay as you go system like the State Schemes.
3. Where the scheme is funded, it may be:4. 'Insured', which merely means that it is managed and administered by an
insurance company, or
5. Self Administered, where the company organises the scheme itself, hiring
suitable professionals to carry out such functions as investment, actuarial and
legal work. Certain related benefits, such as life assurance benefit, will usually
be insured through specialist companies.
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Comparing providers
Financial Strength
Consideration should be given to:-
1. Press and company own reports on volume of business, and any

increases/decreases since last reported.
2. Make up of new business i.e. balance of single and regular premium, balance of
life and pension business.
3. Liquidity ratios, profit margins as revealed by company reports and statements.
4. Free Asset Ratio history, although neither this nor any other ratio should be
used on its own.
5. Additional consideration might perhaps be given to compliance history, including
fines paid, systems reorganised, training redone.
Quality of service
A number of the following could be checked through your financial adviser:
1. Answering of queries by telephone/letter.

2. Production of correct figures.
3. Correct processing of paperwork.
4. Preparation and delivery of policy within a reasonable period.
5. Correct and timely delivery of bonus notices, unit statements.
6. Correct and timely payment of annuities, or collection of premiums.
Investment choice and performance
Your attitude to risk will need to be balanced against the performance

requirement to achieve your pension planning.
Investment performance history should be considered, but along with changes in

market conditions so that there will be no automatic assumption that performance will be repeated.
It should be borne in mind that charges will have an effect on performance.
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Comparing Product Providers- Introduction
Comparing Providers & Products
Introduction
It is often very difficult to make direct comparisons of both providers and products within the
Financial Services Industry. The difficulty is comparing like-for-like and the complexity of the
operations of the providers, as well as the products they supply often makes direct
comparisons difficult. The size and complexity of the market also complicates the situation.
This is one of the reasons why we stress throughout our Site that to get best advice you
should speak to a good financial adviser. A good adviser will know and understand the market
better than anyone and is in the best position to offer advice based on both knowledge and
experience of the market and its products and providers.
In the notes that follow we list the providers of protection, savings & investment,
pensions and mortgage products in generic terms. We also provide information on the
best way to compare providers and products. We hope you will find the information helpful.
main index |
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http://www.financial-planning.uk.com/consumer/info/prod-provider/index.htm [4/20/2002 5:59:27 PM]
Buying your home - insurance
Buying your Home

Insurance: The lender will normally insist that you take out life assurance, except where your mortgage is
linked to an endowment policy. The cheapest option is term assurance (which pays out if you die before the end
of the mortgage term). The Sunday Times quotes the example as at 31/1/99 of a 30 year old non smoker who
can take out 100,000 of cover for 10.15 a month from Marks & Spencer.
You also need to buy buildings and contents insurance. Lenders are often keen to promote their own policies.
You do not have to take out these insurances with you lender and better deals may be available elsewhere.
Your local high street insurance broker will be able to help. Also remember that there are a number of direct line
telephone insurers who may be competitive. This is an area where you may be able to bargain. If one company
gives you a lower quote, go back to the other and try to negotiate a better premium. This often works.
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Buying your home - pensions
Buying your Home

Pensions: Pensions are probably the last thing on you mind if you are buying your first home. If your employer
offers you an occupational pension scheme then it is sensible to join. You may need to make extra contributions
to top up your pension fund - but that can come later (depending on your circumstances).
If you are self-employed or do not have access to a company scheme, pensions are more complicated. It is
always best to consult a good financial adviser.
You do not have to take out a personal pension, (but the tax situation is particularly attractive. You receive tax
relief on your contributions at either 23% or 40% depending on the rate of tax you pay. A contribution of 100
costs a higher rate taxpayer only 60. Choosing a personal pension is not easy and it is always advisable to
seek professional help.
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Motgage Interest Charges - things to watch out for
Motgage Interest Charges

Twelve year debt recovery deadline causing problems for mortgage defaulters
If you were one of the unfortunates who defaulted on your mortgage in the late
eighties and early nineties, and handed over the keys to the lender, you may be in for a surprise. Normal
loans are subject to the six year recovery period imposed by the statute of limitation, but mortgage lenders have
up to twelve years to commence recovery proceedings. There may be many reasons why lenders could take so
long to attempt to recover the money, but if you 'walked away' less than twelve years ago, and you are not sure
how quickly the house sold, be prepared.
Office of Fair Trading investigates 'hidden' interest charges
Have you recently moved house? Are you on the move in the near future? If you have a completion
date towards the beginning of the month you could find yourself paying interest on money you no longer owe.
This is because it is common practice to charge a full month's interest, whatever the date you move during the
month. The Office of Fair Trading have indicated that this practice will be investigate as part of a much wider
mortgage enquiry.
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http://www.financial-planning.uk.com/consumer/home-buying/home-buyagain8.htm [4/20/2002 5:59:31 PM]
Planning for Retirement - FSEC information help files
PLANNING FOR RETIREMENT

We are all faced with difficult decisions when planning our retirement. For those not fortunate enough to be in an
occupational pension scheme, the choices and decisions can be confusing. The range of available products will
increase even more when the Government's new pension plans come to fruition.
It is always sensible to seek out professional advice when considering pension options because of the
complexity and the number of options which are available. The importance of pension planning is fundamental
to all of us and this is an area we should all consider very carefully.
Overview
Moving overseas when you retire
Call for shake-up on pension annuities
Current state pensions
Occupational schemes
Personal pensions
Additional voluntary contributions
Free standing additional voluntary
contributions
Other useful investments
10 Tips for picking pensions
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http://www.financial-planning.uk.com/consumer/plan-retirement/index.htm [4/20/2002 5:59:32 PM]
Planning for Retirement Overview - FSEC information help files

Overview
Most people convert their pension funds into income by purchasing an annuity.
Annuity rates have fallen in recent months and are expected to get even lower in the
medium term. This means that we either lower our expectations as far as retirement
income is concerned, or we save more and increase our pension funds.
Alan Pemberton of AMP, an independent financial adviser: "Other
investments can offer greater flexibility and do not have to be used to buy an annuity. A
mixture of TESSAs, PEPs and the new Individual Savings Account (ISA), combined with
your pension is a sensible strategy."
However complex pensions schemes are, however annuity rates move and whatever
the Government plans to do, we as individuals must be proactive as far as our pension
arrangements are concerned. The Sunday Times reported on 14th February 1999 that
more that 13 million people face poverty in retirement because they have not made
adequate pension provision.
According to Fleming Investment Trust Services, the picture is getting worse every year.
The Sunday Times argue that a good pension should provide an income of two thirds of your final salary. This in
itself is confusing, with the number of people in their 50s losing their jobs and moving on to something which is
less well paid.
The Sunday Times emphasise that the best advice is to start pension planning early. They say a 20 year old
man can expect an annual pension of 40,300 when he retires - if he saves 100 a month. If he delays for 5
years, his pension will be worth just 25,100.
Many self employed people and women who take career breaks to start a family lag behind in the pension
stakes. Currently the Sunday Times estimate that more than 2 out of 3 people who are working for themselves
are not saving enough for their retirement.
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http://www.financial-planning.uk.com/consumer/plan-retirement/plan_r1.htm [4/20/2002 5:59:34 PM]
Planning for Retirement Current State Pensions - FSEC information help files

Current State Pensions
The basic pension

Couples currently (14/2/99) receive 103.70 a week as a basic
pension and a single person 64.70. In some cases this could be
topped up by the state earnings related pension scheme
(SERPS), but only to a maximum of about 100 a week.
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Planning for Retirement Occupational Schemes - FSEC information help files

Occupational Schemes
Inland Revenue rules allow you to invest 15% of your annual salary
into a company scheme - that includes the value of any taxable
benefits you receive such as company car, bonus or medical
insurance.
The Sunday Times argue that
almost everybody offered a
company scheme should join.
Your employer normally makes
extra contributions on your behalf,
helping to boost the fund.
Company schemes fall into two categories:
Final salary schemes: Your pension will be based on your salary at
retirement. You normally earn 1/60ths of final salary for every year's
service, up to a maximum of 40 years, or two-thirds of final salary.
Money-purchase plan: Your contributions, and those of your employer, are invested in a range of tax-free equity
and gilt funds. Your investment pot at retirement is used to buy an annuity.
Click for further reading
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Planning for Retirement Personal pensions - FSEC information help files

Personal pensions
The amount you can put into a personal pension varies according to your age. For older
people the limits are generous (if you have the money to put into the fund!).
Policyholders in their late forties can pay a quarter of their annual salary into their
pension from pre-taxed earnings, rising to 35% for those in their late 50s. From age 61,
you can contribute 40% of your salary.
The Sunday Times comments that this is the only advantage that personal pensions
have over company schemes. The charges for personal pensions can be high , and are
usually levied in the early years of the plan, so if you cancel your policy early, you may
be left with a fund that is worth less than the total of the contributions which you have
paid in. Your retirement income will depend on the final value of your fund and the level
of annuity rates when you retire.
The Sunday Times states that at current annuity rates, if you want some kind of inflation
proofing, a man of 55 will get somewhere between 400 and 450 a year for each
10,000 worth of pension savings . That rises to more than 600 if he waits until 65.
Click for further reading
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Planning for Retirement Additional voluntary contributions - FSEC information help files

Additional voluntary contributions
Workers in company schemes can make up any shortfall in pension
savings with additional voluntary contributions (AVCs). They qualify for
tax relief in the same way as your company scheme up to the
maximum of 15% of your annual salary.
Your employer may offer an in-house scheme and normally absorbs
any associated costs. Some schemes allow staff to buy back "added
years" to cover gaps in their service. Most AVC's, however, work in a
similar way to a money-purchase agreement.
REMEMBER You should not use any information contained in

this article as the basis of any action until you have discussed
matters with your financial adviser.
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Planning for Retirement Free standing additional voluntary contributions - FSEC information help files

Free standing additional voluntary contributions
FSAVCs are bought independently, usually through an insurance company. You will
have to meet the costs of setting up and managing the plan, which can take a big bite
out of small savings.
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Planning for Retirement useful investments - FSEC information help files

Other useful investments
PEPs are often used in retirement planning because they also
shelter savings from tax. The new ISA will perform a similar function
- although the amount you can invest each year is less generous.
The Sunday Times states that if you have less than eight years to
go before retirement, you should invest cautiously and chose funds
that invest heavily in gilts. They say alternatively, you could pick a
corporate bond PEP.
The Sunday Times says that although National Savings products
are not particularly tempting right now, the index linked tax-free
certificates can still be worthwhile to higher earners. If inflation stays
at its current 2.8% rate, they will be worth a gross equivalent rate of
7.42% fixed for five years.
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10 Tips for picking pensions
On 28th February 1999, the Sunday Times published the following 10 tips for "picking
the perfect pension"
1.
How do I choose the right pension fund?
The first thing to do is to decide which type of pension you should have. If you work for a company that offers an
occupational scheme, you should almost certainly join it. Company schemes are usually far more generous than
personal pensions because employers make contributions on your behalf.
If there is no company scheme, you may need a personal pension scheme. However, the launch of the
Government's stakeholder pension in 2002 may mean companies will in future have to offer some form of
pension for staff. Stakeholder pensions are designed for contributions of up to 3,600 a year, so if you are likely
to stay in your job and contribute 300 a month or less, it may be worth waiting and starting some retirement
savings in an ISA or PEP until stakeholder arrives. However, it is important not to put off saving for retirement
altogether - even short delays can result in a drastically reduced fund at retirement.
If you decide to take out a personal pension plan, you will invest in choice of funds offered by the pension
provider. Your choice of funds will depend on your attitude to risk - please use this link to assess your attitude to
risk. For example you may chose to invest in equity funds or a "with profits" fund. Equity funds are riskier
investments than "with-profit" funds, but they could grow at a faster rate. Take advice on the funds you choose
to invest in - it will depend on a combination of your circumstances and your own attitude to risk.
2.
Which is the best pension company?
There is no right answer - it depends on your requirements and circumstances. Different companies offer
various terms and conditions on their personal pensions that suit different people.
3.
Can I stop paying without penalty?
Flexibility is one of the most important features of a pension. In general terms, pensions force you to make a
trade-off between policies with little flexibility and expensive schemes that allow you as much freedom as you
need. With some schemes you may be penalised through higher charges or a lump sum penalty from your fund,
even if you stop contributing for just a couple of months. Others will close the pension altogether. Most advise
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their clients to opt for the most flexible pensions.
4.
Where can I get a cheap pension?
There is no such thing as a cheap pension. However, the Sunday Times has identified IFAs who will rebate
commission.
5.
How much should I put into my pension?
To retire on half your final salary, the Sunday Times suggests you divide your age by two - that is the
percentage of income you should contribute.
6.
How much am I allowed to put in?
For people in company schemes, the maximum contribution is 15% of salary. There is no specific limit on how
much the company can pay on your behalf but the upper amount is governed by the maximum pension
stipulation of 2/3 salary and the 87,600 earnings cap .
With personal pensions, the limit varies according to your age and earnings. If you are under 36, you can
contribute a maximum of 17.5% of your income each year subject to an earnings cap of 87,600. Between the
ages of 36 and 45 it rises to 20%; from 46 to 50 it is capped at 25%; it goes up to 30% between 51 and 55 and
35% from 56 to 60.
7.
What other features should I look for?
Performance and charges are the key. Insurance companies and financial advisers can provide projections of
their personal pension performance, based on a variety of assumed growth rates. Using their figures, you can
see the impact of the charges on the maturity value. Insurers can also provide year by year breakdowns of the
transfer value - the amount you could transfer to another policy.
8.
Will I be able to retire early without penalty?
Sometimes the company will penalise you by about 4% of your fund value for every year you retire early. Your
IFA should be able to the names of providers who impose such penalties.
9.
What is the best way to make payments?
For most people a regular-premium policy, where your contributions are made monthly by direct debit, is best.
However, if you are putting in 10,000 a year or more, it is probably better to make a series of single premium
contributions because of the way the charges operate.
10.
Can I control how the fund is run myself?
You can through something called a self-invested personal pension (SIPP) which allows you to choose how
your money is invested. In the early years you may want to take risks - then switch into more secure funds as
you near retirement. However, SIPPs can be expensive and are usually recommend for people who have at
least 50,000 to invest or who pay regular premiums of at least 500 a month.
See also the Government's proposals for LISAs in our pensions timeline section.
index |
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Assessment of risk - FactFind form2
Assessment of risk is vital in developing any investment, saving and protection strategy. As a general rule
of thumb, the higher the projected return, the higher the potential risk, and the lower the risk, the lower the
potential for reward.
Your attitude to risk may well be formed by your attitude to the following:
1. Inflation - are you optimistic or pessimistic about inflation in the medium to long term?
2. Interest rates
- what will happen in the medium to longer term
- what is happening in Europe, America, Japan?
3. Market risks - are market rates realistic, what's happening to business activity?
4. Exchange Rate risk - is there a foreign dimension to the investment?
5. Political risk - is an impending general election affecting performance?
6. Investment timescale - a shorter timescale tends to increase the risk.
These background questions are by no means comprehensive - but provide food for thought!
The following list is not comprehensive, but merely a guide for ease of reference. Clearly, the
categories are also dependent upon the size of the portfolio. Larger portfolios have increased scope for
diversification which decreases the risk profile of individual categories of investment . The list is risk
based, so additional thought should be given to the tax and inflation implications.
NIL-LOW RISK
British government stocks

Local authority stocks
If held to maturity
Deep discount bonds
Corporate bonds
Bank and building society deposits

Premium Bonds
Annuities
Treasury Bills
TESSAs
LOW-MEDIUM RISKS
British government stocks

Local authority stocks
If not held to maturity
Deep discount bonds
Corporate bonds
Some unit trusts
Some investment trusts
Some PEPs (managed)
Some insurance bonds
MEDIUM-HIGH RISK
Ordinary UK shares (equities)
Overseas securities
Foreign currency accounts
Offshore funds
Land and property
Some PEPs (self managed)
Some insurance bonds
Some unit trusts
Some investment trusts
HIGH RISK INVESTMENTS
Commodities
Eurobonds
Futures
Gems
Precious metals
Penny Shares
Options
Racehorses
Click here for a calculator to assess YOUR attitude to risk.
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Attitude to risk - FactFind form2a
Attitude to Risk
print this page
On the following scale how would you assess your attitude to investment risk. For example how would you
rate the following investments.
Low
Medium
High
Shares in UK Companies quoted on the

Stock Exchange
Personal Equity Plans (PEPs)
TESSAs
Unit Trusts
Gold
Commodities
In general, therefore, what level of risk would you accept to help you achieve your financial objectives,
bearing in mind that usually, the higher the potential return, the greater the potential risk?
Self
Low Risk 1 2 3 4 5 6 7 8 9 10 High Risk
Spouse/Partner
Low Risk 1 2 3 4 5 6 7 8 9 10 High Risk
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Attitude to risk - FactFind form2a
Do you think that your general attitude to investment risk would change with circumstances or be dependant
on the type of investment?
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Personal Details - Fact Finding form3
print this page
Personal Details
SELF
First Name(s)
Surname
Title
Address
Postcode
How long at this address
Telephone
Home
Work
Mobile
SPOUSE/PARTNER
Fax
E-mail
Date of Birth
Marital Status
Nationality
NI Number
Tax District
Tax reference
Current tax rate
Current tax code
How is Married Couples

Allowance apportioned
Marital Status
Is your general health
Good/Average/Poor
Good/Average/Poor
Smoker/Non-smoker
Smoker/Non-smoker
for less/more than 12 months
for less/more than 12 months
Do you smoke?
What is your average daily

consumption of alcohol
Do you suffer from any disability:

Temporary
Long-Term
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Children and Dependants - FactFind form4
print this page
Name
Relationship
Children and Dependants

Marital Status
Age
At Home?
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Professional Advisers - FactFind form5
Professional Advisers
print this page
SELF
SPOUSE/PARTNER
Solicitor
Accountant
Bank
Other
eg stockbroker, second bank,
trustees, will administrators
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FREE Financial Planning Information - FactFind form6
Employment Details
print this page

SELF
Do you have more

than one employment?
Status:
Employed
Self employed
Partner
Director
Retired
Not in
employment
Occupation
What does this entail?
Name of employer
Name of self employed business
How long in this employment
What is your retirement date?
When would you like to retire?
Are you domicile in the UK
Are you resident in the UK

for tax purposes.
Do you work abroad at all
SPOUSE/PARTNER
FREE Financial Planning Information - FactFind form6
Do you intend to work abroad
index |

Estate Planning - FactFind form7
Estate Planning
print this page
SELF
SPOUSE/PARTNER
Have you made a will?
Yes/No
Yes/No
Is it up to date
Yes/No
Yes/No
Estate Planning - FactFind form7
Have your circumstances

changed in any way since you
made the will?
Principal Beneficiaries to benefit

on your death, and proportions
Do you anticipate any major

changes in your circumstances in
the near future? eg expectation of
an inheritance, job change, major
financial commitment.
Have you made use of the IHT

allowances.
If yes, please give brief details of

amounts and dates.
Have you made any Potentially

Exempt Transfers (PETs) within
the last seven years
If yes, please give brief details of

amounts and dates.
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Income - FactFind form8
Income
print this page
SELF
Earned Income(s)
Gross annual
salary/wage/drawings
N.B. How much of your salary is

pensionable?
Take home (net) amount
Highest tax rate payable
Are any of the following earned,

and how much
Bonuses
Commissions
Fees
Overtime
Profit Share
Profit related
pay
TOTAL EARNED INCOME
Other Income from:
Annuities
Bank Deposits 1
SPOUSE/PARTNER
Bank Deposits 2
Bank Deposits 3
NI Number
Building Society Account 1
Dividend from shares
Insurance Bonds
National Savings
Pensions in Payment:
Occupational
Self-employed
State pensions
Rents receivable
State Benefits
Trust Income
Unit Trusts
Other eg investments abroard
TOTAL UNEARNED INCOME
TOTAL EARNED AND

UNEARNED
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Expenditure - FactFind form9
Expenditure
print this page
SELF
SPOUSE/PARTNER
Insurances
Mortgage
Loans
Rent
Hire Purchase
Household
Personal
Protection ie insurance policies
Savings
Pensions
Other
Expenditure - FactFind form9
index |

Assets - FactFind form10
Assets
print this page
SELF
Property(s)
Main residence:
Value Owned by
Other property
Type of property Value
Investments : Total Current Values
Shares
Investment shares
Shares in own
business (employed)
Shares in own
business (self
employed)
SPOUSE/PARTNER
Gilts
Unit Trusts
Investment Trusts
TESSAs
Date of Birth
Investment Bonds
PEPs
BES
EIS
OEICS
UCITS
Commodities
Assigned or purchased policies
Derivatives
Other eg collections, portraits etc.
Current Account: average balance
NB Does your current

account pay interest?
Deposit Acounts:
Bank Deposit
National Savings
Building Society
Post Office
Other
TOTAL VALUE OF ASSETS
index |

Employment Benefits - FactFind form11
print this page
Employment Benefits
SELF
In addition to the pension

benefits detailed
previously, do you qualify
for any other employee
benefits of a financial
nature:
Company Car Package
Life Assurance
NB is your "expression of
wish" up to date
PHI
Personal Accident
Private Medical Insurance
Share Schemes
Please note which, if any,

are contributory
If contributory, are the

contributions deducted
from salary
SPOUSE/PARTNER
Employment Benefits - FactFind form11
How long will your

employer pay sarary if you
are absent through illness
Contracting Out
Are you contracted out of

SERPS
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Trusts - FactFind form12
Trusts
print this page
SELF
SPOUSE/PARTNER
Are you a beneficiary of any

Trust
Yes / No
Yes / No
Are you currently benefiting
Yes / No
Yes / No
Income
Other
index |

Loan liabilities and Tax Liabilities - FactFind form13
There are two forms on this page - Loan liabilities and Tax Liabilities
Goto Tax Liability form
Liabilities - Loans
print this page
Loans
Type
In the name of
Lender
Purpose
Outstanding Sum
Repayment method
Origional Term
How long to run
Secured by
Any arrears
Goto Loan Liability form above
Liabilities - Tax
SELF
Outstanding Tax Liability

Income Tax
CGT
VAT
IHT
NB Have all the current allowances been

used. Have you received any gifts of value
over the last seven years?
Dependants
Current Commitments
Future Commitments
Overdraft
SPOUSE/PARTNER
Credit Cards: average outstanding

balance:
1
2
3
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Planning for Retirement useful investments - Conservatives call for shake-up on pension annuities

Moving overseas when you retire:
British residency: If you are abroad for fewer than 183 days in any one tax year, or if you spend an average
of 91 days or more in Britain over a four year period, you will be treated as a UK resident for tax purposes.
Double taxation agreements: Many countries have double taxation agreements with Britain to ensure individuals
are not taxed twice on income from their pensions, savings and investments. Details are available on the
Revenue web site at www.inlandrevenue.gov.uk
Bank accounts: You will need a bank account. The DSS and your pension company will send your money to
the bank if instructed. Remember that your pension will be paid in sterling - so you will have to pay for it to be
converted into the local currency. If you are resident abroad, you may prefer to open an offshore account in a
tax-friendly haven, such as the Channel Islands or Gibraltar. A standing order could then be set up to fed
enough cash through to a local bank as required. Interest on offshore accounts is paid gross and you do not
usually have to pay tax until you bring the money back on-shore.
Offshore investments: Many people who want to retire abroad choose offshore investments as part of
their preliminary financial planning. These funds are often kick started with a lump sum payment and topped up
by regular contributions. They are tax efficient because no tax is payable until profits are brought onshore - this
may be to Britain or another country. The Sunday Times states that you can accumulate untaxed gains within
an offshore bond and defer the tax bill until you draw an income in retirement. The option is particularly
attractive for higher rate taxpayers since they can avoid paying tax at their present rate and take the profits
when they move into a lower tax bracket, either here or overseas.
State pension: How much state pension you get when you retire abroad depends where you move to. In EU
countries or in countries such as America, Israel and Malta the state pension increases in line with inflation as it
does here. However, elsewhere - and the list includes many popular retirement destinations such as South
Africa, Australia, Canada and New Zealand - the pension will remain at the level it was when you left.
Insurance: Life insurance is very important to many financial plans. Provided all premiums are paid as
stipulated by the policy, a claim will be met regardless of where the policyholder dies.
Policies such as critical illness cover will not normally pay out if you live outside the EU for more than 13 weeks.
The Sunday Times suggests that such cover could be purchased from a local insurance company if you feel you
need such protection.
The Sunday Times suggests that those with private medical insurance should discuss their situation with their
insurer. In most cases it will be necessary to switch to an international plan which will either pay for treatment
overseas, or back in the UK.
Would-be expatriates should also find out what is available on the equivalent of the National Health Service.
Form E111 from your local DSS office lists reciprocal agreements and a call to the county's embassy (where
you intend to retire) should fill in the gaps. Talk to other expatriates about their experiences.
If you are planning ahead and intend to go to somewhere like America, where private health insurance is a
necessity, the sooner you take out a suitable transferable policy the better.
Property: Many banks and building societies have branches overseas. They should be able to help you with
financial matters, including arranging a mortgage. If you are some time off retirement, you could buy a property
now, use it for holidays and then retire there later. Remember that if you have to return to the UK for whatever
reason, you may not be able to afford a suitable property. House price inflation in the UK has been high relative
to other countries in recent years.
http://www.financial-planning.uk.com/consumer/plan-retirement/990620e.htm (1 of 2) [4/20/2002 6:00:07 PM]
If you do not sell your UK property, but keep it as a base for visits, or a place to return to if the overseas venture
turns sour, then arrangements should be made to ensure it remains secure and in good order.
index |
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http://www.financial-planning.uk.com/consumer/plan-retirement/990620e.htm (2 of 2) [4/20/2002 6:00:07 PM]

20/6/99: Conservatives call for shake-up on pension annuities:
The Sunday Times reported today that a group of Tory MPs will this week demand the abolition of the rules
that force pensioners to accept "paltry" incomes at retirement. The report states that most people with company
or personal pensions are forced to buy an annuity before they reach the age of 75. Annuity rates have
plummeted during the past 7 years. In January they plunged to a 30 year low, condemning many people to an
impoverished retirement. The Annuity Bureau was quoted as saying that a man with a pension fund worth
100,000 could have secured an annual income of 15,823 7 years ago (no age of the man was given in the
article). A year ago this would have bought him an annuity of 9,700 a year - now the pension would pay just
9,494.
The Sunday Times says that the longer-term outlook is even worse. They quote analysts at Barclays Capital
who predict gilt yields of 2% from today's 5% in five years time. In the above example, this would reduce the
pension to 4,200.
The report contained the following quotations:
Nick Gibb, MP for Bognor Regis: "It is scant reward for people who have been prudent enough to save
for their retirement. We think the Government should now abolish the rule that forces people to buy an annuity
before they reach 75."
Lynn Caddy, a spokeswoman for Age Concern: "We support any move that gives pensioners the
flexibility to decide what to do with their pension funds. But we are keen that the Government works with the
insurance industry to find a replacement for the annuity that will give people a stable income for life."
The predicament faced by pensioners is already encouraging insurance companies to launch new annuity
products.
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http://www.financial-planning.uk.com/consumer/plan-retirement/990620b.htm [4/20/2002 6:00:09 PM]
Elderly People - National Savings Launches a New Pensioners' Bond
Elderly People
We are reviewing the contents of this section. If you have a

question which you think should be answered here please
email us.
Thanks for your help
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http://www.financial-planning.uk.com/consumer/elderly/index.htm [4/20/2002 6:00:10 PM]
Death of a Partner - financial information from Financial Planning Horizons
Death of a Partner
The importance of a will

Protecting my family's income in the event of my death
Protecting my business if my (business) partner dies
index |

http://www.financial-planning.uk.com/consumer/deathofpartner/index.htm [4/20/2002 6:00:11 PM]
Death of a Partner - The importance of making a will and keeping it up-to-date cannot be stressed highly enough
Death of a Partner
The importance of a will:
The importance of making a will and keeping it up-to-date cannot be stressed highly
enough. You may find the following, which was taken from an article written by Paula Hawkins and published
in the Times, helpful:
Dying intestate (without making a will) creates huge problems for families. This is particularly true
where children from previous marriages or stepchildren are involved. If you die intestate and your
estate is worth less than 125,000, then your spouse inherits everything. If your current spouse is not
the mother or father of your children, then your children will not automatically be entitled to any
provision at all - they would have to make a claim, which is a costly way to drag out the trauma of
losing a parent.
If you have young children, it is essential to make a will to ensure that they will be cared for by the
people whom you choose in the way you want.
If you have complex personal affairs, dying intestate can open up the possibility of unseemly and
protracted legal battles between friends, partners and relatives. This may mean that a large part of
your estate ends up in the pockets of lawyers.
According to IFA Promotion, people in Britain are paying 1.3 billion more inheritance tax than they
need to. Inheritance tax is charged at 40% on any money in your estate in excess of 231,000 (in the
1999/2000 tax-year). If you are married, you can draw up wills, which divide assets in such a way as to
maximise the tax advantage. You may also want to make gifts during your lifetime, which will be taxfree, as long as you survive for 7 years after the gift has been made.
If you have already made a will, you should update it regularly. Make sure that all your assets,
including pensions and insurance policies, are left to people you want to benefit. If you have married
since you made your original will, it must be redrawn.
Drafting a will does not have to be expensive. Solicitor's fees for a simple will may be something like
75-125.
Information on - estate planning
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http://www.financial-planning.uk.com/consumer/deathofpartner/dopartner1.htm (1 of 2) [4/20/2002 6:00:13 PM]
Death of a Partner - The importance of making a will and keeping it up-to-date cannot be stressed highly enough

http://www.financial-planning.uk.com/consumer/deathofpartner/dopartner1.htm (2 of 2) [4/20/2002 6:00:13 PM]
Did you Know...! I know that if I die without any kind of protection, my family will suffer a loss of income
Did YOU Know....

I know that if I die without any kind of protection, my family will
suffer a loss of income.
What other things should I look out for and how can I protect my
family?
It is always sensible to consider any loans that you have outstanding and whether your
estate will be of sufficient size to attract inheritance tax.
If you are married you need to consider joint ownership of your home - joint ownership
of a home may reduce the size of your estate to below the threshold over which
inheritance tax becomes payable.
A financial adviser will help you to highlight potential problems and the best way to
protect your family. Find out about the most common protection products available on the market. The
information should prepare you for a more meaningful discussion with your financial adviser.
index |
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Lifestages self employed - reserves should be set aside in suitable accounts to pay tax
SELF EMPLOYMENT
Being self-employed and working from home are not necessarily
comfortable bedfellows. Many businesses fail each year because,
among other things, the owner has found it difficult to mix domestic
life and business life in the same setting. Advice abounds from
banks, accountants and various business organisations, and we
hope the following notes will help you form some idea of what you
will need to discuss with your advisers.
1. Find yourself an accountant, one who is used to dealing with
people doing what you do. Ask for recommendations, and then ask a
few of them to tell you what they can do for you and what it will cost
you.
2. Work out the basics of your paper system before you do a thing. Whether you are making a profit or
loss at any particular time of the year, cash flow will determine whether your business thrives or
declines; quite simply, if you don't have the cash to pay the bills, your business is dead. And don't think
you will be able to rely on the bank - last minute support of businesses is not what they are into. So,
make sure you always issue invoices promptly, and get over any potential embarrassment about
chasing for payment. Also, do not undercharge for your work or offer discounts to get work - such
actions are likely to be quoted as precedents to prevent you charging reasonable prices in the future.
3. Keep all of your receipts in order so you can be sure you can claim all expenses against income.
4. On the whole you will be paid without any deductions, so get into the habit of setting aside adequate
sums for tax and the profit related element of National Insurance.
5. In anticipation of earning money, set up a separate business account. Don't be tempted to mix your
business income with your domestic expenditure; it could lead to some very complicated accounting,
not to mention some unnecessarily high accountancy bills.
6. Register yourself as self employed and set up a direct debit to pay the weekly flat rate amount on a
monthly basis.
7. Organise suitable business insurance to cover office contents, staff, public liability and any other
requirements that your business needs.
8. What about personal insurance? What happens when you are too ill to work? Investigate income
replacement insurance if income ceases when you stop working. Perhaps investigate how you can
continue to pay premiums on certain policies when your income ceases. And make sure the car covers
you for business mileage.
9. What are your earnings going to be for the first year? Do you need to register for VAT sooner or later?
Discuss the situation with your accountant.
10. If you work alone consider joining a trade association where you can meet other people in similar
Lifestages self employed - reserves should be set aside in suitable accounts to pay tax
circumstances to yourself and where there might be business advantages. One with a very wide
membership and a widespread branch network is the Federation of Small Businesses, who
can be contacted on 0171 233 7900
that of the other linked pages is not intended to suggest any particular course of action.
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Lifestages - termination of employment, redundancy
TERMINATION OF EMPLOYMENT
1. Where this occurs due to redundancy, actions should not be precipitate

e.g. redundancy payments should not be locked away immediately into
limited access accounts.
2. On the other hand, the money must be placed in a secure environment
to produce the best possible income for an uncertain duration.
3. State benefits will be limited, and any
cash or income may produce benefit
restrictions. Bear in mind that employee
benefits e.g. group life assurance, will be
lost.
4. Similar considerations are needed where termination is because of ill health. The main differences lie
in the fact that a pension may be payable, and the form of illness may incur increased expenditure.
Your protection planning may have included a policy which pays a lump sum on diagnosic of certain
illnesses.
5. You may like to look at Redundancy Cover
of action.
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http://www.financial-planning.uk.com/consumer/lifestgs/life9.htm [4/20/2002 6:00:18 PM]
PROTECTION - Redundancy Cover
2.2.8 Redundancy Cover
The purpose of the cover is to replace some of the earnings lost through redundancy, so will not be
open to a claim where the job is lost because of other reasons for dismissal.
Generally, the policy will have to be in force for a minimum period before a claim is allowed, and there
will be a deferred period after the claim before monthly benefit is paid.
Benefit will have either a cash limit, or may be claimed to pay only certain expenditure such as
mortgage and related payments. Benefits payable may also have a mortgage amount ceiling.
Benefit payment period will generally be limited to between 6 and 24 months, perhaps with an upper
age limit.
Most policies are only available via mortgage lenders and occasionally linked to some universal whole
of life policies, but being a high risk area of insurance given recent and current economic conditions,
the choice is limited and premium rates are quite high.
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Lifestages windfall - a lottery or football pools win
THE WINDFALL
1. This would be a lottery or football pools win rather than an inheritance, as
the latter is often expected and to a certain extent may be planned for.
2. The most important point to remember is that the normal planning
exercise should not be ignored. Rather, the higher the cash sum, the more
necessary it becomes.
3. In particular, you may wish to protect your dependants against the full
effects of Inheritance Tax, and against capital erosion. Your financial
adviser should be able to suggest various options for both contingencies.
that of the other linked pages is not intended to suggest any particular course of action.
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http://www.financial-planning.uk.com/consumer/lifestgs/life10.htm [4/20/2002 6:00:21 PM]
Links to Financial Planning Information
We have provided links to the following sites for your convenience, they are not controlled by us. We would
appreciate feedback on sites listed in this area - thank you. email us
LINKS to useful sites

1. Self Assessment - Information from the Inland Revenue
2. Office for National Statistics - lots of interesting fact and figures
3. Financial Services Authority (FSA) - Consumer Help
4. Inland Revenue - excellent site
5. UK Government - an insight into Government and the Monarchy, well worth a visit
6. Banking for young people - banking for students, young people and new graduates
7. Student loan schemes - useful information
8. Interest rates - a guide to National Savings rates

http://www.financial-planning.uk.com/consumer/links/links.htm [4/20/2002 6:00:23 PM]
Lifestages early married life - a high accumulation, high expense period
EARLY MARRIED LIFE

This may be a high accumulation, high expense period, with perhaps two incomes, but
an active social life. May be difficult to get down to planning initially, after which you may
wish to consider the following as preparation for discussing the matter with your financial
adviser:
1. It may be worth reviewing existing savings strategy.
2. Personal protection may need to be extended or even set up, particularly if one
partner does not work, or a child is expected, to make provision for the survivor(s).
3. Acquisition of property will probably arise, so the correct purchase route needs to be
chosen.
4. Full utilisation of personal tax allowances should be ensured.
5. Pensions may be relevant as promotion and prospects improve.
6. Wills should be written by both parties
7. Expenditure is likely to increase, along with commitments. How will this affect savings and investment
stategies?
of action.
index |
Lifestages early married life - a high accumulation, high expense period

Lifestages middle age + children - higher earnings because of promotion
MIDDLE AGE, OLDER CHILDREN

Continuing high expenditure on maintaining children, but possibly
compensated by return to work of the caring parent and higher earnings
because of promotion for the other partner.
You may wish to consider the following as preparation for discussing the
matter with your financial adviser:
1. Saving/investing may be made easier by the greater availablity of
unallocated income. This could also mean maximisingpension planning.
2. Care for older relatives may become a factor.
3. Protection of both cash lump sums and income remains high priority, even more so the older one
becomes.
4. Policies written in trust should be considered for inheritance tax considerations, this should really have
been done before.
5. Trusts and wills should be reviewed.
6. School fees may need to be topped up, and university/college expense needs to be catered for.
7. The possibility of redundancy should not be overlooked.
of action.
Lifestages middle age + children - higher earnings because of promotion
index |

Lifestages pre-retirement - planning need to be considered from a different viewpoint
PRE-RETIREMENT
As family leaves home, expenditure on this element reduced to some extent, continuing
whilst they find their feet and independence.
1. Grandchildren may come on the scene, so inheritance tax planning and related subjects
may need to be considered from a different viewpoint.
2. Investment opportunities may be more available with more easily accessible funds.
3. Personal protection - life assurance, Permanent Health Policy (PHI) - should be kept up
to date.
4. Pension provision should be kept up to date.
5. Wills should be reviewed and updated.
6. Long-term care should be considered now.
7. Private medical insurance should be investigated, if not already taken out.
8. Inheritances may affect plans.
of action.
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Lifestages pre-retirement - planning need to be considered from a different viewpoint

PROTECTION - Private Medical Insurance (PMI)
2.2.5 Private Medical Insurance (PMI)
The purpose of PMI is to cover the cost of medical expenses and to reduce waiting time for treatment.
Cover may be taken out by individuals in their private capacity, or may be provided as a part of the
employment package, in particular management jobs, where the market tends to be status driven.
Given that conditions may be treated more quickly using private treatment, it is a useful business
protection.
It may be argued that such cover is unnecessary given a comprehensive National Health Service;
indeed, in an emergency, few would disagree that the NHS provides a service that is able to respond
with an appropriate level of speed.
Private healthcare should be seen, rather, as complementary to the NHS services. Primary care from
GPs, accident and emergency cover, and the treatment of long term chronic conditions are almost
exclusively provided by the NHS.
In the UK around 80% of PMI cover is provided by non profit making provident associations such as
BUPA, Private Patients Plan (PPP), and Western Provident Association (WPA). The remainder is
covered by a number of commercial insurers.
Most providers offer policies which, up to stated limits (which may be a full refund of cost), provide
benefits covering the following:-
1.
2.
3.
4.
In-patient hospital charges

In-patient surgical and medical fees
Outpatient charges
Home nursing charges for a maximum period of perhaps 26 weeks per year.
Depending on the provider, there may be a simple full recovery of fees or a maximum expense ceiling
that may be claimed in a policy year.
In addition there are plans which offer cover only if treatment is not available under the NHS within,
say, 6 weeks, as well as budget plans offering more restricted levels of cover and allowing
accommodation only in cheaper hospitals.
Generally, cover is available from age 18 and up to age 70 or 75, with options to cover the policy
holder alone, or together with his/her spouse and any children.
Cover is often available world-wide, and may include the costs of the necessary repatriation to the UK
when medically necessary.
Where cover is offered only where the NHS is unable to offer treatment within 6 weeks, or where a
policy excess applies, cover is correspondingly cheaper.
PROTECTION - Private Medical Insurance (PMI)
Where cover is sought by an individual, perhaps to include his family, a detailed proposal questionnaire
will need to be completed in respect of each family member to be covered; the underwriter may seek
additional evidence from the proposer's own or any other doctor, and may require a medical
examination to take place before offering cover.
The premiums charged for individual contracts will depend on the level and range of cover being
provided and the age of the individuals being covered.
Under group schemes the costing structure will depend additionally on the size of the group being
covered; with small groups the total cost may be a simple accumulation of the premiums per individual,
but with a discount to reflect reduced administrative costs.
With larger groups the age structure of the scheme may be looked at as a whole with a uniform rate of
premium being charged in respect of each member, member's spouse (often the same rate), and a
reduced rate in respect of any children to be covered. A similar approach can be adopted with regard
to voluntary groups provided a minimum level of membership is achieved.
In addition to the PMI covers above, schemes are also available that cover hospital cash benefits.
Such schemes tend to be restrictive in terms of the levels of cover they are able to provide and will give
a daily or weekly benefit in the event of hospitalisation. Such schemes are designed to cover additional
domestic costs which may be incurred as a result of such a hospitalisation, rather than to cover the
cost of private medical care.
In addition, there are also schemes available to cover the expense of dental treatment. Such schemes
are generally marketed through dental practices and will not generally fall into the remit of a typical
financial adviser, but should be borne in mind as part of general expenditure now that many dentists
are converting to private work covered by such policies e.g. DenPlan
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Lifestages retirement - maintenance of spendable income becomes essential
RETIREMENT
Employed income ceases; make up of expenditure changes;
time becomes available; maintenance of spendable income
becomes essential.
1. Income may need to be topped up from savings/investments
to maintain standard of living. If plans not laid in earlier years,
this may be a very uncomfortable period.
2. Inheritance tax planning must take place in earnest, including
bringing will up to date.
3. It may be possible/necessary to plan actual retirement date to fit in with savings and investments
becoming available. This should have been part of earlier planning.
4. It may be possible to retire in stages rather than make a sudden break.
5. Death of a partner makes replanning a necessity.
6. It may become necessary to move to a smaller house or retirement home which will mean a replanning
exercise. Will your long term care planning help?
7. One or both partners may become incapacitated and reliant totally or partly on third party help - a
costly exercise.
of action.
Lifestages retirement - maintenance of spendable income becomes essential
index |
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MINORS: Money for the kids

Christmas is coming and the geese are getting fat - and so could your
child's interest payments, provided you know what to look for. The
following points aren't all inclusive, but raise them with your adviser to
start the ball rolling. If nothing is appropriate now, there might be
something for you to consider at some more appropriate time.
Children have their own personal tax allowance at the same rate as
an adult. Currently (November 1999) this means that income up to the
allowance limit of 4335 escapes tax deduction. The Revenue
acknowledge the special situation of children by allowing them to take interest on savings without
deduction of tax. The institution which holds the savings or investment should provide you with form
R85 to apply for the income without deduction. You can claim back tax that has been deducted in error
by submitting form IR 110.
Children also qualify for the full capital gains tax allowance, currently 7100.
To stop parents being too generous to their offspring the Revenue tax all income earned in excess
of 100 per annum where the interest is from money given by a parent. The rule does not apply to
other relatives and friends. Where more than this is earned, the hapless parent must pay tax on the lot,
not just the excess over the limit.
Alas, that succulent tax free fruit, the ISA, is available only if you are age 18 or above.
Shares are an option, but only through a bare trust with the shares held in the name of an adult. The
child is the beneficial owner, however, and entitled to the dividends. The trust assets must go to the
beneficial owner when he or she is 18.
NB. Although some trust wordings can seem deceptively simple, don't be tempted to put one together
yourself. Although a form of words may seem appropriate, and it is not difficult to obtain 'standard'
wordings, it is safer to obtain professional advice before embarking on this route
Shares may be held another way, by means of unit or investment trusts. The same rules apply as for
shares, in that the account will be in the name of an adult, designated in favour of the child. Watch out
for the tax position, though, as it is no longer possible to reclaim tax deducted from dividends.
Tax free growth is offered by certain friendly society accounts, although the conditions are rather
limited - must be maintained for ten years, and limited annual investment. Nevertheless, as part of a
larger portfolio it may be worth considering.
National Savings may be a useful part of a portfolio, as there is usually some sort of tax free contract
available for children. And there are always premium bonds.
http://www.financial-planning.uk.com/consumer/lifestgs/life1a.htm (1 of 2) [4/20/2002 6:00:32 PM]
of action.
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http://www.financial-planning.uk.com/consumer/lifestgs/life1a.htm (2 of 2) [4/20/2002 6:00:32 PM]
Starting A Family, protection issues - FSEC information help files
STARTING A FAMILY
Working Families Tax Credit:
Although the intention is commendable (e.g. a greater contribution towards
childcare costs), calculating The Working Families Tax Credit, like many other
State benefits, is not straightforward. If you are in any doubt about the
benefits, try your local benefits office, or call the helpline on
0800 5975976. The following notes will help put some of the more important
points in perspective before you enquire further.
The WFTC is a payment for working families which effectively replaces

family credit.
Although introduced in October, it will be paid with salary only in April
2000.
Basic qualification criteria are: at least one child; work more than 16 hours each week; have savings of
less than 8000; combined family income net of tax and national insurance under about 30,000.
The amount available will depend on earnings, hours worked and the number of children in the
household.
Payment has four elements: the basic weekly tax credit; an additional element if you work more than
30 hours each week; a tax credit for each child; a childcare tax credit. The final sum will depend on
how you rate in each of the four elements.
You can still claim child benefit for children under 16, and for children of 16 to 18 who are in full time education.
The benefit does not figure in the calculations for WFTC.
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TAX DEADLINE DATES IN THE FINANCIAL YEAR 1998/99
TAX DEADLINE
DATES IN THE FINANCIAL YEAR 2002/2003
Apr
May
6th
19th,
31st
Jun
Jul
Aug
6th,
31st
Sep
Oct
30th
5th
Nov
Dec
Jan
Feb
Mar
31st
28th
31st
Jan
Feb
Mar
31st
28th
31st
TAX DEADLINE
Apr
May
6th
19th,
31st
Jun
Jul
6th,
31st
Aug
Sep
Oct
30th
5th
main contents |
Nov
Dec
page back

http://www.financial-planning.uk.com/consumer/info/dates/dates.htm [4/20/2002 6:00:38 PM]
TAX DEADLINE DATES IN THE FINANCIAL YEAR 2002 - 2003
TAX DEADLINE
APRIL 2002
6 April
Tax returns will be issued for 2001/2002
MAY
19 May
Companies must submit forms P14, P35, P38/38A

(detailing PAYE and NIC deductions) to avoid penalty
31 May
Employees should receive their P60 by this date.
JULY
6 July
Companies must file form P11D.
31 July
Second instalment due of "Self Assessment" income

tax for 2001/2002
SEPTEMBER
30 September
Tax return for 2001/2002 should be sent to the Inland

Revenue to avoid tax penalty, if the individual wants
the IR to calculate the tax.
OCTOBER
http://www.financial-planning.uk.com/consumer/info/dates/tax2002-2003.htm (1 of 3) [4/20/2002 6:00:39 PM]
5 October
Deadline date for new sources of income giving rise

to income tax or capital gains tax liability.
JANUARY 2003
31 January
Balance of "Self Assessment" tax due for 2001/2002

First instalment due for "Self Assessment" 2001/2002
Tax return must be with IR by this date (100 penalty
if missed).
Capital gains liability due for 2001/2002 or 30 days
after the issue of the assessment.
Higher rate tax on investment income 2000/2001 due
(or 30 days after issue of assessment).
FEBRUARY
28 February
5% surcharge on any unpaid 2001/2002 tax.
MARCH
31 March
Last opportunity:
for occupational pension scheme members to make
AVCs in this tax year.
to take advantage of the annual CGT exemption for this year.
to make use of any unused 3,000 annual exemption

from IHT brought forwards from 2001/2002
to use up small gifts expenditure exemption for this
year.
to invest in 2002/2003 ISA or contribute to an existing

TESSA.
to invest in a Property Enterprise Zone Trust for the
2002/2003 tax year.
to invest in an Enterprise Investment Scheme for
2002/2003 tax year.
calendar | tax year 2000/2001
main contents |
page back

TAX DEADLINE
APRIL 2000
6 April
Tax returns will be issued for 1999/2000.
MAY 2000
19 May

(detailing PAYE and NIC deductions) to avoid penalty.
31 May
JULY 2000
6 July
31 July

tax for 1999/2000.
SEPTEMBER 2000
30 September

OCTOBER 2000
5 October

JANUARY 2001
31 January
Balance of "Self Assessment" tax due for 1999/2000.

First instalment due for "Self Assessment" 1999/2000.
if missed).
Capital gains liability due for 1999/2000 of 30 days
Last day to elect PPP contributions made prior to
previous 6th April to be applied to the previous tax
year (or the year before that if there were no relevant
earnings last year).
FEBRUARY 2001
28 February
MARCH 2001
31 March
Last opportunity:
to take advantage of the annual 7,200 CGT
exemption for this year.
from IHT brought forwards from 1999/2000.

year.
TESSA.
2000/2001 tax year.
2000/2001 tax year.

TAX DEADLINE
APRIL 1999
6 April
Tax returns will be issued for 1998/99.

Dividend tax credit reduces to 10%. Only reclaimable
by PEP/ISA managers and then only until 2004. HRTs
have an additional 22.5% tax liability.
MAY 1999
19 May

(detailing PAYE and NIC deductions) to avoid penalty.
31 May
JULY 1999
6 July
31 July

tax for 1998/99.
SEPTEMBER 1999
19 September
Maturing certificates of 41st Issue National Savings

Certificate automatically switch to the General
Extension rate of interest. 42nd Issue will be maturing
at any time between 20th September and Jan 2001,
depending on the date of purchase
19 September
Fifth anniversary of the last day of sale of 7th issue of

index-linked National Savings Certificates. Mature
certificates of the 6th issue of index-linked National
Savings Certificates automatically switch to variable
extension terms, currently index linking. 8th Issue will
mature between 20th September and Jan 2001,
depending on the date of purchase.
30 September

OCTOBER 1999
5 October

JANUARY 2000
31 January
Balance of "Self Assessment" tax due for 1998/99.

if missed).
Capital gains liability due for 1998/99 of 30 days after
the issue of the assessment.
Higher rate tax on investment income 1998/99 due (or
30 days after issue of assessment).
Last day to elect PPP contributions made prior to
previous 6th April to be applied to the previous tax
year (or the year before that if there were no relevant
earnings last year).
FEBRUARY 2000
28 February
MARCH 2000
31 March
Last opportunity:
from IHT brought forwards from 1998/99.
year.
TESSA.
1999/00 tax year.
1999/00 tax year.

TAX DEADLINE
APRIL 2001
6 April
Tax returns will be issued for 2000/2001
MAY
19 May

(detailing PAYE and NIC deductions) to avoid penalty
31 May
JULY
6 July
31 July

tax for 2000/2001
SEPTEMBER
30 September

OCTOBER
5 October

JANUARY 2002
31 January
Balance of "Self Assessment" tax due for 2000/2001

if missed).
Capital gains liability due for 2000/2001 or 30 days
Last day to pay PPP contributions if electing to use
combined carry forward (for the last time) and carry
back
FEBRUARY
28 February
MARCH
31 March
Last opportunity:
from IHT brought forwards from 2000/2001

year.
TESSA.
2001/2002 tax year.
2001/2002 tax year.
main contents |
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Letters sent to Financial Planning Horizons
YOUR LETTERS TO FPH
we will forward your mail
main index |
page back
...If I went to work for 7 hours a week would it then be based on both of us (childrens credit)....
click to read more
...The policy matures in 2018, the monthly premium is 95.91 and the target amount is 70,000
click to read more
...can anybody send me a list of reputable companies who buy these policies (endowment) ...
click to read more
I have been told that I am entitled to childrens tax credit...
click to read more
is there any way of finding how a endownment policy is doing...
click to read more
I am looking to sell my Endownment...
click to read more
... Do i have to surrender to the company that i have the policy with or can i 'shop about'...
click to read more
We are looking for an ISA to run along side our mortgage...
click to read more
i have a endownment policy which i would like to surrender....
click to read more
.. information on purchasing endownement policies (with profits).
click to read more
.. so our original holding (held since 1995/6) was reduced by almost 30 shares. ....
click to read more
http://www.financial-planning.uk.com/consumer/noticeboard/letters/index.htm (1 of 13) [4/20/2002 6:00:49 PM]
This week my mortgage endowment with Guardian Royal matured but with insufficient funds to repay the
mortgage ....
click to read more
I am 25 years old, and am looking into getting an endowment policy but have no idea how to start....
click to read more
I am very confused as to how the whole pension scheme works...I just don't get it...
click to read more
We inherited land in 1987....
click to read more
I WONT TO SELL MY ENDOWMENT POLICY...
click to read more
we have an endownment policy we would like to sell...
click to read more
Can you advise me what the milage rates would be for staff who have car allowances ?...
click to read more
I have two endowment policies to sell:...
click to read more
We wish to sell our morgage endownment policy...
click to read more
I am thinking of cashking in my endownment policy....
click to read more
...a list of companies that will buy endownment policies.
click to read more
...a list of companies who buy endownment policys...
click to read more
...a list of companies that buy endownments
click to read more
...Can we claim Childrens Tax Credit while he (Grandson) lives with us?
click to read more
...I am due to replace my company car in May 2001 and want to make my choice partly on environmental
grounds.....
click to read more
...if you had a baby on the 5th of March 2002 you would get the tax credit in full in the year ended 5th April
2002?
click to read more

...we would like some advice on how to sell this policy
click to read more
...should 2 invoices be raised, one for the advice and one for arranging the contract?
click to read more
...I can only invest a maximum of 1800 pounds (TESSA) in the final year and I want to invest more than that
figure.....
click to read more
...We do not actually need this policy and would like some information on selling.....
click to read more
I am thinking about selling my 3 endownment policies....
click to read more
I have a six year endownment policy....
click to read more
I wish to sell my morgage endownment policies....
click to read more
I AM INTERESTED TO KNOW IF THERE IS A LIST OF STATES THAT TAX OR DO NOT TAX AN OUT OF
STATE PENSION....
click to read more
I am looking to sell a 6year old endowment policy....
click to read more
Are there any reputable firms that I can sell my endownment to....
click to read more
can a company pension plan that is now frozen be sold?
click to read more
I wish to sell an eight year old index-linked endownment policy....
click to read more
I wish to sell a unit linked endownment policy....
click to read more
WE BROUGHT OUR ENDOWNMENT IN AUGUST 1991....
click to read more
... What options do i have in terms of transferring the funds either to to a scheme in the UK that i can contribute
to or even over here in USA ?
click to read more
... i see companys on teletext saying cash in youe endownment for up to 30% more......
click to read more
... to sell my endownment policy, it is 11 years old......
click to read more
... I am really worried about spending this sort of money when i personally believe that house prices are going to
drop off due to first time buyers not being able to afford to buy......
click to read more
... a financial institution who is offering CEPPP (HYIP/PPP) Capital Enhancement Private Placement
Programs......
click to read more
... withdraw funds from building society in the UK and put it into an account in Europe - in Euros.....
click to read more
... how to go about getting the best deal.
click to read more
...15 years left on it. We would like to hear from anyone interested in purchasing it.
click to read more
... Please could you let me know if there is any chance of gaining by selling the policies to a third party.
click to read more
I intend to move to Greece when I retire....
click to read more
... regarding the transfer of property and any other assets to siblings....
click to read more
I am trying to identify all insurance companies who are mutual....
click to read more
... Is this a legal method of collecting increased payments?....
click to read more
I am looking to sell my endownment policy....
click to read more
I would like to sell my Index Linked Endownment Policy....
click to read more
...Can i cash in all or part of the deffered pension.
click to read more
I have a unit Linked endownment policy which I and my husband wish to sell....
click to read more
...I am looking for the best return I can possibly get....

click to read more
i have a unit linked life assurance policy....
click to read more
...I wish to sell for the best price.
click to read more
Can you please send me a list of companies that sell endownments.
click to read more
I have an endownment policy that is "unit linked" and i would like to get quotes to attain the best offer as i would
like to sell....
click to read more
I have a 9 year old index linked endowment that I would like to sell....
click to read more
...a list of companies in northern ireland who would buy an endownment policy
click to read more
..how do I sell these endownments? how do I get the best price for them?
click to read more
...details regarding investing in unit/investment trusts for children.
click to read more
I have two endownment policies which have not been kept up to date....
click to read more
..will I have to pay NI contributions? If I dont what happens to my retirement pension?..
click to read more
..ALSO TO CHANGE MY MORGAGE BEING SELF-EMPLOYED MY SALARY FLUCTUATES..
click to read more
..a list of companys,who will buy endowment morgages..
click to read more
I have an endownment policy with Friends Prov....
click to read more
....we are looking for companies that specialise in buying this type of policy (endowment) to make a better offer.
click to read more
I'm looking for an insurance policy that can be look as an better investment tool....
click to read more
...I do not know what happened to the endowment, whether it had been cashed in, frozen or what ever. How can
I track down the policy to see if it still stands.
click to read more
I have an endownment policy and would like to sell....
click to read more
We have an Endownment policy that has been running for 10 years with the Royal Guardian Financial Co. We
are looking to cash it....
click to read more
I have an Endownment policy that has been running for 6 years. I am looking at cashing it in....
click to read more
I am currently looking to sell an existing endownment policy of 19 years which is not linked to a property....
click to read more
..... information on the ISA services you provide....
click to read more
..... I was in receipt of a pension until 1973 when I remarried my present husband. Am I entitled to any pension
now.
click to read more
i have two endowment policys i would like sell....
click to read more
...it is expected to make approx 40000 i would like to sell it now....
click to read more
i am interested in joining cahoots banking service....
click to read more
I am looking to find some assistance with my finances....
click to read more
I have just read your Special Report: Occupational pensions dated 11/98 with interest....
click to read more
I WOULD LIKE TO SELL OUR ENDOWMENT POLICYS....
click to read more
I'm looking to sell my endownment of over 5 years....
click to read more
...the risk associated with defined benefit final salary occupational pension schemes...
click to read more
my Son will be coming into approx 5,000 in a few weeks....

click to read more
I'm interested to hear of plans for Cahoots internet banking....
click to read more
...why there is a North South dive in the housing market.
click to read more
...the policy could not have achieved the results. Perhaps you could advise me if Insurance companies were
forced to use LAUTRO charges.
click to read more
...the average time it takes to complete a remortgage...
click to read more
I am currently looking to sell an existing endownment policy, which is not linked to a property...
click to read more
...I was wondering if i can take an endowment policy in my sole name only....
click to read more
How much should I spend a month to pay off loans, how much can I afford to use for entertainment...
click to read more
...the trustees are obliged to offer you a deferred pension no matter when you leave the company...
click to read more
we have 4 endowments linked to our mortgage...
click to read more
...We would have made more money in the Building Society..
click to read more
Please can you send me some information on buying shares
click to read more
I am looking for information on taking up a pension, ... and wish to retire in the year 2015....
click to read more
I am researching a novel and have a tax query.
click to read more
I need to find out where to go to "sell" my existing endownment policys.
click to read more
please forward details on PHI thankyou....
click to read more
What do you think of the future of the National Express? I heard the rumour....
click to read more
The UK stock market price has risen drastically last 10 years....
click to read more
Please send more inforamtion about getting coverage (dred disease) insurance.
click to read more
We are a married couple who earn 19,107 annually and 10,000 annually. We have seen a house we would
like for 100,000....
click to read more
Please could you send me details of the minimiser morgage....
click to read more
....after 10years of paying for something which i was led to believe to at least cover my loan, i am now told i will
have a short fall of 12000.00....
click to read more
....any information with regard to minimiser or flexible rate mortgages.
click to read more
....Does the UK company have to pay any tax on this transaction....
click to read more
My two brothers and myself own a property in which our parents live no mortgage exists. It is my intention to
partex this property....
click to read more
I am 22 and don't have a pension yet as so far....
click to read more
...will inheritance tax be calculated on the estate value then or now?
click to read more
I understand VAT for the UK has been altered on products concerning energy savings, eg double glazing.....
click to read more
....We have an eleven month old boy and we would like to start a savings plan possibly over twenty years.
click to read more
Please can you advise what the cut off age is when you no longer become entitled to the State pension?...
click to read more
Does stamp duty still apply if two people exchange properties of say 250k each?...
click to read more
Stamp duty is charged on UK purchases, but not the US purchases. Why is this?
click to read more

..please send me the names of companies providing alternatives to fixed annuities?
click to read more
I am interested in starting an endowment policy....
click to read more
I would be grateful for information about any tax liability...
click to read more
...Smile do not offer Tessa-ISAs. What can I do In October upon maturity?
click to read more
...We are short of money now Can I , or would it be advisable to get my money out of the Scheme...
click to read more
If I were to purchase a property priced at 60,000 would I have to pay stamp duty?
click to read more
Although my wages do not yet reach the NI Level,I feel sure that they will soon
click to read more
Are the insurance lump sums payable on death counted as part of the estate?
click to read more
Can my daughter re-claim any tax relief at all for this expense. She pays this fee herself from her own funds, so
is there any tax exemption that she can claim, in her own right, for paying for her own training???
click to read more
I am interested in starting a SIPP...
click to read more
I am trying to finfd as much information regarding SIPPs as possible before I decide to transfer my existing
pension.
click to read more
I have been searching without much sucess for regularily updated site on the Internet to compare the results of
Pension companies.
click to read more
I'm interested in the investment charges, commision rates, mortality tables that are being used for the unit linked
policies currently in the UK market.
click to read more
After the completion of my new property, how quickly will the stamp duty have to be paid.
click to read more
I have two endowment policies running in the UK, one taken out in 1984 and one in 1988.....
click to read more

I will be putting down a 10% deposit. Do I also have to pay stamp duty of 2.5% or is this only when I sell the
property?....
click to read more
I split from my husband a little over 2 years ago and have began to worry about my financial future....
click to read more
The price of Scoot is now 3.00. If selling a number of these shares to utilise 7.1k CGT limit, which price do I
use as the purchase price....
click to read more
...Eagle Star want us to pay 100 extra per month.
click to read more
I would like pros and cons for a nonprofit to initiate an endowment fund.
click to read more
...mutual building societies and their marketing strategies which enable them to sustain a competitive edge
against the stronger players.
click to read more
can you send me your article on "With-profit annuity"...
click to read more
...calculating a transfer value where someone leaves a defined benefit scheme 20 years before the "normal
retirement date"?
click to read more
do you know of any banks that offer USD current account (inc cheque book) to UK residents?
click to read more
What can we do about Telewest, the cable company messing up our pension scheme?
click to read more
click to read more
I am enquiring about Self Invested Personal Pension schemes and whether they would be suitable for me.
click to read more
I bought shares in the last tax year (98-99) and sold them in this (99-00) at a profit which exceeds the cgt
allowance.
click to read more
if you earn all your income from investments how does this affect your taxation.
click to read more
Isn't it possible to run your own share ISA without having to go through the risky business of transfering your
shares to a third party (ISA provider)...

click to read more
With regard to stamp duty, could you please explain how this works...
click to read more
I want to invest a lump sum of 1,000 pounds for my 5 year old daughter...
click to read more
Could you please advise on how, financcial services are taxed , with regard to value added tax.
click to read more
I was paid offshore, but was paying National Insurance in UK even though I was never in UK. Can I recover the
contributions that I have paid...?
click to read more
Could you tell me or explain to me the difference between the following type of Life Assurance....
click to read more
.....carry forward and carry back contributions to an existing personnal pension plan will be discontinued....
click to read more
...how many children die every year from a terminal illness..
click to read more
...could I have had my (pension) contribution refunded...
click to read more
....purchasing a Nursing / Care Home using a SIPP.
click to read more
We did not expect to make this type of increase on a house in such a short time and are now worried about
Capital Gains Tax....
click to read more
...best Cash Isa (mini one for 3000 investment)
click to read more
How do I go about writing letters for my loan about late payments on previous accounts.?????
click to read more
I am interested in trading my endowment policies rather than surrendering them..........
click to read more
My wife and I are thinking of investing some small cash......
click to read more
Can they each leave me their share of the whole asset.... without me having to pay inheritance tax on either
portion?
click to read more

...At the end of the financial year what percentage of v.a.t will I be able to claim back.
click to read more
I am interested in capped mortgages.
click to read more
Pension question. I am a civil servant and a member of the Principal Civil Service Pension Scheme, which is a
final salary occupational scheme.
click to read more
I have managed to get myself into financial trouble, and amd wondering what the effect of declaring the
company bankrupt will be
click to read more
"What are the most significant changes to have taken place recently in the Financial Services industry?
click to read more
Just looked at your site having noticed a message in UK.finance but couldn't link to your links & tools
sections.....
click to read more
I am currently writing a market intelligence report entitled Financial Services on the Internet.....
click to read more
I am an independent financial advisor and specialise in discounted mortgage protection.....
click to read more
Your site isn't very easy to read when connected with a slow modem.....
click to read more
COULD YOU PLEASE PROVIDE ME WITH A TABLEOF FIGURES WHI CH SHOW MORTGAGE
REPAYMENT RATES.....
click to read more
I found your web site extremely useful as I am in the process of buying a new house.....
click to read more
Russia is reforming now existing pension system. NPFs (nonstate pension funds) will play very important role in
new pension system.....
click to read more
main index |
page back

FREE Financial Planning Information - noticeboard letters
(Ref 181)
country: UK
contact_name: karen milford
message: Dear Sir,
At the moment my husband and I don't qualify for childrens credit. The assessment is based on my husbands
income because I don't have one. If I went to work for 7 hours a week would it then be based on both of us. For
example 1 person has a limit of say 20K before its paid but 2 people have double, 40K before its paid. Hope
this makes sense !
FPH REPLY
Thanks for your letter.

We cannot offer advice, but will post your letter on the letters page to see if any other site visitor has something
to offer. Please be sure to follow professional advice before taking any action.
Regards
John Hose
index |
page back

http://www.financial-planning.uk.com/consumer/noticeboard/letters/181.htm [4/20/2002 6:00:51 PM]
(Ref 180)
country: UK
contact_name: Miss Goldie
message: Dear Sir,
I have an endownment policy I would like to sell. It is 9 years old and is a with profits policy. The current
surrender value is about 9,500 and the accumulated bonuses are about 37,000 at present. Can you advise
me who I could approach, what the sale value is likely to be, etc. The policy matures in 2018, the monthly
premium is 95.91 and the target amount is 70,000
FPH REPLY

Regards
John Hose
index |
page back

(Ref 179)
country: UK
contact_name: mike
message: Dear Sir,
I am interested in selling my fifteen year endownment policy,can anybody send me a list of reputable companies
who buy these policies and any other information which might be helpfull.
FPH REPLY

Regards
John Hose
index |
page back

(Ref 178)
country: UK
contact_name: andrew elsdon
message: Dear Sir,
I have been told that I am entitled to childrens tax credit but I did claim once and I havent heard anything for a
year. Coud you please let me know what I need to be eligible.
FPH REPLY

Regards
John Hose
index |
page back

(Ref 177)
country: UK
contact_name: stephen atkinson
message: Dear Sir,
is there any way of finding how a endownment policy is doing on the internet alist of best and worst companies
or a company graph for the last ten years
FPH REPLY

Regards
John Hose
index |
page back

(Ref 176)
country: UK
contact_name: Mr C M Wickens
message: Dear Sir,
I am looking to sell my Endownment, that has been running for approximately seventeen years, and would like
to get the best possible price for it.
Yours faithfully Mr C M Wickens
FPH REPLY

Regards
John Hose
index |
page back

(Ref 175)
country: UK
contact_name: Geoff Head
message: Dear Sir,
I have a single life policy plan that i last paid into 7 years ago. I have been informed by the Life assurance
company that the policy, if surrendered today, is valued at over 700.00 and that the amount changes daily. The
sum assured is for 69518. My question is: Do i have to surrender to the company that i have the policy with or
can i 'shop about' in the hope of finding a better surrender value?
FPH REPLY

Regards
John Hose
index |
page back

(Ref 174)
country:
contact_name: Anita Jarvis
message: Dear Sir,
We are looking for an ISA to run along side our mortgage. What is the best isa and provider to choose and we
can I find them?
Thanks Anita
FPH REPLY

Regards
John Hose
index |
page back

(Ref 173)
country: UK
contact_name: john dembickjy
message: Dear Sir,
i have a endownment policy which i would like to surrender , policy is about 9 years old pay monthly 49. 59
many thanks
FPH REPLY

Regards
John Hose
index |
page back

(Ref 172)
country: UK
contact_name: Kaz
message: Dear Sir,
Can you please send me some information on purchasing endownement policies (with profits).
Thank you.
FPH REPLY

Regards
John Hose
index |
page back

(Ref 171)
country:
contact_name: Anne Jones
message: Dear Sir,
My husband and I have recently been issued with a new share certificate for National Grid Group plc, showing a
number of shares of 10 pence each. Back in February 1998 they consolidated the shares and valued them at 11
13/17p, so our original holding (held since 1995/6) was reduced by almost 30 shares. I am not used to dealing
with shares but this doesn't seem right. Are you able to comment on this?
FPH REPLY

Regards
John Hose
index |
page back

(Ref 170)
country: UK
contact_name: W R West
message: Dear Sir,
This week my mortgage endowment with Guardian Royal matured but with insufficient funds to repay the
mortgage , should they have alerted me to this situation as originally advised when i purchased the policy , they
say its because of low interest rates and low stock market
W R West
FPH REPLY

Regards
John Hose
index |
page back

(Ref 169)
country: UK
contact_name: Helen Carver
message: Dear Sir,
I am 25 years old, and am looking into getting an endowment policy but have no idea how to start. I have looked
at a couple of insurance companies web-sites but they do not appear to have any listed. Can you suggest
where I should be looking and explain a little bit more about them. Thank you.
Yours faithfully Helen Carver
FPH REPLY

Regards
John Hose
index |
page back

(Ref 168)
country: UK
contact_name: Carolyn Lee
message: Dear Sir,
My husband and I have spent the past 16 years in the US. I am very confused as to how the whole pension
scheme works. My husband has been recovering from cancer, and as a result of his illness, lost his job. We
may now be in a position to start saving again, we have bits and peices but I don't know where to begin. Our
financial situation is pretty dire but we are climbing back. I haven't a clue where to go to sort this out. I try and
read all that's here but it's not enough - I just don't get it. Can you recommend someone I can talk to?
Carolyn Lee
FPH REPLY

Regards
John Hose
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(Ref 167)
country: USA
contact_name: Jake Kelley
message: Dear Sir,
We inherited land in 1987. We are in ther process of selling it for about $60,000.00. What type of capital gain tax
can we expect to pay? Is there any exemptions that would apply if this money was used to purchase a house?
Is there anything we can do to avoid a large capital gain tax?
Thanks
FPH REPLY

Regards
John Hose
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(Ref 166)
country: UK
contact_name: suzanne
message: Dear Sir,
I WONT TO SELL MY ENDOWMENT POLICY COULD YOU PLEASE HELP ME, WHO I WOULD SELL IT TO
AND THE ONE THAT WILL GIVE ME THE BEST DEAL, IT MATURES IN 2004 AT THE MOMENT THE
SETTLEMENT FIGURE IS 9038.80
FPH REPLY

Regards
John Hose
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(Ref 165)
country: UK
contact_name: Mr J whelan
message: Dear Sir,
we have an endownment policy we would like to sell.It is in its eleventh year
FPH REPLY

Regards
John Hose
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(Ref 164)
country: UK
contact_name: marcus vallance
message: Dear Sir,
Can you advise me what the milage rates would be for staff who have car allowances ? I know the normal rates
for use of a private car - surley these can;t be the same if the employee are getting an allowance as well?
regards
FPH REPLY

Regards
John Hose
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(Ref 163)
country: UK
contact_name: nina bailey
message: Dear Sir,
I have two endowment policies to sell : Policy (1) Legal&General 04/03/1986 Type - Low start-up Expires
04/03/2021 Benefit assured 5,876.00, terminating 26,000.00 Premium 22.30 Policy(2) Legal&General
16/03/1988 Type - Low start-up Expires 16/03/2021 Benefit assured 2,562.00, terminating 14,000.00
Premium 12.50
FPH REPLY

Regards
John Hose
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(Ref 162)
country: UK
contact_name: Mrs D Spamer
message: Dear Sir,
We wish to sell our morgage endownment policy,homebuilder plus, it is 9yrs old and is gauranteed to pay out at
the end of the term,of 25 yrs, the policy is taken out with Guardian Financial Services.
FPH REPLY

Regards
John Hose
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(Ref 161)
country: UK
contact_name: Simmonie
message: Dear Sir,
I am thinking of cashking in my endownment policy , but I'm not sure if this is a good idea. I have had it for 4
years. Can you please give me some advise on this.
Thanks Simmonie
FPH REPLY

Regards
John Hose
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(Ref 160)
country: UK
contact_name: Natalie Jones
message: Dear Sir,
Please can you send me a list of companies that will buy endownment policies.
Regards Natalie
FPH REPLY

Regards
John Hose
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(Ref 159)
country: UK
contact_name: Mr Michael Burns
message: Dear Sir,
Please could you give me a list of companies who buy endownment policys,and any other information which
might be helpfull.
yours sincerely mike.
FPH REPLY

Regards
John Hose
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(Ref 158)
country: UK
contact_name: Nick Barnes
message: Dear Sir,
Please could you send me, via e-mail, a list of companies that buy endownments,
many thanks Nick barnes
FPH REPLY

Regards
John Hose
index |
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(Ref 157)
country: UK
contact_name: William Pickard
message: Dear Sir,
I am a retired person. My wife and I are in our 50's, and our sole income is my employment pension. In mid2001 our 12 yrs old grandson came to live with us with the agreement of his mother. We are in receipt of Child
Benefit for him. Can we claim Childrens Tax Credit while he lives with us?
Bill Pickard
FPH REPLY

Regards
John Hose
index |
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(Ref 156)
country: UK
contact_name: Paul Morse
message: Dear Sir,
Company car tax liability I am due to replace my company car in May 2001 and want to make my choice partly
on environmental grounds. I have read somewhere that the most recent diesel engines meeting the Euro 4
standard may not be subject to the 3% supplement applied to Euro 3 diesels and would be grateful if you could
let me know if this is so under the present system or is under consideration for the immediate future. This last
question is important as I keep my car for 4 years and at the moment there are only a few manufacturers that
make cars complying with the Euro 4 standard.
I look forward to your assistance in this. Paul Morse
FPH REPLY

Regards
John Hose
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(Ref 155)
country: UK
contact_name: Lorna Buchan
message: Dear Sir,
The childrens tax credit. Is is apportioned from the date of birth of the child in the tax year or, say if you had a
baby on the 5th of March 2002 you would get the tax credit in full in the year ended 5th April 2002?
FPH REPLY

Regards
John Hose
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(Ref 154)
country: UK
contact_name: mrs walker
message: Dear Sir,
We have an endownment policy taken out onour previous property it has been running for 6 yeras now we
would like some advice on hoe to sell this policy
FPH REPLY

Regards
John Hose
index |
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(Ref 153)
country: UK
contact_name: M. Travis
message: Dear Sir,
Can you confirm that VAT should be paid on all fees for giving advice and arranging a contract other than
execution only when it is obvious that no advice has been given, or should 2 invoices be raised, one for the
advice and one for arranging the contract?
I look forward to your reply Mike Travis
FPH REPLY

Regards
John Hose
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(Ref 152)
country: UK
contact_name: Paul Cartwright
message: Dear Sir,
I currently have a TESSA which matures in July 2002. However, I can only invest a maximum of 1800 pounds in
the final year and I want to invest more than that figure. Is it possible for me to open an ISA also to invest more
money tax free.
Thank you your time. Paul Cartwright
FPH REPLY

Regards
John Hose
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(Ref 151)
country: UK
contact_name: Amanda Walker
message: Dear Sir,
My partner has an endownment policy taken out on his previous address. We do not actually need this policy
and would like some information on selling. The policy is currently 3 1/2 years old, and we pay approx 44.00
each month for it.
FPH REPLY

Regards
John Hose
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(Ref 150)
country: UK
contact_name: Paul Byng
message: Dear Sir,
I am thinking about selling my 3 endownment policies that are roughly half way through there term, then
changing to a repayment mortgage could you please advise if this is a good idea?
FPH REPLY

Regards
John Hose
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(Ref 149)
country: UK
contact_name: James Burnett
message: Dear Sir,
I have a six year endownment policy with the C.I.S. that I would like to sell. Can you advise.
FPH REPLY

Regards
John Hose
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(Ref 148)
country: UK
contact_name: a dixon
message: Dear Sir,
I wish to sell my morgage endownment policies 1 is 18 years old and the other is 8 years old they were taken
out with london and manchester and are now held with friends provident how do i go about this
FPH REPLY

Regards
John Hose
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(Ref 147)
country: USA
contact_name: DANIEL H. MCCARTHY
message: Dear Sir,
I AM INTERESTED TO KNOW IF THERE IS A LIST OF STATES THAT TAX OR DO NOT TAX AN OUT OF
STATE PENSION. EXAMPLE, I WORKED IN ILLINOIS AND THEN I RETIRED AND MOVED TO ARIZONA IS
MY RETIREMENT INCOME FROM ILLINOIS TAXED BY THE STATE OF ARIZONA.
PLEASE ADVISE. THANK YOU
FPH REPLY

Regards
John Hose
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(Ref 146)
country: UK
contact_name: william reid
message: Dear Sir,
I am looking to sell a 6year old endowment policy, can you help!
FPH REPLY

Regards
John Hose
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(Ref 145)
country: UK
contact_name: Anita Virdee
message: Dear Sir,
Are there any reputable firms that I can sell my endownment to obtain more money than that offered by the
investor ?
FPH REPLY

Regards
John Hose
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(Ref 144)
country: UK
contact_name: stephen kearns
message: Dear Sir,
can a company pension plan that is now frozen be sold?
regards steve kearns
FPH REPLY

Regards
John Hose
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(Ref 143)
country: UK
contact_name: Claire Cunningham
message: Dear Sir,
I wish to sell an eight year old index-linked endownment policy. Where or how do I get the best deal?
FPH REPLY

Regards
John Hose
index |
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(Ref 142)
country: UK
contact_name: Claire Cunningham
message: Dear Sir,
I wish to sell a unit linked endownment policy which has been running for 8 years. Where can I get the best
deal?
FPH REPLY

Regards
John Hose
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(Ref 141)
country: UK
contact_name: LISA SMITH
message: Dear Sir,
WE BROUGHT OUR ENDOWNMENT IN AUGUST 1991 WE ARE LOOKING TO SELL IT, HOW DO WE GO
ABOUT IT
FPH REPLY

Regards
John Hose
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(Ref 140)
country: USA
contact_name: Barry Holmes
message: Dear Sir,
I'am a UK citizen that has lived in the USA for nearly 4 years. I have 2 personnel pensions with the Prudential in
the UK. What options do i have in terms of transferring the funds either to to a scheme in the UK that i can
contribute to or even over here in USA ?
Regards Barry Holmes
FPH REPLY

Regards
John Hose
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(Ref 139)
country: UK
contact_name: n.turner
message: Dear Sir,
i want to cash in my endownment as i have just moved home and now have no mortgage. scottish widows say
its value is 8750 but i see companys on teletext saying cash in youe endownment for up to 30% more. who is
the best Co to deal with please or would it be best to accept scottish widows offer.
Thanks
FPH REPLY

Regards
John Hose
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(Ref 138)
country: Malta
contact_name: Jo Palmer
message: Dear Sir,
I am interested to sell my endownment policy, it is 11 years old, can you please send me some more info
FPH REPLY

Regards
John Hose
index |
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(Ref 137)
country: UK
contact_name: Ewan Thomas
message: Dear Sir,
I am currently looking for my first home. I am 23 years old and earn very good money, however i am really
struggling to find a suitable home at the current house prices. I live in colchester and wish to stay in the town,
but for a two bedroom terrace house you are looking at paying 95K and above. I am really worried about
spending this sort of money when i personally believe that house prices are going to drop off due to first time
buyers not being able to afford to buy. The reason for this email is to try and get some advise on what the
housing market will do. Any feedback will be gratefully received!
Kind regards, Ewan Thomas
FPH REPLY

Regards
John Hose
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(Ref 136)
country: Sweden
contact_name: Mr. Roman Zaretzki
message: Dear Sir,
Please can you tell me where I can find in the UK a financial institution who is offering CEPPP (HYIP/PPP)
Capital Enhancement Private Placement Programs. I'm 100% sure that such exist - banks deny this, because
they want to make the big money. Your hint where I can find such institution is very welcome.
Thank you very much indeed, Roman Zaretzki
FPH REPLY

Regards
John Hose
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(Ref 135)
country: UK
contact_name: Anna Ri
message: Dear Sir,
Someone has mentioned to me that it is wise to withdraw funds from building society in the UK and put it into an
account in Europe - in Euros. I haven't heard or read anything. Is this wise?
FPH REPLY

Regards
John Hose
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(Ref 134)
country:
contact_name: aniza meghani
message: Dear Sir,
I have an endownment policy which I would like to cash in. Could you please advice me, as to how to go about
getting the best deal.
Thank-you
Yours sincerely, aniza
FPH REPLY

Regards
John Hose
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(Ref 133)
country: UK
contact_name: sue kagan
message: Dear Sir,
My husband and I have a unit linked endownment, with 15 years left on it. We would like to hear from anyone
interested in purchasing it.
FPH REPLY

Regards
John Hose
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(Ref 132)
country: UK
contact_name: SHARON JONES
message: Dear Sir,
I am looking to sell three endownment policies which my husband and I have held for nearly 12 years. At the
moment I have been told they are worth 8150 if I surrender now. They are held with Standard Life . Please
could you let me know if there is any chance of gaining by selling the policies to a third party.
Thank you.
Sharon Jones
FPH REPLY

Regards
John Hose
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(Ref 131)
country: UK
contact_name: stephen west
message: Dear Sir,
I intend to move to Greece when I retire. Although this is still several years in the future, (I am 47), I am trying to
accumulate as much useful information as possible to see if this is a viable thing for me to do, (with my wife).
Thanks.
FPH REPLY

Regards
John Hose
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(Ref 130)
country: UK
contact_name: allen jones
message: Dear Sir,
could you possibly let me know the current legal position regarding the transfer of property and any other assets
to siblings in the event of having to enter a nursing or residential home.
thank you
allen jones
FPH REPLY

Regards
John Hose
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(Ref 129)
country: UK
contact_name: Eric Stewart
message: Dear Sir,
I am trying to identify all insurance companies who are mutual and offer with profits endownments with a view to
cashing in when they de-mutualise a la Friends Provident - can you help?
Regards Eric
FPH REPLY

Regards
John Hose
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(Ref 128)
country: UK
contact_name: Antoinette Lavelle
message: Dear Sir,
I need advice about the handling of a pension contribution increase. The wording of a letter received contains
the following sentences. "Accordingly your personal contributions should now increase and I suggest an
increase of 4.00 per week (which is 17.33 per month). assuming this is ok there is nothing more for you to do,
otherwise if you would like to increase further please return the attached sheet by 12th May in the envelope
provided, to let me know what you want." A reply was not made due to domestic difficulties. We now have
received a notice that the pension contributions are to be increased as from 1st. May.
My question is: Is this a legal method of collecting increased payments? My understanding was that increases
were to be made with the express permission of the client and not as a result of default! We have tried, without
success, to contact the company over the last two days.
What should we do next?
Sincerely---Toni Lavelle
FPH REPLY

Regards
John Hose
index |
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http://www.financial-planning.uk.com/consumer/noticeboard/letters/128.htm (1 of 2) [4/20/2002 6:01:56 PM]
(Ref 126)
country: UK
contact_name: john t boyle
message: Dear Sir,
I am looking to sell my endownment policy,which i have held for eleven years it has a value of 10,500 pounds
but i understand it is possibly to achieve a higher price.Could you please put me in touch with such companies.
thank you very much
JOHN BOYLE
FPH REPLY

Regards
John Hose
index |
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(Ref 125)
country: UK
contact_name: Hugh Gilmartin
message: Dear Sir,
I would like to sell my Index Linked Endownment Policy. I am changing my mortgage to a Repayment type.My
Endowment has been running for 9 Years and has a surrender Value of 21,900.
FPH REPLY

Regards
John Hose
index |
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(Ref 124)
country: UK
contact_name: gary lennard
message: Dear Sir,
I have been made reduntant after 13 years service,And i have a deffered pension,Can i cash in all or part of the
deffered pension.
Thanks
FPH REPLY

Regards
John Hose
index |
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(Ref 123)
country: Ireland
contact_name: Marie O'Connor
message: Dear Sir,
I have a unit Linked endownment policy which I and my husband wish to sell. I would be grateful for Company
contacts who would be interested in purchasing same.
Yours Faithfully,
Marie O'Connor
FPH REPLY

Regards
John Hose
index |
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(Ref 122)
country: UK
contact_name: Mr Elrick
message: Dear Sir,
I wish to sell my endownment policy I am looking for the best return I can possibly get, the policy I have is nine
years old has no low start and is unaltered with attatched bonuses. Could you please contact me as soon as
possible.
Mr Elrick
FPH REPLY

Regards
John Hose
index |
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(Ref 121)
country: UK
contact_name: a keeble
message: Dear Sir,
i have a unit linked life assurance policy, which i am thinking of surrendering, please contact me.
FPH REPLY

Regards
John Hose
index |
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(Ref 120)
country: UK
contact_name: keith palmer
message: Dear Sir,
I have a scotish widows endownment policy which is 12 years old due to mature in 2013. monthly payment of
79 present surrender value of 17188 insurance value on death 53000.I wish to sell for the best price
FPH REPLY

Regards
John Hose
index |
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(Ref 119)
country: UK
contact_name: M A Barker
message: Dear Sir,
Can you please send me a list of companies that sell endownments.
Many Thanks
FPH REPLY

Regards
John Hose
index |
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(Ref 118)
country: UK
contact_name: T Mahmood
message: Dear Sir,
I have an endownment policy that is "unit linked" and i would like to get quotes to attain the best offer as i would
like to sell. Do you have a list of companies in uk that may be interested? I would be grateful if you could pass
this on to me or help me in any way.
Thank you for your time.
FPH REPLY

Regards
John Hose
index |
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(Ref 117)
country: UK
contact_name: stavros constantinou
message: Dear Sir,
I have a 9 year old index linked endowment that I would like to sell .please can u recomend some companies
that would buy.
FPH REPLY

Regards
John Hose
index |
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(Ref 116)
country: UK
contact_name: e o'hare
message: Dear Sir,
would you please give me a list of companies in northern ireland who would buy an endownment policy.
FPH REPLY

Regards
John Hose
index |
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(Ref 115)
country: UK
contact_name: brian
message: Dear Sir,
I'am looking into selling my endownments one of them as been running for ten years now and the other one as
been running for three years. how do I sell these endownments? how do I get the best price for them?
Yours Bri
FPH REPLY

Regards
John Hose
index |
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(Ref 114)
country: UK
contact_name: Miss H Clarke
message: Dear Sir,
Please could you forward me a guide with details regarding investing in unit/investment trusts for children.
Thanks
FPH REPLY

Regards
John Hose
index |
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(Ref 113)
country: UK
contact_name: DEREK MCFETRIDGE
message: Dear Sir,
I have two endownment policies which have not been kept up to date,could you advise me on what to do as i
am thinking about moving house.
yours faithfully
D.McFetridge
FPH REPLY

Regards
John Hose
index |
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(Ref 112)
country: UK
contact_name: sue lodder
message: Dear Sir,
can you explain to me if I earn 68.00 weekly will I have to pay NI contributions? If I dont what happens to my
retirement pension? would I have to pay voluntary contributions to protect my pension ? I am single.
thank you sue lodder
FPH REPLY

Regards
John Hose
index |
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(Ref 110)
country: UK
contact_name: DAVID HIRE
message: Dear Sir,
I HAVE HAD A ENDOWMENT POLICY WITH ABBEY LIFE FOR APPROX 8 YEARS,& WOULD LIKE TO
CASH IT IN TO RAISE SOME MONEY AND ALSO TO CHANGE MY MORGAGE BEING SELF-EMPLOYED
MY SALARY FLUCTUATES PLEASE ADVISE.
FPH REPLY

Regards
John Hose
index |
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(Ref 109)
country: UK
contact_name: kevin egan
message: Dear Sir,
could you please send me a list of companys,how will buy endowment morgages .thank you.
FPH REPLY

Regards
John Hose
index |
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(Ref 108)
country: UK
contact_name: Paula Cutts
message: Dear Sir,
I have an endownment policy with Friends Prov that I took out when purchasing my house, 8 years ago, I may
be interested to sell this policy, can you help?
FPH REPLY

Regards
John Hose
index |
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(Ref 107)
country: UK
contact_name: RICHARD BABATUNDE
message: Dear Sir,
are looking to cash it in because we are urgently in need of money. The company has offered 6600.00 for final
settlement. But we are looking for companies that specialise in buying this type of policy to make a better offer.
Regards
Mr & Mrs Babatunde
FPH REPLY

Regards
John Hose
index |
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(Ref 106)
country: SELANGOR
contact_name: raymond gan
message: Dear Sir,
I'm looking for an insurance policy that can be look as an better investment tool, compare to the unit trust and
other property investments, espacially in this slow market condition.
please advise
FPH REPLY

Regards
John Hose
index |
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(Ref 105)
country: UK
contact_name: Alan Garby
message: Dear Sir,
In 1991 I sold my house which had an endowment policy attached to the morgage. The Endowment had been
probably running for 3-4 years, i first took it out on a previous house. When I sold my house I didn't buy another,
I went to live and work in America for 3 years. I do not know what happened to the endowment, whether it had
been cashed in, frozen or what ever. How can I track down the policy to see if it still stands.
FPH REPLY

Regards
John Hose

(Ref 104)
country: UK
contact_name: bill jackson
message: Dear Sir,
I have an endownment policy and would like to sell it could you send me a list of companies who I can sell it to
FPH REPLY

Regards
John Hose

(Ref 103)
country: UK
contact_name: Mr & Mrs Babatunde
message: Dear Sir,
are looking to cash it in because we are urgently in need of money. The company has offered 6600.00 for final
settlement. But we are looking for companies that specialise in buying this type of policy to make a better offer.
Regards
Mr & Mrs Babatunde
FPH REPLY

Regards
John Hose

(Ref 102)
country: UK
contact_name: Deborah Simpson
message: Dear Sir,
I have an Endownment policy that has been running for 6 years. I am looking at cashing it in. I have been
offered a settlement figure but have been informed that if purchased by a third party I may receive more for it.
Deborah Simpson
FPH REPLY

Regards
John Hose

(Ref 101)
country: UK
contact_name: lefley
message: Dear Sir,
I am currently looking to sell an existing endownment policy of 19 years which is not linked to a property. I would
be grateful if you could forward me a list of possible companies who deal with buying such policies as this.
Many Thanks,
tony
FPH REPLY

Regards
John Hose

(Ref 100)
country: UK
contact_name: charlie evans
message: Dear Sir,
I would be very grateful if you could send me some information on the ISA services you provide. I am 17, and
appreciate I have to wait until April to be able to open such an account, but I am unsure of the details that are
entailed with this package.
Thank you for your time,
Charlie Evans (miss)
FPH REPLY

Regards
John Hose

(Ref 099)
country: UK
contact_name: Mrs C Dinham
message: Dear Sir,
My first husband was killed on a training exercise in Germany in 1971. I was in receipt of a pension until 1973
when I remarried my present husband. Am I entitled to any pension now.
Yours faithfully
Christine Dinham
FPH REPLY

Regards
John Hose

(Ref 098)
country: UK
contact_name: mrs b wilkins
message: Dear Sir,
i have two endowment policys i would like sell please quote value. start date 13 dec 1988 maturity date 13 dec
2016 4 pound per month and start date 1dec 1987 maturity date 2016 11.08 pound per month both policys are
with norwich union, if you do not do this type of work could you recomend someone
thank you.
b wilkins mrs
FPH REPLY

Regards
John Hose

(Ref 097)
country: UK
contact_name: p cartwright
message: Dear Sir,
i have an endownment policy taken out in 1988 it matures in 2013 current value 10343 at maturity it is
expected to make approx 40000 i would like to sell it now can you advise
p cartwright
FPH REPLY

Regards
John Hose

(Ref 096)
country: UK
contact_name: M Brocklehurst
message: Dear Sir,
i am interested in joining cahoots banking service. also am interested in investment bonds to give a monthly
return investment capitasl about 40k to be spread over 4 10k bonds
M Brocklehurst
FPH REPLY

Regards
John Hose

(Ref 095)
country: USA
contact_name: katrina wolford
message: Dear Sir,
I am looking to find some assistance with my finances, debt, defaulted student loans, and bad credit rating. I
desperately need some assistance but don't really know who to contact and what type of services are available
to me. Any information will be greatly appreciated.
Sincerely, K.Wolford.
FPH REPLY

Regards
John Hose
index |
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(Ref 094)
country: UK
contact_name: Stephen reynolds
message: Dear Sir,
I have just read your Special Report: Occupational pensions dated 11/98 with interest and have a couple of
questions: Q14 asked What is the maximum pension I can take - Your report stated 2/3rds of the previous years
income. What would it be if you had not worked that year? or the one before? or even had to accept a lower
paid job for the last 10 years of employment such that your final salary did not reach the level it was 10 years
ago? What are your options if your pension turns out to be over funded? Can you use the surplus to provide a
pension for your wife? Can the surplus be refunded after the deduction of tax? Can I pass it on to my children
through life insurance? Looking forward to your response.
Regards Steve
FPH REPLY

Click to see the report
Regards
John Hose
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(Ref 093)
country: UK
contact_name: ROISIN McKINLEY
message: Dear Sir,
I WOULD LIKE TO SELL OUR ENDOWMENT POLICYS. WELL MAY BE 2 OUT OF 3 .POLICYS AS IT DOES
NOT SUIT IN CHANGING OUR MORTGAGE.
THANKYOU .MRS R McKINLEY
FPH REPLY

Regards
John Hose
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(Ref 092)
country: UK
contact_name: Mrs Julie Illingworth
message: Dear Sir,
I'm looking to sell my endownment of over 5 years which I have with Legal & General. I believe you can get a
better deal if you sell to a third party. Have you got any details of company's who may be interested? If so
please forward on details.
FPH REPLY

Regards
John Hose
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(Ref 091)
country: UK
contact_name: Carl Woodroffe
message: Dear Sir,
I would like to know as much as possible about the risk associated with defined benefit final salary occupational
pension schemes. Could you please let me know whether you can assist.
Many thanks Carl Woodroffe
FPH REPLY

Regards
John Hose
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(Ref 090)
country: UK
contact_name: Ray Jenkins
message: Dear Sir,
my Son will be coming into approx 5,000 in a few weeks. We are looking for a long term savings account with
high interest. It is possible that he will not access this money for several years although would like to reserve the
option to take it out and will accept penalties or give notice.
Thank You......
FPH REPLY

Regards
John Hose
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(Ref 089)
country: UK
contact_name: A.J. Amos
message: Dear Sir,
I'm interested to hear of plans for Cahoots internet banking, and would like to hear further of the benefits and
opportunities.
Yours faithfully, A.J. Amos
FPH REPLY

Regards
John Hose
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(Ref 088)
country: UK
contact_name: Alec
message: Dear Sir,
I am a student in the north. And at the moment I am studying why there is a North South dive in the housing
market. I would be very greatfull if you would send me these reasons as soon as possible.
yours faithfully Alec
FPH REPLY

Regards
John Hose
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(Ref 087)
country: UK
contact_name: Chris Wheatley
message: Dear Sir,
I was sold an endowment policy to cover a mortgage of 92,000 in December 1993. GRE (the insurance
company) gave an illustration of the future benefits based on a rate of return of 5%, 7% and 10%. If the rate of
return was 7%, then the target fund of 92,000 would be achieved. I have recently received correspondence
from GRE that states the rate of return after charges is 7.3% however, they also inform me that this will not
achieve the target fund of 92,000.
I understand that when GRE produced the illustration they did so using "Industry Standard Charges" issued by
LAUTRO. They were forced to use these charges, rather than their own which were much higher. In the
circumstances, the policy could not have achieved the results. Perhaps you could advise me if Insurance
companies were forced to use LAUTRO charges.
FPH REPLY

Regards
John Hose
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(Ref 086)
country: UK
contact_name: Stephen Silver
message: Dear Sir,
I have been trying for some time to find out the average time it takes to complete a remortgage. I was wondering
if you had any data on this. I look forward to hearing from you.
Stephen Silver
FPH REPLY

Regards
John Hose
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(Ref 085)
country: UK
contact_name: Mike Davies
message: Dear Sir,
I am currently looking to sell an existing endownment policy, which is not linked to a property. I would be grateful
if you could forward me a list of possible companies who deal with buying such policies as this.
Many Thanks
Mike Davies
FPH REPLY

Regards
John Hose
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(Ref 084)
country: UK
contact_name: CHRISTINE LEACH
message: Dear Sir,
My husband and myself have recently divorced. I was wondering if i can take an endowment policy in my sole
name only. At present the house is valued at 160.000, the house is also still in joint names, but, we are going
to court to get it signed into my name only.
Your help in this matter a.s.a.p would be of deep apreciation with regards
Ms.C.Leach
FPH REPLY

Regards
John Hose
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(Ref 083)
country: USA
contact_name: David Pham
message: Dear Sir,
I was wondering if you could help. I will be making $43/hour and the way I figure it after state and federal taxes I
will have about $5000 a month. What should I do with this money. I have $150,000 worth of school loans
building interest at about 8 percent. How much should I spend a month to pay off loans, how much can I afford
to use for entertainment, should I try to save up and buy a house, should I throw my money into
savings/funds/stocks???
Please help me.
DaveThanks
FPH REPLY

Regards
John Hose
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(Ref 082)
country: UK
contact_name: Jonathan Anderson
message: Dear Sir,
I am led to believe that the following is true : If you are contributing to an in house AVC linked to your
occupational scheme, that the trustees are obliged to offer you a deferred pension no matter when you leave
the company. ( ie they are unable to make a refund of personal contributions and buy you back into SERPS.)
Guidance on this would be appreciated.
Thanks
Jonathan Anderson
FPH REPLY

Regards
John Hose
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(Ref 081)
country: UK
contact_name: K.Rafter
message: Dear Sir,
we have 4 endowments linked to our mortgage. One assurance company recently requested that we increase
our payment from 79.00 pcm to 118.00 pcm. As this is our most recent and largest endowment we felt
obliged to do this. Some of our smaller and older endowments are showing much smaller shortfalls. The reviews
of these smaller endowments are not fuly complete. We have three with the same company and only two have
been reviewed. Do you have any information that could be helpful in deciding what to do with the endowments
to overcome this problem that seems to be hiting everyone with endowment policies.
Yours Truly K.Rafter
FPH REPLY

Regards
John Hose
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(Ref 080)
country: UK
contact_name: Tracey J Lane
message: Dear Sir,
Please help
May 1998 we took out a Scottish Equitable International Bond Security + 2, the bond (26,000) has not made
any money yet. The unit price was 1.44380 in May 1998; the unit price as of April 2000 was 1.43399. We would
have made more money in the Building Society.
Please can you advise should we sell and lose money or should we hold on to the Bond until the 5 years is up?
Still going down we have lost 3000.00
Kind regard Tracey
FPH REPLY

Regards
John Hose
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(Ref 079)
country: UK
contact_name: Lee Pritchard
message: Dear Sir,
Please can you send me some information on buying shares thanks
FPH REPLY

Regards
John Hose
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(Ref 078)
country: UK
contact_name: Ken Hailes
message: Dear Sir,
I am looking for information on taking up a pension, my date of birth is 30/03/1951 and wish to retire in the year
2015. I am looking to contribute approx 250.00 per month, any information will help.
Regards K Hailes
FPH REPLY

Regards
John Hose
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(Ref 077)
country: UK
contact_name: Denise Mina
message: Dear Sir,
I wonder whether you could help me. I am researching a novel and have a tax query. If a character was gifted
15,000 on the day before another character, who was no relation, died, how much would their liability be? This
is assumign that their estate was worth about 250, 000. Also who would get in touch with the character to claim
the tax? The trustee of the estate or the revenue? I do hope you can help me, I promise to give you an
acknowledgement in the book so do include your name.
Thanking you in advance, Denise Mina
FPH REPLY

Regards
John Hose
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(Ref 076)
country: UK
contact_name: John Fardoe
message: Dear Sir,
I need to find out where to go to "sell" my existing endownment policys. I intend to take out a repayment
mortgage. I have contacted my current insurers but the amount to surrender seems quite minimal.
Regards R J Fardoe
FPH REPLY

Regards
John Hose
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(Ref 075)
country: UK
contact_name: Jonathan Lynch
message: Dear Sir,
please forward details on PHI thankyou J Lynch
FPH REPLY

The Site does have a number of references to PHI which can be found by using the site search facility.
Regards
John Hose
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(Ref 074)
country: UK
contact_name: atsuko ishizuka
message: Dear Sir,
What do you think of the future of the National Express? I heard the rumour that the company will be taken over
by another company in the next few years due to their bad business dicisions.
atsuko ishizuka
FPH REPLY
Thanks for your letter. We cannot offer advice, but will post your letter on the letters page to see if any other site
visitor has something to offer. Please be sure to follow professional advice before taking any action.
Regards
John Hose
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(Ref 073)
country: UK
contact_name: atsuko ishizuka
message: Dear Sir,
The UK stock market price has risen drastically last 10 years. Does it mean it is likely to fall drastically in the
near future as it happened to the Japanese market in the 90's?
atsuko ishizuka
FPH REPLY
Regards
John Hose
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(Ref 072)
country: USA
contact_name: Robert Caldwell
message: Dear Sir,
Please send more inforamtion about getting coverage (dred disease) insurance.
Robert Caldwell
FPH REPLY
Regards
John Hose
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(Ref 071)
country: UK
contact_name: Mrs G Jones
message: Dear Sir,
We are a married couple who earn 19,107 annually and 10,000 annually. We have seen a house we would
like for 100,000. We have a 5,000 deposit for this house. Are we liable for a mortgage for this amount?
Regards
Mrs Jones
FPH REPLY
Regards
John Hose
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(Ref 070)
country: UK
contact_name: Philip Forrest
message: Dear Sir,
Please could you send me details of the minimiser morgage. I would also like to know what benifits I would
receive as a Unison member. Regards
FPH REPLY
Regards
John Hose
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(Ref 069)
country: UK
contact_name: MR.JOHN DIENN
message: Dear Sir,
please could you advise me as i have been informed by my endowment company that after 10years of paying
for something which i was led to believe to at least cover my loan, i am now told i will have a short fall of
12000.00 i only had a morgage of 50000.00 i have contacted my endowment company who just told me to
increase my monthly payments this was not what i was led to believe would happen in fact i was told there
would be an excess over the amount i needed please reply as i need help and advise
thank you john dienn
FPH REPLY
Regards
John Hose
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(Ref 068)
country: UK
contact_name: Miss D Chambers
message: Dear Sir,
Please send any information with regard to minimiser or flexible rate mortgages.
FPH REPLY
Regards
John Hose
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(Ref 067)
country: Japan
contact_name: david Glass
message: Dear Sir,
I may sell shares in my Japanese company to a UK company. The par value of the shares is 500 yen, and
current nominal value is 900 yen, thus it is valued at 400 yen above par (500 par + 400 - 900 nominal). If The
UK company buys these shares at par 500 yen, it is getting a 900 value share for 500. IS the additional 400 yen
considered to be a gift in the UK? Does the UK company have to pay any tax on this transaction, or gift tax on
the 400 yen gain? If yes, how much?
Thank you an best regards, David Glass
FPH REPLY
Regards
John Hose
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(Ref 066)
country: UK
contact_name: J HOGAN
message: Dear Sir,
my two brothers and myself own a property in which our parents live no mortgage exists.
It is my intention to partex this property with a house valued at 50,000 dearer and have our parents live there. I
have been informed by the Inland Revenue over the telephone that Px does not attract stamp duty however a
recent article in the Sunday Times implies that the purchaser of the lower priced house will be the only one to
benefit by not paying stamp duty. Any advice?
FPH REPLY
Regards
John Hose
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(Ref 065)
country: UK
contact_name: Sibylle Duell
message: Dear Sir,
I am 22 and don't have a pension yet as so far I have been unable to afford to have any extra deductions from
my salary. My new employer doesn't provide a comppnay scheme so I want to start a personal pension plan,
but how do I choose the right provider for me? Everywhere I am being told that I should go to a financial advisor I can't afford that!!! Where can I get literature or help of any sort with this problem? I want to start asap.. Many
Thx in advance for your time,
Best Regards,
Sibylle Duell
FPH REPLY
Regards
John Hose
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(Ref 064)
country: UK
contact_name: JIM
message: Dear Sir,
MY WIFE INHERITED PART OF AN ESTATE 10 YEARS AGO, WHICH WAS HELD IN TRUST UNTIL NOW.
WILL INHERITANCE TAX BE CALCULATED ON THE ESTATE VALUE THEN OR NOW.THANK YOU??
FPH REPLY
Regards
John Hose
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(Ref 063)
country: UK
contact_name: Lance Malkin
message: Dear Sir,
I understand VAT for the UK has been altered on products concerning energy savings, eg double glazing. Is this
correct and what is the new rate if so.
Many thanks.
FPH REPLY
Regards
John Hose
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(Ref 062)
country: UK
contact_name: Martin Magookin
message: Dear Sir,
I would be grateful if you could give me some information on any products that you have for investing in baby
bonds.We have an eleven month old boy and we would like to start a savings plan possibly over twenty years.
thanking you
martin magookin
FPH REPLY
Regards
John Hose
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(Ref 061)
country: UK
contact_name: Dawn Leader
message: Dear Sir,
Please can you advise what the cut off age is when you no longer become entitled to the State pension when
you retire. I understand that it is to stop soon.
FPH REPLY
Regards
John Hose
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(Ref 060)
country: UK
contact_name: andy tompkins
message: Dear Sir,
Does stamp duty still apply if two people exchange properties of say 250k each, or if one was worth less and
money was used to top up the value?
FPH REPLY
Regards
John Hose
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(Ref 059)
country: UK
contact_name: Jim Balfour
message: Dear Sir,
I trade stock on the UK and US markets. Stamp duty is charged on UK purchases, but not the US purchases.
Why is this?
Thanks, Jim Balfour
FPH REPLY
Regards
John Hose
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(Ref 058)
country: UK
contact_name: Paul Phillips
message: Dear Sir,
Could you please send me the names of companies providing alternatives to fixed annuities?
Regards
Paul Phillips
FPH REPLY
Regards
John Hose
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(Ref 057)
country: UK
contact_name: Lesley Henderson
message: Dear Sir,
I am interested in starting an endowment policy and was wondering if you could e-mail some details best suited
for me. If you could do this i would be very grateful.
Lesley Henderson
FPH REPLY
Regards
John Hose
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(Ref 055)
country: UK
contact_name: laurie, miss
message: Dear Sir,
I would be grateful for information about any tax liability I may have regarding the estate of my mother. I am
Canadian, living in the uk for many years. My mother died in Canada last year, leaving me $32,000 Cdn on
which, of course, Canadian tax has already been paid. I am self-employed and at present earning very little.
Many thanks.
FPH REPLY
Regards
John Hose
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(Ref 054)
country: UK
contact_name: Peter Gatty
message: Dear Sir,
I have a Tessa that matures in October 2000. I also have a cash ISA with Smile that is fully subscribed. Smile
do not offer Tessa-ISAs. What can I do In October upon maturity?
FPH REPLY
Regards
John Hose
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(Ref 053)
country: UK
contact_name: Herbert McMullan
message: Dear Sir,
I took out a Hill Samuel Life Personal Pension No. I Scheme to provide a pension for my wife in 1989 She is due
to retire in 2002 We are short of money now Can I , or would it be advisable to get my money out of the
Scheme, Yours sincerely
H McMullan.
FPH REPLY
Regards
John Hose
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(Ref 052)
country: UK
contact_name: Louise Macpherson
message: Dear Sir,
If I were to purchase a property priced at 60,000 would I have to pay stamp duty? The rule says up to 60k
there is no stamp duty to pay and that from 60k there is 1% to pay - which is not entirely clear, if I am thinking
of offering 60k on a property. thank you
Louise Macpherson
FPH REPLY
Regards
John Hose
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(Ref 051)
country: UK
contact_name: Mrs B Hannis
message: Dear Sir,
I am employed by the Local Playgroup as leader for 2 morning sessions and by the local school as Mid day
supervisor for 2 lunchtime sessions.
My husband also pays me to keep his accounts.
Although my wages do not yet reach the NI Level,I feel sure that they will soon Could you please tell me if I can
pay my NI Contributions on a voluntary basis and how I do this. and should I be filling in a Tax return although I
do not earn enough to pay tax??
I have tried ringing your office,but never seem to get through I do hope you can answer my queries quickly,as I
want to keep everything in order.
Yours Barbara Hannis
FPH REPLY
Regards
John Hose
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(Ref 050)
country: UK
contact_name: Anthony Williams
message: Dear Sir,
Are the insurance lump sums payable on death counted as part of the estate?
FPH REPLY
Regards
John Hose
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(Ref 049)
country: UK
contact_name: alan cotterell
message: Dear Sir,
My Daughter is currently in full-time education studying for her Music degree. She has to pay a yearly course
fee of 1025, ( NB. As her parents, we would not be allowed any reductions in these charges if we paid for them
on her behalf).
Can my daughter re-claim any tax relief at all for this expense. She pays this fee herself from her own funds, so
is there any tax exemption that she can claim, in her own right, for paying for her own training???
If not WHY NOT???? Some of her friends have all their fees subsidised by the Tax payer so why should she be
penalised in this way???
Thank You
AGC.
FPH REPLY
Regards
John Hose
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(Ref 048)
country: UK
contact_name: Max Smith
message: Dear Sir,
I am interested in starting a SIPP but can only transfer about 30k from my current pension fund (I am 34). Is
this considered to low?
I have my own limited company but have just a PP. What are the costs and how quickly can a SIPP be set up (if
appropriate). Can a portion of the sum be used to pay off part of my current mortgage?
Yours faithfully
Max Smith
FPH REPLY
Regards
John Hose
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(Ref 047)
country: UK
contact_name: Steven Hancox
message: Dear Sir,
I am trying to finfd as much information regarding SIPPs as possible before I decide to transfer my existing
pension.
I am currently employed as a lecturer and have a teacher's pension provision. I also hold a lump sum with
another private pension provider of approx 35,000. I would like to know if it would be economical for me to take
out a SIPP. I am already very active in the stock market with personal investments.
If I were to transfer my pension do you have lists of leading firms that provide easy dealing services within the
SIPP environment.
Thank you
Steve Hancox
FPH REPLY
Regards
John Hose
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(Ref 046)
country: UK
contact_name: M.D.Reddecliffe
message: Dear Sir,
I have been searching without much sucess for regularily updated site on the Internet to compare the results of
Pension companies. this would lead me to make an informed choice. I should be grateful if you could supply me
with the above via my E-Mail address
FPH REPLY
Regards
John Hose
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(Ref 045)
country: Unlisted_Country
contact_name: Naveed Shahid
message: Dear Sir,
I'm interested in the investment charges, commision rates, mortality tables that are being used for the unit linked
policies currently in the UK market.
Thanking You
Naveed Shahid
FPH REPLY
Regards
John Hose
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(Ref 044)
country: UK
contact_name: Daran Atkinson
message: Dear Sir,
After the completion of my new property, how quickly will the stamp duty have to be paid
FPH REPLY
Regards
John Hose
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(Ref 043)
country: UK
contact_name: Steve Dickman
message: Dear Sir,
I have two endowment policies running in the UK, one taken out in 1984 and one in 1988. I seem to recall that
Lawson changed some tax rules that made Endowment-linked mortgages less attractive (tax related - I think).
So from 1987 insurance comapnies started low-cost stuff and raised their projections so that the lower
premiums, which looked attractive, have now ended up not covering the mortgage that they are linked to.
Am I right in my assumptions?
Are there any 'class action' lawsuits under way for 'over-selling'?
I would appreciate any information
Thanks
FPH REPLY
Regards
John Hose
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(Ref 042)
country: UK
contact_name: Tony Collins
message: Dear Sir,
I am a first time buyer and am looking at a property valued at 289,000. I will be putting down a 10% deposit.
Do I also have to pay stamp duty of 2.5% or is this only when I sell the property?
What other costs would you suggest budgeting for.
Kind regards,
Tony Collins
FPH REPLY
Regards
John Hose
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(Ref 041)
country: UK
contact_name: MRS D J WILLIAMSON
message: Dear Sir,
I split from my husband a little over 2 years ago and have began to worry about my financial future. We took out
an interest only mortgage approx 9 1/2 years ago with Alliance & Leicester. This was a pension mortgage and
the pension is with Allied Dunbar. Although we have a pension each his pension was to pay the mortgage off at
the end of the 25 year term.
Firstly, I want to change the mortgage now to a re-payment mortgage
I also want to be able to save to pay the mortgage off because I want to have the mortgage in my name
eventually. What would be a good way to save?
I am only working part time at the moment and as so will save a little at a time
If need be I will get my ex to contribute too
Would I be able to get some of the money saved in his pension to use towards paying off the mortgage?
Our mortgage is 117,000 our house value is 155,000
Please contact me either by phone or letter (although I am going to somerset from 21-25 Februrary.
Many thanks
FPH REPLY
Regards
John Hose
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(Ref 040)
country: South_Africa
contact_name: stephen Hunt
message: Dear Sir,
I purchased two blocks of shares in Scoot.com. Block 1, 5000 at 40p in Nov 99. Block 2, 5000 at 137p in Feb
2000. The price of Scoot is now 3.00. If selling a number of these shares to utilise 7.1k CGT limit, which price
do I use as the purchase price .i.e. If I use 40p as the purchase price I need sell approx 2730 shares to achieve
7.1k profit, but if I use the block 2 1.37 price I must sell 4355 shares ???
Stephen Hunt
FPH REPLY
Regards
John Hose
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(Ref 039)
country: UK
contact_name: jane elmidoro
message: Dear Sir,
we would welcome advise on our Eagle Star endowment policy which we took out in the early 1990s. We have
recently been advised by our broker that it is not performing well and Eagle Star want us to pay 100 extra per
month. We feel that this is most unsatisfactory and are seeking advised and direction of where to turn to.
Do we tackle our broker for wrong information or Eagle Star. We understand that there has been critism over
Endowment Policies that were wrongly advised to borrowers. Please can you help.
Thank you
Jane Elmidoro
FPH REPLY
Regards
John Hose
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(Ref 038)
country: UK
contact_name: Karen
message: Dear Sir,
I would like pros and cons for a nonprofit to initiate an endowment fund. Would you have this information? I
would appreciate it if you could help us. We help the community with education and services related to kidney
disease.
Thank you in advance!
FPH REPLY
Regards
John Hose
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(Ref 037)
country: UK
contact_name: AMANDA ATKINSON
message: Dear Sir,
I am a final year marketing student at the University of Northumbria at Newcastle, and for my discertation, I
have chosen to study mutual building societies and their marketing strategies which enable them to sustain a
competitive edge against the stronger players.
I would be most grateful if you could donate any information which you think may be of relevance to me.
Thank you very much.
Amanda Atkinson.
FPH REPLY
Regards
John Hose
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(Ref 036)
country: France
contact_name: SEU Dsir
message: Dear Sir W. Burrows,
can you send me your article on "With-profit annuity" wrote in Money Marketing or in Financial services
publications.
Thank you.
FPH REPLY
Regards
John Hose
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(Ref 035)
country: UK
contact_name: Chris King
message: Dear Sir,
The definitions of "Final Remuneration" I have seen refer to earnings in the years before "normal retirement
date" or death. What definition is used otherwise, for example for calculating a transfer value where someone
leaves a defined benefit scheme 20 years before the "normal retirement date"?
FPH REPLY
Regards
John Hose
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(Ref 034)
country: UK
contact_name: steve
message: Dear Sir,
do you know of any banks that offer USD current account (inc cheque book) to UK residents? thanks for your
help
steve
FPH REPLY
Regards
John Hose
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(Ref 033)
country: UK
contact_name: Peter West
message: Dear Sir,
What can we do about Telewest, the cable company messing up our pension scheme?
I applied to join four years ago and found I couldn't. The others who work here have had their contributions so
completely mishandled that they don't even know what's happening anymore.
This needs investigating I think.
FPH REPLY
Regards
John Hose
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(Ref 032)
country: UK
contact_name: Pete Summers
message: Dear Sir,
I'm self-employed (shed D) and interested in opening a SIPP, with the aim of transferring an existing personal
pension (over 100K) into the SIPP and investing in a mix of funds and equities on an execution only basis. I
would like to know what all your costs are and if you deal online.
Set up fee?
Annual admin fee?
Transaction fees?
Other trading fees?
Dealing online?
Qualifying stocks and funds?
Income drawdown fees?
Exit/transfer fees?
Any other hidden costs?
Commission payable to IFA?
What about these so called 'hybrid' SIPPS which are a combination of a traditional insured personal pension?
Are they Cost efficient?
Thankyou
Pete Summers
FPH REPLY
Regards
John Hose
we will forward your mail to Pete Summers

(Ref 031)
country: Leeds. UK
contact_name: Paul Heraty
message: Dear Sir,
I am enquiring about Self Invested Personal Pension schemes and whether they would be suitable for me. I am
a self employed computer contractor operating within a limited company. With the onset of the new IR35 tax
legislation I am about to be stung for a great deal of my hard earned cash, and am therefore looking at the most
tax efficient ways to syphon moneys out of my company. I am told that the most efficient way is by contributing
to a pension. I am 33 years old. Have a gross salary of 70k per annum. And would be able to afford to
contribute 10k per annum towards a pension.
Knowing what a rip off pensions are, I am enquiring about SIPP's whether I would be eligable to take one out,
and more importantly whether they one would be suitable for me.
Can you help point me in the right direction please.
FPH REPLY
Regards
John Hose
we will forward your mail to Paul Heraty

(Ref 030)
country: UK
contact_name: Mr L.Whewell
message: Dear Sir,
I bought shares in the last tax year (98-99) and sold them in this (99-00) at a profit which exceeds the cgt
allowance. If I re-invest part of this capital sum in more shares or unit trusts, can I effectively carry over part of
the tax liability into the next tax year (00-01).
Regards,
L.Whewell
FPH REPLY
Regards
John Hose
we will forward your mail to Mr L.Whewell

(Ref 029)
country: London, UK
contact_name: Neil Murphy
message: Dear Sir,
if you earn all your income from investments how does this affect your taxation. I understand that you have a
CGT allowance of 7,100 after which you pay CGT at 20% if you are a basic rate taxpayer, or 40% if you are a
higher rate taxpayer. If you have no earning from work,does this mean that you can use your Income Tax
allowances to reduce CGT liability.
Yours Hopefully,
Neil M
FPH REPLY
Regards
John Hose
we will forward your mail to Neil Murphy

(Ref 028)
country: Beds. UK
contact_name: Robert Harrison
message: Dear Sir,
Isn't it possible to run your own share ISA without having to go through the risky business of transfering your
shares to a third party (ISA provider) and paying that third party a management fee for holding a share block
you already owned. Surely the Government has allowed for this option in the ISA scheme.
The block of shares dedicated to the ISA could be notified to the IR in the same way as investment income on
the annual tax return. As a small shareholder I am appalled at the charges I would incurr if I wanted to set up a
share ISA using blocks of shares I already own. I am also unhappy that the shares have to be sold and bought
back in the name of the ISA provider. What is the protection in law if the ISA providers company gets into
financial trouble?
I would be grateful for your considered opinion on these matters.
Sincerely R.Harrison
FPH REPLY
Regards
John Hose
we will forward your mail to Robert Harrison

(Ref 027)
country: UK
contact_name: Miss L West
message: Dear Sir,
With regard to stamp duty, could you please explain how this works i.e., for properties over 60,000 would you
pay 1% of the whole amount or 1% of the remaining value of the property after 60,000?
Thanks in advance
Yours sincerely Miss. L. West
FPH REPLY
Thanks for your letter Miss L West . We cannot offer advice, but will post your letter on the letters page to see if
any other site visitor has something to offer. Please be sure to follow professional advice before taking any
action.
Regards
John Hose
we will forward your mail to Miss L West

(Ref 026)
country: London UK
contact_name: Danielle Hommel
message: Dear Sir,
I want to invest a lump sum of 1,000 pounds for my 5 year old daughter and then 50 pounds per month
thereafter. Can you provide me with any advice as to what I should do?
FPH REPLY
Thanks for your letter Danielle. We cannot offer advice, but will post your letter on the letters page to see if any
other site visitor has something to offer. Please be sure to follow professional advice before taking any action.
Regards
John Hose
we will forward your mail to Danielle

(Ref 025)
country: BOTSWANA
contact_name: Esther Mokgatlhe
message: Dear Sir,
Could you please advise on how, financcial services are taxed , with regard to value added tax
FPH REPLY
Thanks for your letter Esther. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Esther Mokgatlhe

(Ref 024)
country: Australia
contact_name: Joseph Marchese
message: Dear Sir,
I worked in europe for six months namely in Switzland and Italy, my emplyer was Qualitair, based in UK, I was
paid offshore, but was paying National Insurance in UK even though I was never in UK. My contributions
amount to almost 1000 Pounds.
My querry is:
Can I recover the contributions that I have paid if so who do I write to.
FPH REPLY
Thanks for your letter Joseph. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Joseph Marchese

(Ref 023)
country: UK
contact_name: Anthony McGhee
message: Dear Sir,
I may not be able to explain fully what I need to know so bear with me.
Could you tell me or explain to me the difference between the foloowing type of Life Assurance.( It may be
straightforward to you. However, I am rather confused).
Examples:
Self Assurance Mortgage
i. We will pay a level cash sum of 35,000 upon death or cic of ....... (premium being 25 pcm)
ii. We will pay a decreasing cash sum of 35,000....... (premium being 25 pcm)
iii. We will pay an increasing cash sum of 35,000...... (premium being 25....)
With Profits Endownment Plan
Extra Option Mortgage Plan
(With same scenarios as above if possible)
I would be grateful if you could advise me of the difference in these policies.
Yours
A. McGhee
FPH REPLY
Thanks for your letter Anthony. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Anthony McGhee

(Ref 022)
country: UK
contact_name: Tim Leleux
message: Dear Sir,
I have heard that with the introduction of the Stakeholder Pension that the option to make carry forward and
carry back contributions to an existing personnal pension plan will be discontinued. What is your interpretation
of this? Regards,
Tim Leleux
FPH REPLY
Thanks for your letter Tim. We cannot offer advice, but will post your letter on the letters page to see if any other
site visitor has something to offer. Please be sure to follow professional advice before taking any action.
Regards
John Hose
we will forward your mail to Tim Leleux

(Ref 021)
country: USA
contact_name: Robin Freeman
message: Dear Sir,
HI!! My name is Robin Freeman as you probably already noticed and I was wanting to know how many children
die every year from a terminal illness. This information is very important to me cause I'm trying to start an
orginazation with my youth group on helping terminally ill patients that are children and cant afford the things
that the want or can't do something that they want to do before they die.
Thank you
Robin Freeman
we will forward your mail to Robin

(Ref 020)
country: UK
contact_name: Mr peter Cooper
message: Dear Sir,
I have been working for a company now for Three Years. But the company was taken over 19 months into my
service in which time I had been paying into a Pension Scheme. which was Wind-Up and now a new free
Pension Scheme was started .
What I would like to know was could I have had my contribution refunded
ThankYou For Any Help
Mr P
FPH REPLY
Thanks for your letter Mr Cooper. We cannot offer advice, but will post your letter on the letters page to see if
action.
Regards
John Hose
we will forward your mail to Mr Cooper

(Ref 019)
country:
contact_name: Nigel Reeves
message: Dear Sir,
Could you provide us with information on purchasing a Nursing / Care Home using a SIPP.
Thank you.
FPH REPLY
Thanks for your letter Nigel. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Nigel

(Ref 018)
country: UK
contact_name: Kirsten Latimer
message: Dear Sir,
My partner and I are splitting up and selling our only home. It was bought 2 years go for 82,500 and we have
just agreed to sell the property for 141,000. We did not expect to make this type of increase on a house in such
a short time and are now worried about Capital Gains Tax or any other tax that might be levied on us. Please
can you advise what the tax laws are in this situation.
With regards,
Kirsten Latimer
FPH REPLY
Thanks for your letter Kirsten. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Kirsten

(Ref 017)
country: UK
contact_name: UMESH NAYEE
message: Dear Sir,
Please send me details of best Cash Isa (mini one for 3000 investment)
Thanks
FPH REPLY
Thanks for your letter Umesh. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Umesh

(Ref 016)
country:
contact_name: angela
message: Dear Sir,
How do I go about writing letters for my loan about late payments on previous accounts.?????
HELP!!
FPH REPLY
Thanks for your letter Angela. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Angela

(Ref 015)
country: Italy
contact_name: Jeremy Turner
message: Dear Sir,
I am interested in trading my endowment policies rather than surrendering them. Can you advise me on who I
should go to.
Regards, Jeremy
FPH REPLY
Thanks for your letter Jeremy. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Jeremy

(Ref 014)
country: USA
contact_name: Louis F Hansen
message: Dear Sir,
My wife and I are thinking of investing some small cash and would like some advice in the best way to make it
work to our advantage.
sincerely Louis & Michaelle Hansen
FPH REPLY
Thanks for your letter Louis. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Louis

(Ref 013)
country: UK
contact_name: Deenagh Foster
message: Dear Sir,
Could you advise me as to the following. My parents own an unworked farm (45 acres). They have a tenancy in
common. Can they each leave me their share of the whole asset (value approximately 500,000) on each of
their deaths, without me having to pay inheritance tax on either portion?
If not, do you have any suggestions?
Yours faithfully
Deenagh Foster
FPH REPLY
Thanks for your letter Deenagh. We cannot offer advice, but will post your letter on the letters page to see if any
Regards
John Hose
we will forward your mail to Mark

(Ref 012)
country: UK
contact_name: Mark Churchill
message: Dear Sir,
In the new year I am starting my own business manufacturing fence panels . I have found a supplier for my
stock whom I have to pay v.a.t
At the end of the financial year what percentage of v.a.t will I be able to claim back.
Thankyou,
M.Churchill
FPH REPLY
Thanks for your letter Mr Churchill. We cannot offer advice, but will post your letter on the letters page to see if
action.
Regards
John Hose
we will forward your mail to Mark

(Ref 011)
country: UK
contact_name: A.Hargreaves
message: Dear Sir,
I am interested in capped mortgages. I had a Halifax 5.99% for 7 years+3 years at market rate lined up. 295 fee,
no valuation or legal costs (paid by Halifax) but didn't sign up in time.
Mortgage required 120,000 repayment type, over 15 years. Value of property 280,000+
Please advise me of next best offers.
Many thanks,
A. Hargreaves
FSEC REPLY
Alison, Thank you for your e-mail. fph cannot answer individual questions for both regulatory and resourcing
reasons. With your agreement, I would be more than happy to post your e-mail on site and invite responses
from other readers.
Clive
Clive
Yes please please post it and we'll see! Thanks, Alison
we will forward your mail to Malcolm

(Ref 010)
country: UK, Cornwall
contact_name: M F Nott
message: Dear Sir,
Pension question.
I am a civil servant and a member of the Principal Civil Service Pension Scheme, which is a final salary
occupational scheme. The final renumeration is based on the best twelve months salary in the last three years.
For a number of reasons this is not always beneficial. For example many of our staff are shift workers whose
shift pay is included in the pension calculation providing they are still on shifts in the last three years. What I'm
attempting to find out is what flexibility do the Inland Revenue allow within the final renumeration regulations?
For example could one use the best year in three in the last ten and index link it to the retirement date. In other
words is there a way of utilising higher pay in previous years within the framework of the Inland Revenue
regulations. I would be gratefull for any enlightenment on the subject.
Malcolm Nott
FSEC REPLY
Malcolm, Thank you for your e-mail. fph cannot answer individual questions for both regulatory and resourcing
reasons. With your agreement, I would be more than happy to post your e-mail on site and invite responses
from other readers.
Clive
Clive
By all means go ahead and post my e-mail on site. Thanks. - Malcolm
we will forward your mail to Malcolm

(Ref 009)
country: UK, Hampshire
contact_name: Chris Massey
message: Dear Sir,
I found your site on the web. Please can you help ? I am the sole director of a limited company - ie. I am a
computer contractor running as a limited company. I have managed to get myself into financial trouble, and amd
wondering what the effect of declaring the company bankrupt will be. Currently I owe 2,500 vat, and some
PAYE, and some coporation tax. I have currently less than 1000 in the company account, and am due to
receive 5000 in income for some recent work. However, I need the money to pay of personal debts. How do I
stand ?
Regards
Chris Massey
FSEC REPLY
Chris,
Thank you for your e-mail. fph cannot answer individual questions for both regulatory and resourcing reasons.
With you agreement, I would be more than happy to post your e-mail on site and invite responses from other
readers.
I will not post the e-mail until I receive agreement from you.
Clive
REPLY FROM CHRIS
Please feel free to post it. I would be grateful for any advice from anybody who can help.
we will forward your mail to Chris

(Ref 008)
country: UK, Gosforth, Newcastle
contact_name: Dawn Sowden
message: Dear Sir,
I am currently applying to be a trainee Financial Consultant with the Prudential. The FC application form
supplement requires me to answer the following question :
"What are the most significant changes to have taken place recently in the Financial Services industry ?
How do you think these changes impact on the role of a Financial Consultant?".I am having difficulty in
answering this question as I don't have an in-depth knowledge of the industry with only applying to be a trainee.
Any advice would be greatly appreciated.
Thank you very much for your time.
Regards
Dawn Sowden
FSEC REPLY
Dawn,
Thank you for your e-mail. fph cannot answer individual questions for both regulatory and resourcing reasons.
With your agreement, I would be more than happy to post your e-mail on site and invite responses from other
readers. I will not post the e-mail until I receive agreement from you.
Clive
REPLY FROM DAWN
Clive,
Thanks for getting back to me! I would very much appreciate it if you could post my e-mail on site. Any
responses from other readers would be more than welcome.
I look forward to getting some replies. Once again, thank you very much for your time and help.
Regards, Dawn
we will forward your mail to Dawn

(Ref 007)
country: UK
contact_name: Flick Harris
message: Dear Sir,
Just looked at your site having noticed a message in UK.finance but couldn't link to your links & tools sections
as the addresses seem wrong (slash going the wrong way I think!)
I also wanted to have a look as I run a site for the National Association for Managers of Student Services & we
have a large student finance section.
I noticed that your logos were a bit "white, middle class" etc though I think it is really difficult to get the image
that really works - so far I've avoided them on our site!
However, a serious point, I realise that student finance is a specialist area but it covers young people & adults,
especially in FE & increasingly HE & needs to include aspects of everything from debt advice, welfare rights &
benefits to redundancy payments, loans etc. Now of course, with student loans being encouraged, much against
the general advice student advisers used to give about not taking out loans where students may be unable to
repay them (!), a couple who have been at university are likely to have joint debts of 20,000 - 30,000 pounds,
with mortgages to find, kids to bring up & pension payments to consider.
It would be useful to consider these on your website along with the other issues.
I must admit, I keep trying to find someone or some organisation that understands all of these issues but
because everyone specialises, no-one does link them all. I suppose that's why I network madly so that we can
all refer to appropriate people but it certainly doesn't help individuals when the so-called experts don't know.
If you feel it would be useful to link to our site for more information & relevant other links in this area, we are at
http://www.namss.org.uk/finance.htm
Best wishes with your site,
Please let me know when your links have been sorted & I will probably put a link from our site when I've had a
look.
Flick
FSEC's reply to Flick:
Thank you for your comments. Thanks also for telling us about the problems you had with our links. This has
now been sorted - although it didn't seem to affect some browsers. We amended the page in question - and you
were right about the slashes.
Your comments are well taken - we'll see what we can do about the "white middle class" bit. I think you have a
point.
By the way we are just putting something up about redundancy!! I take your point about student finance -I think
we understand the issues - we will see what we can do. Can't promise anything but I think it will be well worth
looking at. Also if you want to supply any material we can look at it!!
I think it will be well worth our putting a link into your site - but would want this on the basis of reciprocity, please.
We all need our hits.
Many thanks again and look forward to hearing from you again.

(Ref 001)
country: UK
contact_name: Kerry Stagg
message: Dear Sir,
I am currently writing a market intelligence report entitled Financial Services on the Internet, for a company
called Market Assessment Publications. This report examines the current trends in online retail banking,
mortgages, pensions, building societies, payment cards and insurance. I would be grateful if you could take a
few minutes to answer the following questions.
What are the current technological developments in online financial services?
Will online transactions be commonplace in the near future (in each of the market sectors listed above)?
What are the security implications of making transactions online?
What will financial service organisations need to do to promote their financial services online?
Any other comments about the future of online financial services?
Thank you for your help. I look forward to hearing from you. If you require any further information regarding the
report/company, please do not hesitate to contact me.
Yours faithfully,
Ms. Kerry Stagg
Freelance Market Analyst
FSEC: If you feel that you are in a position to help Kerry, please e-mail FSEC using the hot key below. We will
pass your e-mail to her direct.

(Ref 002)
country: UK, Lincs
contact_name: Mr John Turney MLIA(dip)
message: Dear Sir,
I am an independent financial advisor and specialise in discounted mortgage protection and term assurance
with cash rebates to clients on the internet since May 1997 at http://www.jturn.clara.net and would like to
enquire about being included in your web site by a link or whether you would consider a banner on the site.
I look forward to hearing from you.
Regards
John Turney MLIA(dip)
FSEC will announce shortly how financial advisers can advertise on our Site. We believe that by carrying such
advertisements we would be adding to the service FSEC are already providing for consumers and this would
add value to the Site. If you are interested in advertising your business, please contact us by using the e-mail
button below and we will contact you as soon as possible.

(Ref 003)
contact_name: Duncan Gittins
message: Dear Sir,
Your site isn't very easy to read when connected with
a slow modem - nearly all useful info requires loading
of images. Normally, I only bother with images for specific
sections of interest.
Regards, Duncan.
FSEC: The biggest image is the site map which would take about 22 seconds to download with a 14.4 modem.
Without the images the site would be very dull and we use the images with mapping behind them - the site map
for example. We have tried to make the images as small as possible and repeated images so that users get the
image from their cache if they have loaded the image before. Intentionally we have used few graphics on the
site to make refresh times as quick as possible - the graphics used have been kept intentionally simple.

(Ref 004)
country: UK, MANCHESTER
contact_name: R.Dooner
message: Dear Sir,
COULD YOU PLEASE PROVIDE ME WITH A TABLEOF FIGURES WHI CH SHOW MORTGAGE
REPAYMENT RATES FOR VARIOUS AMOUNTS BORROWED,AGAINST TERM AND INTEREST RATE.
FSEC: We are looking at this. If anyone out there can help, we would be grateful.

(Ref 005)
country: UK
contact_name: Lisa Robinson
message: Dear Sir,
I found your web site extremely useful as I am in the process of buying a
new house for the first time and the information here was helpful to me.
However, one comment regarding the layout - I was reading through the
mortgage section and got pretty annoyed at having to go Back each time I wanted to see the next section - so if
I was reading abotu Repayment Mortgages and wanted to read about Investment Mortgages I had to go back to
the index and select the next option. I would have preferred if there were a NEXT button on each page to make
it easier to read through all the sections.
Apart from that - excellent site and one I will probably use again in the
future.
Regards,
Lisa Robinson
FSEC: Very many thanks for your comments.
We are seriously looking at your suggestion and hopefully will come up with something which helps. It may take
a little time, though. Thanks for accessing the Site - I hope you will visit us again soon.

(Ref 006)
country: Russian_Federation
contact_name: Vladimir Babaev
message: Dear Sirs,
Russia is reforming now existing pension system. NPFs (nonstate pension funds) will play very important role in
new pension system. More than 300 such funds act in Russia now, but nobody of them has practical
experience. For this reasons a lot of the funds failed, and people are losing their trust to NPFs.
NPF RESURS is one the biggest funds of Rostov region and has position between 50 biggest funs of Russia.
But feel, that without cooperation with foreign Pension Funds, without their experience we will have big
difficulties in future development.
We know that UK has one of the most developed system of not state pensions and are searching partners who
is ready to cooperate with us and share with us their practical experience.
We search reliable and experienced company with desire help us for sending on of our representative for
acquiring the skills and the experience needed to implement relevant changes in our NPF RESURS
development strategy and day to day activity. We plan to do it through ten weeks practical work experience in
pension fund, insurance company or consulting co.
During this training I want to receive experience in following issues:
basic principles of insurance pension system;

principles of motivation of people to save their money for retirement times:
role of companies in pension system;
schemes of companies pension systems;
strategies of development pensions funds;
approaches to investing policy;
marketing policy of pension funs;
pensions programs for people;
case studies ( companies who save and pay pensions for their staff, pension funds, investment
company, etc.);
practical work and procedures of work with clients.
We can discuss this list of task. During this study tour I plan to visit some companies in different
regions of UK and possible out of UK in EU countries. Finance of this program possible via TACIS
Productivity Initiative Program (PIP). You can receive some information about PIP via Internet
http://www.pip-tacis.org
If you feel that you are in a position to help Vladimir, please e-mail FSEC using the hot key below. We will pass
your e-mail to him direct.

EURO INFORMATION from FPH
The Euro
Which countries have replaced their national currency with the euro?
Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal and Spain.
Which countries in the European Union have not replaced their national currency with the euro?
The UK, Denmark and Sweden.
Until what date could the old currency be used in countries that have converted to the euro?
For a few weeks after 1st January 2002 the old currencies could be used as well as euros. The date on
which old currencies ceased to be legal tender varied from country to country. The dates for each
country are shown below:
Country
Last day old currency was legal tender
Austria
28 February 2002
Belgium
28 February 2002
Finland
28 February 2002
France
17 February 2002
Germany
28 February 2002
Greece
28 February 2002
Ireland
9 February 2002
Italy
28 February 2002
http://www.financial-planning.uk.com/consumer/noticeboard/euro/index.htm (1 of 4) [4/20/2002 6:04:48 PM]
Luxembourg
28 February 2002
Netherlands
28 February 2002
Portugal
28 February 2002
Spain
28 February 2002
When did euro notes and coins become available in the UK?
1 January 2002.
What are the denominations of the notes and coins?
There are seven bank notes: 5, 10, 20, 50, 100 and 500 euro.
There are eight coins: 1, 2, 5, 10, 20 and 50 cents and 1 and 2 euros.
One euro is made up of 100 cents.
What do the notes and coins look like?
Euro notes are the same in each country and can be used anywhere in the euro area.
Each country in the euro area has produced its own coins. One side of the coin is common to all the
countries, but the other side is unique to the country of origin. The slightly different coins can be used
in any country within the euro area.
The notes contain a number of security features including:
a security thread;
cotton fibre based paper;
a raised ink relief;
watermarks on both sides of the note;
holographic images showing the euro symbol and denomination
and
on 50 to 500 euro notes an extra architectural holographic image.
Images of the notes and coins can be viewed on the The Official Treasury Euro Resource web site at
www.euro.gov.uk
What exchange rates are used to convert the old currencies to euros?
Country
Euro Equivalent
Austria
13.7603 schillings
Belgium
40.3399 francs
Finland
5.94573 markka
France
6.55957 francs
Germany
1.95583 marks
Greece
340.750 drachmas
Ireland
0.787564 punts
Italy
1936.27 lire
Luxembourg
40.3399 francs
Netherlands
2.20371 guilders
Portugal
200.482 escudos
Spain
166.386 pesetas
main index |
notice board |
page back

PROTECTION - Protection Product Providers
2. PROTECTION PRODUCTS AND THEIR USES

2.1 Protection Product Providers
The type of provider is not necessarily a guide as to suitability or cost effectiveness of a particular
product.
Providers tend to be:
1. Insurance companies, both proprietary and mutual.

2. Friendly societies.
3. Lloyds underwriting syndicates, in particular for very short periods not usually
available from i and ii.
4. Private Medical Insurance is offered by insurance companies, and also by
certain Provident Associations e.g. BUPA, PPP, WPA and similar.
Suitable for both personal and business uses
index |
back page

PROTECTION - 'Living Too Long'
1.2 'Living Too Long'
This is not just a problem of ensuring that income continues in retirement. The likelihood of living
longer is greater today than in most of our history.
Old age brings its own protection requirements:
1. There is still the need for life cover to provide for the family and payment of tax
and outstanding debt.
2. Physical infirmity is an increasing possibility, so care and protection will need to
be catered for.
3. Ill health is also increasingly likely, so medical care becomes of greater
importance
index |
back page

PROTECTION - Loss of Income
1.3 Loss of Income
Loss of income can come about through:
1.
2.
3.
4.
Redundancy.
Dismissal.
Enforced early retirement e.g. ill health.
Sickness or injury.
The consequences of loss of income are similar to those in 1.1 above, with the additional problems that
might be caused by long term sickness or disability:
1.
2.
3.
4.
Special nursing/medical facilities might be a costly requirement.

Special tools or facilities might be required.
Alterations might be required for comfortable living.
The possible practical strain on the health and time resources of the family of a
sick or disabled person.
index |
back page

PROTECTION - Business Needs
1.4 Business Needs
Smaller businesses are more susceptible to certain losses than larger businesses, particularly where
those small businesses are dependent on a small number of key players.
Loss of a key employee could mean a number of practical problems which could lead to short, medium
and even long term loss of income, profit and growth.
Whether the business is a sole proprietor, partnership or private limited company, death of such an
employee could mean:
1.
2.
3.
4.
Loss of profitable sales connections

Loss of specialist knowledge
Time and income loss whilst locating and training a replacement
Loss of confidence of shareholders, creditors, staff, suppliers, bank, and so
forth.
Anticipated loss of profits from such eventualities may be safeguarded by suitable term assurance
policies taken out by the company.
A key employee may be 'lost' in a profit-related sense by sickness or disability, in which case it may be
possible to fund a suitable short-term IPI policy to recompense the company to some degree.
Partnership Protection may take an additional form whereby partners complete a suitable partnership
agreement, part of which relates to disposal and purchase of shares in the event of retirement or prior
death.
Linked to the agreement, for example, will be a suitable policy to fund the purchase of the deceased's
business share from the estate.
Share Protection operates in a similar way, with a view to ensuring shares on retirement or prior
death go to the required new ownership.
Protection in the above is necessary because ownership of part of a business by an 'outside' party may
not be beneficial for a number of reasons:
1. There may be no commitment to the business.

2. The new 'owner' may be willing to become involved but might be quite
incompetent.
3. Ownership might pass into the hands of a competitor.
4. The new owner may demand a cut of the profits but may be unwilling or unable
to participate and offer anything of value to the business in return
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PROTECTION - Business Needs
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PROTECTION - Determining Protection Requirements
1.5 Determining Protection Requirements
Protection requirements will depend on a variety of factors.

Perceived Risk. If the client is not aware of the risk, or is unwilling to acknowledge its importance, it is
unlikely that any action will be taken to minimise it.
Age. Requirement will change with age, because in general we follow a 'pattern' over our lifetime
during which our responsibilities change, the demands made upon us vary, and our wants and needs
change in line with dependants, income and our financial fortunes.
Dependants. Protection requirements will depend on the number, age and the level of care required of
us. They could vary from babies, adolescents and college students, through the disabled to the
physically infirm caused by age.
Income. The greater the earned income, the greater the likelihood of protection need if the earned
income is the only source of support. Additionally, of course, the amount of disposable income will be
the ultimate determinant.
The actual amount required will depend on the individual circumstances, but a reasonable rule of
thumb would be to take a multiple of income and reduce it by the amount of benefits available from
other sources e.g. State, other policies, pension schemes, compensation. It might be reasonable also
to take into account any reduction in outgoings resulting from death.
Financial Liabilities. Generally, they can be assessed under the following headings:
1.
2.
3.
4.
Income - all sources. Maintenance of the flow may be considered a liability.

Expenditure - all avenues, out of income or capital
Assets - current and potential future. Maintenance may be considered a liability.
Liabilities - current and potential future
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PROTECTION - The Sole Trader
2.2.9 The Sole Trader
The sole trader market has its own planning needs which should be considered quite separately from
domestic requirements.
In addition to protection policies to support ongoing income of the family in the event of death, the
following points will need to be considered when calculating the amount of protection needed:
1.
2.
3.
4.
Trading debts
Business borrowing
Outstanding tax and NIC
If the business folds, money will need to be found for redundancy payments for
any staff.
5. There may be penalties to be paid for unfulfilled business commitments
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PROTECTION - Partnership Protection
2.2.10 Partnership Protection
Partnership protection is concerned with maintaining and continuing the partnership in the event of one
or more of the partners ceasing to act as a partner, due to illness, injury or death.
It is essential that partners make sure that in the event of the death of one of them, the remainder are
in a position to buy out the deceased's share in the partnership from the estate. The first step in
securing this situation is to draw up a formal partnership agreement specifying what is to happen in the
event of death, and giving the surviving partners the legal right to buy the deceased's share.
Similar considerations apply on the retirement or ill health of a partner, or withdrawal from the
partnership for any other reason.
A partnership is formed whenever two or more people are in business together where they choose not
to form a limited company. Partners share in the risk of the operation and in the capital, goodwill and
profits, so it is important, although not obligatory, that a formal partnership agreement is in place.
The partnership agreement will prevent the partnership from being dissolved automatically in the event
of death, retirement or resignation.
In the event of death, for example, the deceased's share of the business would pass into the estate.
This may pose problems as the partner's dependants generally will neither be willing nor able to
contribute to the business, and indeed may wish to withdraw their share of the capital.
Planning is essential, therefore, to ensure the partnership share passes to the surviving partners for
suitable value.
Life assurance policies are an ideal planning tool in these circumstances; to provide funds to be
available and in the right hands and enable the necessary cash to be used to purchase the partnership
share.
The Double Option agreement is a flexible form of 'buy and sell agreement' (see below), which states
that in the event of the death of a partner, the estate has the option to sell and the other partners have
the option to buy the shareholding usually, but not always, in the proportions in which they already hold
the balance of the partnership shares.
When one option is exercised, the other must follow. The partners may have to exercise the option
within a fixed period from the partner's death and during this period the estate may not sell to anybody
else.
The agreement will also specify that each partner must take out a life policy to produce the necessary
funds. A suitable trust will be used, having the other partners as co-trustees. Under the trust, the
surviving partners only retain their interests in the proceeds of the policy if the option to purchase under
the agreement is exercised. Thus each partner will take out a policy in their own name (usually a whole
of life policy, term assurance, or pension term assurance) with the policy written in trust for the benefit
of surviving partners, the proceeds being in accordance with the current balance of shareholding.
PROTECTION - Partnership Protection
As the makeup of the partnership is likely to change over time, it is important that a flexible trust is
used with suitable powers of appointment, permitting the addition and deletion of potential beneficiaries
The 'buy and sell agreement' states that in the event of the death of a partner, the estate is obliged to
sell and the other partners are obliged to buy the deceased's shareholding in the proportions in which
they already hold the balance of the partnership shares. This is the major advantage of using this
route.
The disadvantage lies in the loss of IHT business property relief. Such a binding contract is viewed by
the Revenue as excluding the value of the business share, because at the point of death it is no longer
business property, having been sold and bought immediately (Ref S113 IHT Act 1984).
Arrangement of trusts and policies will be similar to that mentioned above.
Where Automatic Accrual is used, each member of the partnership enters into an agreement with the
other partners that, in the event of death, the deceased's interest in the business passes to the
surviving partners automatically without payment.
It is usual, however, for life policies to be written in trust so that the family of the deceased does
receive some cash, effectively in payment for the deceased's interest in the business.
At retirement the question arises as to the ability of remaining partners to buy out those retiring.
Any of the above forms of agreement may be used for this purpose, but suitably worded to provide
rights or options on retirement as well as death, and with a date of retirement being specified.
In practice, a 'suite' of policies - protection and investment - will be used to fund for the anticipated
liability. These will provide cash on death, and also cash on surrender, or maturity. Whilst surrender is
not entirely satisfactory, it does provide an extra element of flexibility for periods of less than 10 years.
Personal Pensions might also feature as part of the planning, part funded by additional drawings. It
might be agreed that the cash element from a PPP will be deemed full compensation or if there is a
discrepancy, loans can be taken out against the future cash value for those remaining.
Leaving for any other reason could be looked at as 'early retirement' and dealt with in a similar way to
retirement, if necessary
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PROTECTION - Share Protection
2.2.11 Share Protection
In the event of the death of a shareholding director, it is essential that arrangements are made to avoid
shares passing to a beneficiary who has no interest in the company, no ability to contribute, or even
worse, a desire to interfere or to introduce outsiders.
If the surviving directors are unwilling or unable to buy the shares, however, this could result in them
being sold elsewhere. In these circumstances, restrictions regarding the transferability of the shares
laid down in the company's Memorandum and Articles of Association may become inoperable.
To avoid this onward sale, therefore, a pre-arranged scheme should be put into place to facilitate the
purchase of the shares of a deceased director from the estate.
Both funding and agreements will be along the lines of those used for partnership protection, and most
insurance companies will provide draft documents for use with their policies.
When suitable life insurance policies are taken out, as the directors will probably be at different ages,
there will be some inequality of cost because the older directors will be paying more in premium but
with a lower expectation of benefit. One way to avoid this problem is by the directors making cash
payments between themselves.
Small differences in premium which are handed over are unlikely to create tax problems, as they
escape under the small gifts or normal expenditure exemptions. Larger premiums, however, may be
subject to tax.
The differences in premium to be handed over to co-directors would be apportioned relative to the
shareholding.
When calculating the value to place on shares to propose for a suitable sum assured, do not forget to
take into consideration the value of directors' loan accounts i.e. undrawn dividends and profits.
Withdrawing cash from the business may often prove more problematic than share purchase
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PROTECTION - Key Employee Insurance
2.2.12 Key Employee Insurance
Most businesses have two essential resources - the physical assets such as plant and machinery, and
the people who manage and operate the business.
More often than not, the former is fully insured, the latter, in terms of the value to the company, hardly
ever.
Of particular value to the company amongst the human resource are those who add significantly to the
value and profitability of the business through their work as individuals, rather than as a team member.
Of the key employees who would fit the above description, not all are necessarily directors or senior
executives.
Who will be classified as a key employee will depend on the industry and the size of the business. The
smaller the business, the greater the likelihood of there being a key person and of identifying the
individual.
The larger the organisation, with the greater potential for back-up and safety nets, the less likely that
the loss of any individual would have a significant impact on the company, either its operation or its
final profits.
Identifying the key employee may be a simple matter of pointing to the sole designer or salesperson.
On the other hand, it may be necessary to ask a few questions, such as:
1.
2.
3.
4.
5.
Who would you pay to keep.

Who was head hunted into their post.
Who deals with the important business connections.
Who would you least like to leave.
Who would be most difficult to replace.
For loss through death, the company might perhaps consider:
1. Term Assurance.
2. Whole of Life.
As key employee insurance is essentially a type of loss of profits insurance, it should be taken into
consideration that key employee status is likely to disappear at some stage, and the potential for lost
profits become negligible.
Consequently, a short-term policy is perhaps more relevant, particularly if it can be renewed, escalated
or indexed. Additionally, of course, it may be the cheapest option, and may be more easily understood
by the client.
Modern unit-linked whole of life policies may be an acceptable alternative with their wide spread of
sums assured and flexibility to keep up with changing requirements.
For loss through disability, the company might consider:
1. Income protection insurance.

2. Critical Illness.
Short-term IPI policies may be useful for temporary replacement of an element of cash flow, but do not
really add value if the illness is prolonged. This is because such policies are usually payable for three
to five years at the most, out of a policy period of perhaps ten years.
Critical Illness cover might be an alternative or an additional route, perhaps best combined with either
term assurance or whole of life to provide a wider degree of cover.
Generally, most short term assurances will qualify for relief on premiums, but the company will be liable
to tax on receipt of the policy proceeds.
Other policies such as whole life are treated as capital items, and so may not enjoy relief on the
premiums.
The treatment does depend on the circumstances, however, and the wise course would be to obtain
guidance on the tax position from the local tax inspector, as practice can vary from inspector to
inspector.
It is not possible for a company to forego relief on premiums as a way of escaping tax liability on
payout. Relief must always depend on 'allowability' as a trading expense, and so claiming an expense
or not is irrelevant. It follows, then, that the policy proceeds are also not affected.
Premium payments will generally attract tax relief provided it can be shown that:
1. The sole relationship is that of employee and employer, so major shareholders

who are insured may find that relief is not permitted on their policy. This is
because the benefit would be partly for their personal benefit as a shareholder,
and so would fail the 'wholly and exclusively... for the purposes of trade'
qualification for expenses.
2. The purpose of the policy is to meet loss of profits resulting from loss of
employee input. Consequently, any policy where part of the premium goes
towards investment content rather than protection would not qualify for relief
because again it would fail the 'wholly and exclusively' test. This might also be
taken to apply to convertible term policies, because the conversion option
means the possibility of change over to an 'investment' policy. If the purpose of
the policy is to secure a loan, this would be seen as part of the cost of raising
capital and so would not be allowed.
3. The policy is short-term, this generally being interpreted as no more than 5
years, and excluding single premium policies.
This means that the 'non-qualifying' rule means that any profit or gains made on a policy would be
treated as company income and subject to corporation tax. Where the claim is on death, any profit
calculation is based on the surrender value immediately prior to the death, not the pay out. Any gain,
therefore, could be fairly insignificant, especially in the early years.
Generally, the rules for life assurance policies regarding taxation of premium and policy proceeds apply
to IPI policies.
Critical illness policies are generally treated as term assurance policies where the base policy does not
have investment content
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PROTECTION - Taxation of Life Policies
2.3 Taxation of Life Policies
The status of a life assurance policy, whether qualifying (by meeting the criteria below) or nonqualifying, will affect the tax treatment of the policy in the hands of the policyholder.
1. Qualifying Policies avoid a tax charge on payment of the policy proceeds on

death or maturity.
2. Proceeds from non-qualifying policies may be subject to a chargeable gain
where a chargeable event occurs i.e. payment of proceeds, assignment for
money or money's worth or surrender.
Endowment Assurance
1. Term must be for ten years or more to be a qualifying policy.

2. Premiums must be restricted so that over a 12 month period they do not exceed
twice the premium payable in any other 12 month period, or represent one
eighth of total premiums payable.
3. The sum assured must represent at least 75% of premiums payable. This is
reduced by 2% for each year, the age of the proposer exceeds age 55, at the
time of inception.
4. Premiums must be payable annually or more frequently and for at least 10
years, or 75% of the term, if shorter.
Whole of Life. The conditions are almost as above, but excluding point (i) and the 75% rule is
calculated assuming premiums are paid until age 85.
Term Assurance. The conditions are again almost as for endowments, but for terms of less than 10
years (minimum 1 year) there are no restrictions on premium payment.
Life Assurance Premiums Relief (LAPR)
1. This relief ceased in the Budget of March 1984 for all new policies.
2. Existing policies could continue with the relief.
3. The relief can be lost if the policy benefits were to be increased, the term
extended or if someone other than the life assured pays the premiums.
NB. LAPR is currently 12.5% (2001/2002)
Capital Gains Tax is not payable on policy proceeds where the claim is made by the original owner. A
liability may arise for the owner where the owner at the time of claim is not the original owner, and
where the policy was acquired for cash.
PROTECTION - Taxation of Life Policies
Similarly, CGT is not payable where the original owner gifts a policy, either by the owner, or by the
recipient. The gifting by a new owner similarly does not attract liability.
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PROTECTION - What Must Be Compared? - Surrender Values

3.1 What Must Be Compared?
3.1.1 Surrender Values
Only products with an investment element acquire a surrender value.

This means that policies such as term assurance, IPI (non-unit linked) and personal accident do not
acquire surrender values.
Those policies that do have an investment element will only acquire a surrender value once premiums
paid exceed the setting up expenses.
Even when expenses have been covered, any surrender value will be low initially because of:
1. Ongoing policy expenses

2. The need for the investment element to grow
3. Ongoing risk premium expense i.e. the cost of the insurance. This would be
particularly noticeable under a unit linked whole of life policy, where the life
cover/investment balance might be changed. The higher the life cover, the lower
the investment element, and the slower the surrender value build up.
The essential point to bear in mind is that early surrender could mean little or no return of premiums.
The longer the investment element has to grow, the greater the figure is likely to be.
Any comparison, therefore, must take into account general management expenses, policy expenses
and investment performance.
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PROTECTION - Premium Levels
3.1.2 Premium Levels
Generally speaking, level term assurance premiums are easier to compare because it is a
comparatively simple contract offering a fixed death benefit for a fixed premium.
Comparing different types of term assurance is usually quite straight forward. Using level term
assurance as a basis for comparison, for the same person, with the same sum assured:
1. Decreasing term will be cheaper

2. Convertible term will be more expensive
3. Renewable term will be more expensive for the same reason as convertible termthere is an increased risk owing to the non-medical, no underwriting element
relating to the built in option.
4. Whatever type is chosen, the longer the term the more expensive the premium
because of the increasing period of risk.
Comparing 'the same' term policy amongst providers will show differences, generally relating to:
1. Underwriting experience.
2. Intrinsic expenses.
Comparing whole life policies may not be so straight forward, as unit linked and universal policies may
have different options available. Additionally, the investment element will not be comparable on the
some basis as the life assurance element
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PROTECTION - Charging and Commission Structure
3.1.3 Charging and Commission Structure
It should be remembered that product providers are in business to make a profit as well as to provide
the various policies. Consequently, an element of profit earning will be in the make up of the charging
structure.
The level of profit will depend on:
1. The cost of running the operation and of paying out benefits, and
2. The volume of premiums and investment performance.
This is a simplification of a complex business, but it serves to illustrate that the more efficient business
has the choice of:
1. Allocating higher bonuses, or

2. Paying out more to claimants, or
3. Offering lower premiums.
As different products will have different expenses and costs relating to them, it is difficult to compare
relative profitability.
Consequently, other than for, say, level term assurance, lower premiums do not necessarily mean a
better policy.
The picture is further complicated by the providers own:
1. Policy wordings and general conditions e.g. definitions.

2. Specific underwriting exclusions and limitations
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PROTECTION - Comparing Policy Options from Different Providers
3.2 Comparing Policy Options from Different Providers
Such a comparison can only follow on from a full fact find and needs analysis.
It follows, therefore, that comparison and selection must be made solely on the basis of:
1. The revealed weakness (needs) in the client's financial situation.

2. Attitude towards financial and investment risk
3. The client's priority e.g. medium or long term investment, savings or protection,
which in turn will stem from
4. The client's available resources, both income and capital
5. The client's overall objectives in creating an organised financial plan.
The client should be made aware of the purpose and effect of the various options and conditions
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PROTECTION - Factors to Consider for Term Assurance
3.2.1 Factors to Consider for Term Assurance
Premium rate.
Choice of options.
Performance in the contracts it is possible to convert to (i.e. from convertible term).
The providers approach to underwriting
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PROTECTION - Factors to Consider for Whole of Life Policies:
3.2.2 Factors to Consider for Whole of Life Policies:
Premium rate and premium payment term (e.g. premiums may cease at 80 or 85 but the cover
continues)
Investment/bonus performance and consistency.
Surrender value figures.
Range of options and additional costs and underwriting requirements, conditions or exclusions.
For unit linked policies, choice of funds and cost of switching between funds.
The provider's approach to underwriting
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PROTECTION - Factors to Consider for Permanent Health Insurance
3.2.3 Factors to Consider for Income Protection Insurance
Premium, and whether 'waiver of premiums' (i.e. cessation of premiums during claim) available
Underwriting requirements relevant to occupation and health and hobbies/pastimes.
What deferred periods are available.
Maximum benefit (usually expressed as percentage of earnings).
Definition of earnings.
Definition of disability.
Options e.g. can cover increase prior to claim, does benefit increase during claim
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PROTECTION - Factors to Consider for Critical Illness Insurance
3.2.4 Factors to Consider for Critical Illness Insurance
Premium, and whether stand alone or an add-on feature.
Range and definition of allowable illnesses/exclusions.
Whether a maximum cover limit applies.
The providers approach to underwriting
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PROTECTION - Factors to Consider for Private Medical Insurance
3.2.5 Factors to Consider for Private Medical Insurance
How are previous and existing conditions treated.
Range of treatments available, both inpatient and outpatient.
Any overall cost limits for treatment.
Additional costs for family members.
Whether different ranges of benefits are available at different cost levels.
NB. This particular type of contract offers a wide variety of options relating to costs,
treatments and age limits. These points mentioned here are but a few; particular attention
should be given to the different requirements of different types of client e.g. single,
married no children, married with children, working, retired.
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PROTECTION - Factors to Consider for Long Term Care
3.2.6 Factors to Consider for Long Term Care
What premium payment methods are available?
How is disability defined?
What Activities of Daily Living (ADLs) are used?
Is partial benefit payable?
What, if any, are the exclusions e.g. failure to follow medical advice?
How is the policy written i.e. stand alone or add-on
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PROTECTION - Factors to Consider for Personal Accident
3.2.7 Factors to Consider for Personal Accident
Similar to IPI policies, and in addition,
Are scale benefits sufficient compensation?
What would not be accepted as a claim e.g. military service?
Is cover 24 hour, worldwide or restricted
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PROTECTION - Factors to Consider for Redundancy Cover
3.2.8 Factors to Consider for Redundancy Cover
Cost - generally more expensive as a stand alone cover.
How long before benefit paid?
How long benefit paid for
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PROTECTION - Comparing Providers - Financial Strength

3.3.1 Financial Strength
The Free Asset Ratio (FAR) shows the proportion of total assets in excess of requirements to support
existing policy liabilities (hence, 'free asset').
It therefore reveals the ability of the provider of with profits business to maintain bonus levels and to
support existing business plans or to expand into other areas.
FAR figures are generally taken from the regular returns made by the life offices to the DTI, as required
by the Insurance Companies Act 1982 and the Insurance Companies (Accounts and Statements)
Regulations 1983.
The FAR should not be used as the only guide to a provider's financial strength, as it will not reflect
current and projected business, nor management effectiveness and other guides.
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PROTECTION - Asset Valuation
3.3.2 Asset Valuation
Mid-market value for listed investments.

Unlisted equities are valued by averaging earnings over three years and multiplying by an agreed
factor linked to price/earnings ratio.
Debts are valued on a reasonable recovery figure i.e. taking into account the possibility of bad debt.
Equipment is valued allowing for depreciation.
Land is valued triennially
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PROTECTION - Liabilities
3.3.3 Liabilities
Generally, the 'Net Premium Method' is used. This involves deducting the value of future net premiums
from guaranteed future benefits.
The figures resulting will vary depending on the rates of interest used for the projected figures. The
higher the rate, the lower the projected liability, and the higher the surplus-thereby impacting on the
FAR
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PROTECTION - Solvency
3.3.4 Solvency
Required solvency margins were laid down by the European Community Life Directive, and is
monitored by the DTI.
Deviation from the required margins would mean submitting a recovery plan to the DTI and being
subject to closer scrutiny until the margins were regained.
Solvency can be taken to mean the excess of assets over liabilities
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PROTECTION - Quality of Service
3.3.5 Quality of Service
Questions to be asked regarding service should cover:
How accurate are illustrations and related performance figures?
Is the documentation prepared properly?
How soon are queries answered and mistakes rectified?
Are proposals processed without delay, and premiums applied correctly?
Are policies and bonus notices issued on time and accurately?
How responsible are client contact staff?

NB. It is important to realise that processing, administration, technical and clerical errors can be just as
damaging as poor investment performance
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PROTECTION - Investment Choice and Performance
3.3.6 Investment Choice and Performance
Mainly relevant where there is an investment element for the product.

The relative importance depends on the client's view of risk and the particular objective in mind when
selecting a product.
The factors in the pages on Financial Strength, Asset Valuation, Liabilities, and Solvency should be
born closely in mind when considering performance.
The usual caveats should be kept in mind:
1. High returns generally will mean high risk, with the reverse being true.
2. Past performance should not be taken as a guide to future performance.
3. Performance in the short term should not be taken as a guide to performance in
the longer term
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Did you Know...! What are the main types of life assurance?
Did YOU Know....

What are the main types of life assurance?
Life assurance is fairly complex - because individual circumstances can be so
different. Reasons for wanting life cover vary enormously and life assurers have tried
to develop policies to satisfy those different needs.
We explain the different types of life assurance cover. You should discuss your
requirements with your financial adviser.
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Did you Know...! Ive heard about Redundancy cover
Did YOU Know....

Ive heard about Redundancy cover, but dont know very much
about it. Can you tell me more?
You should seek the advice of your financial adviser if you are thinking of taking up this
cover because of certain recent rulings.
If payments from a policy claim are made direct to you, there is a possibility that any
benefit payments due to you may be reduced by the amount paid by the policy.
However, this is unlikely to happen if policy payments are made direct to the mortgagee
or a loan company (where payments are in respect of outstanding loans).
Select for redundancy cover information but for the latest information, consult your
financial adviser.
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Did you Know...! Choosing Life Assurance
Did YOU Know....

Choosing Life Assurance
Talking to a professional adviser is the best way to determine your protection needs as
they change with your circumstances. It makes good sense, however, to go to your
meetings armed with information to ensure the meeting flows smoothly. The questions
posed and answered below are frequently asked questions; knowing the answers
should make your meeting more productive.
1. What happens if I am ill when I need life assurance?
It doesn't necessarily mean that you won't qualify for some sort of cover.
Depending on the illness, it may have no effect on the cover you want, or the
level of cover may be reduced, or the company may suggest a different type of
policy to the one you applied for. Sometimes the company may suggest you
wait until you have recovered before applying again. However, much will
depend on the stage of your illness, your medication and their experience of
underwriting this type of 'risk'.
2. Does smoking affect my application?
Yes. Generally speaking, companies charge higher premiums if you smoke, and even if it is less than a
year since you have smoked.
3. How much cover can I have?
Perhaps the starting point should be, 'How much cover do I need?' In theory there is no upper limit to
the amount of life assurance you can buy, but inevitably the company will wonder why you are taking
out a million pound policy if your income is only 10,000 per annum. None of their business, you might
think. On the one hand you are right, how you spend your money is up to you. On the other hand,
though, the company's underwriter (the person who assesses the risk of each proposal) may have had
poor experience of low income/large sum assured situations. Once you have arranged sufficient
protection to cover current outstanding liabilities (credit cards, bank loans, mortgage, school and
university fees, other financial commitments), then you should talk with your adviser on whether
additional sums are needed for future commitments.
4. What if I lose my job and can't afford the premiums?
Generally speaking the cover ceases on simpler policies, but, depending on the policy, premiums may
continue out of reserves until they are used up, at which point the policy ceases. The policy may also
offer a 'premium waiver' option, which is basically a premium insurance. As you would expect, you pay
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extra for this, but means that in certain circumstances, if you are unable to pay the premiums, they will
be paid for you for an agreed period.
5. Can I increase the sum assured once the policy has started?
Some policies give this option, although it generally means an increase in the premium at the same
time.
6. Who will own the policy when I die?
When you die the policy ceases, so it would be more correct to be concerned about the destination of
the policy proceeds. This will depend on how the policy was set up i.e. is it in your name? On the life of
someone else? In trust? The answer may be different again if it is the type of policy that pays out
before death. In general, the proceeds will go to whoever you want to receive them. The question that
hangs over the whole exercise is - 'will tax be payable?' If the policy isn't set up in the right way, tax
could be payable, especially if the proceeds go into your estate on your death.
7. Do I get money back if I cancel my policy?
The answer, again I'm afraid, is 'It depends.' It depends on the type of policy and how long you have
been paying premiums into it. Generally speaking, you might expect money back only from those
policies that incorporate an element of investment, but only once the initial expenses of setting up the
policy have been covered. A simple term assurance policy would not repay anything if you cancelled it.
8. How often should I review my policies?
As often as your circumstances change. Our needs change as our circumstances change, and if we
are to protect our interests and the interests of those for whom we are responsible, we must plan
ahead, within our budget, for the changes we can anticipate, as well as for those we can't.
See examples of changing needs: 'Lifestages: minors through to retirement'; 'Case studies';
'Noticeboard: Brian Riley'.
Because of the complexity of the market, simple questions don't always have a simple answer, but talking to a
professional adviser could lead to a solution.
Remember, don't take any financial action until you have spoken with a professional adviser.
index |
back page

Did you Know...! I am thinking about buying life assurance cover
Did YOU Know....

I am thinking about buying life assurance cover, but I get very
confused by the number of companies selling life assurance and
the range of products available.
How do I compare products and providers?
Yes, there are many life products available and also a large number of companies
selling their own, similar products. This is the main reason why we would always
suggest seeking the advice of a financial adviser. However, to satisfy your immediate
curiosity, these pages may be helpful.
index |
back page

Did you Know...! How can I find more about the wide range of savings and investment products
Did YOU Know....

How can I find more about the wide range of savings and
investment products which seem to be around these days?
There are a tremendous number of savings and investment products currently
available - and they are available from a large number of providers.
We have provided comprehensive information on both providers and products and
have attempted to explain what they are and who they are.
index |
back page

Did you Know...! Ive often heard about TESSAs and PEPs but have no idea what they are
Did YOU Know....
A new tax on savings. Britain's stance over the 'withholding tax' is causing more
than a few ripples in the ongoing monetary negotiations. Here is a summary of the
essential element of the proposals.
What is the withholding tax?

It remains a proposal for the moment, but if implemented it will mean a 20% tax deduction on all
savings throughout Europe, with the tax being deducted, or 'withheld' at source.
ii
How is this different to the current regime of 20% tax deducted at source in this country?
Currently in Britain, not all savings have tax deducted at source, so non-taxpayers do not have to
reclaim any sums. Conversely, taxpayers may overlook the fact that they have to declare nondeducted interest. The proposed new system would change this.
iii
Who is proposing the new system, and why?

Germany is the main proponent of the system, because they want to stop tax evasion, particularly
from large investors who invest abroad to escape domestic tax.
iv
Why is our government blocking its acceptance?

Mainly because it would cause a good deal of upset within the banking and financial institutions in
the City of London, and necessitate a significant overhaul of the system of taxing banks and similar
institutions that deal with investments not taxed at source.
What is the effect of this government block on acceptance?

As Britain is the only country taking this stance, there are likely to be repercussions in other areas
of tax and benefits.
NOTE Do not take any action without first consulting your financial adviser. This information and that of
the linked pages is not intended to suggest any particular course of action.
index |
back page

Did YOU Know....

Ive often heard about TESSAs and PEPs but have no idea what they
are. Can you please tell me?
Both TESSAs and PEPs have been in the news recently because the Government
intends to replace them with something called an ISA (which stands for Individual
Savings Account), in 19999.
ISAs will be an investment in which an individual is likely to be able to 'shelter' an
existing PEP or TESSA, Unit Trusts, Life Assurance Policies, Savings Accounts and
even cash up to a certain limit.
Details are not yet finalised and you are advised to watch for announcements in the
press. We will publish details in the News pages on this site as soon as information
becomes available.
index |
back page

Did you Know...! I dont know what National Savings have to offer these days
Did YOU Know....

Ive always wanted to save my money in National Savings
Accounts because I know my money will be safe.
However, I dont know what National Savings have to offer these
days.
The choice of where you save is up to you. You should speak to your financial
adviser to see what options would best fit your circumstances.
The following explains in general terms the National Savings Products which are
currently available.
index |
back page

Did you Know...! I need to find out about Annuities and what they can be used for
Did YOU Know....

I need to find out about Annuities and what they can be used for.
Can you help?
If you are thinking about purchasing an Annuity (for whatever reason) please consult
your financial adviser.
Nevertheless, you may find the general notes on Annuities helpful.
index |
back page

Did you Know...! Can you tell me something about the State Pension Schemes
Did YOU Know....

Can you tell me something about the State Pension Schemes:
Select the link for information about both the Basic Pension and the State Earnings
Related Pensions Scheme (SERPS).
index |
back page

http://www.financial-planning.uk.com/consumer/dyouk/q12.htm
Did YOU Know....

Im trying to find out as much as I can about Occupational Pension
Schemes. Have you any information for me?
Pensions can be very complex and we have provided some basic information in our
underlying text pages about all types of pensions.
index |
back page

Did you Know...! Personal Pensions confuse me!
Did YOU Know....

Personal Pensions confuse me and I am trying to find out if I am
eligible to take out a Personal Pensions Plan. Can you help me?
Wherever pensions are involved you would be well advised to speak to your financial
adviser. However, to find out who is eligible to take out a personal pensions policy.
I have a Personal Pensions Plan and I want to know what benefits I
will get when I retire?
For information about the benefits under Personal Pensions Policies at retirement.
I have a Personal Pension Plan and am treating it as a savings
vehicle. Am I right in thinking that I can draw my money out when I
retire?
The rules governing Personal Pension Plans certainly provide for the possibility of some cash being available at
retirement, but you should contact your financial adviser to determine your own situation. Review the general
position.
I am 35 and have just gone self employed. I need to take out a Personal Pension Plan
in the near future and need some advice on products and providers. Can you help?
This page is not designed to help you choose a product or provider - just to give general information. Please see
your financial adviser, because as your choice of pension product may be one of the most important decisions
you take in your life.
Click here for some generic information, which may prepare you when you see your adviser.
index |
back page

http://www.financial-planning.uk.com/consumer/dyouk/q13-16.htm (1 of 2) [4/20/2002 6:05:54 PM]
Did you Know...! Personal Pensions confuse me!
http://www.financial-planning.uk.com/consumer/dyouk/q13-16.htm (2 of 2) [4/20/2002 6:05:54 PM]
Did you Know...! Im getting married in 6 months time and my fiance and I are looking for a house
Did YOU Know....

Im getting married in 6 months time and my fiance and I are
looking for a house. The trouble is I dont know how much I can
borrow - can you help?
The answer to this question is no - not specifically. You will need to see a financial
adviser to get that sort of information.
However, we can give you some pointers on what the mortgage adviser will consider,
when weighing up how much you are likely to be allowed to borrow.
index |
back page

http://www.financial-planning.uk.com/consumer/dyouk/q19.htm
Did YOU Know....

There seem to be so many firms offering mortgages these days
that I find it difficult to know who to go to. Can you help?
Again, it is always most sensible to consult a specialist, so see your financial adviser.
However, we have provided a few "rule of thumb" guidance notes which may help.
index |
back page

Did you Know...! Should I rent or buy my home?
Did YOU Know....

Should I rent or buy my home?
Rent or buying habits differ considerably between countries, with the UK having an
especially high ratio of people buying, rather than renting. However, the housing
recession which started in the early nineties and produced negative equity for
thousands of buyers led to many more people renting their homes.
Without knowing your circumstances it is impossible to answer. Much will depend on
what type of property you would like, the area you desire and your monthly budget.
You should perhaps also ask - do you one day want to own your own property?
You should approach a financial adviser or a mortgage adviser who will be able to
advise you once your individual circumstances and needs are known.
index |
back page

Did you Know...! Im very confused about the type of mortgage I should go for
Did YOU Know....

Im very confused about the type of mortgage I should go for.
There seems to be all sorts of conflicting information - I just feel
like giving up!
Please dont give up - see somebody who can give you some sound advice - a
financial adviser.
To provide you with a little more clarity of thought use the information available on
our web pages.
index |
back page

Did you Know...! Why do financial advisers ask so many personal questions
Did YOU Know....

Why do financial advisers ask so many personal questions these
days? I dont like people poking into my affairs - why do they have
to do it?
This is not only common sense, it is a regulatory requirement; here she cannot offer
advice without your personal details. If your adviser knows nothing about you, your
financial situation and in particular your financial aims and goals, he or she would find it
very difficult to help you achieve these goals.
The more information your adviser has, and it must be up to date, the easier it will be to
advise on products and to help you organise your financial priorities, and to distinguish
between wants and your NEEDS.
So that you can prepare for this "fact find" process with your adviser, we have provided
a number of "fact find" questionnaires in the Section of our pages which provide "Tools
to clarify YOUR financial situation".
Why advice from a competent adviser can be important.
index |
back page

Ask the right questions

The material you will find on the site will answer a lot of questions, even some that may
nohave occurred to you to ask until you had acquired this background information.
Inevitably, though, the more you know, the more you will want to ask, and the less satisfied
you will be with sketchy generalisations.
Don't be afraid to admit that you don't know something. Some of the biggest
scams, not only in finance, have been allowed to proceed because a clever con artist has
realised that intelligent people hate to admit to a lack of knowledge and understanding.
Once you overcome this hurdle, make the most of it by asking the most basic questions;
when you are on the trail of essential knowledge and information there is no such thing as a
'dumb' question. Don't limit your questioning to those areas where you are ignorant of the
facts; ask a few where you know the answers. This activity will confirm your own knowledge
and make sure that your adviser knows the basics also. If there is a difference between what you thought and
the answer provided, you may be surprised to find that you know more than you realised, and the expert less!
While we can't provide you with the definitive set of questions to ask, we hope that the following basic queries will
set you on the right path, and provide the spur to ask others. Combine these questions with the information you
provide in the fact find (see 'Factfind your situation') and you will have the foundation for ongoing planning
exercises.
The areas covered are:
1. The Basics
2. Taxation
3. General finance
4. Health insurance and income protection
5. Life assurance
6. Mortgages
7. Retirement
8. Savings and investment
main index |

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The Basics
1. Where are my important documents e.g. will, life assurance policies.
2. Is my will up to date? Is my spouse's will up to date? Is my business partner's will up to date? Are our
share agreements up to date?
3. What financial milestones have I got coming along? Are there any marriages, christenings, bar mitzvars,
significant birthdays, or similar dates where cash needs to be expended that can't be supported out of
normal income?
4. How long before I retire?
5. Will my current pension plans meet my needs for income after I retire, or is there a shortfall?
6. How should I cater for inflation?
7. Do my advisers have the relevant knowledge and experience to understand my situation and
requirements?
8. Do I have a schedule of current financial commitments, and do I know why I am spending what I am
spending?
9. Can I locate the paperwork for my existing financial commitments (standing orders, policies,
guarantees, etc)?
10. Do I understand my existing savings and investment commitments? What don't I understand about
them? Do I know why I started them?
11. Do I want to give to my family before I die? To anyone
12. Is my will up to date? Have I made a new one since my divorce?
13. Which of my accounts are joint accounts?
14. What do I owe at the moment?
15. What am I owed at the moment?
16. What are my assets worth at the moment?
17. What is my income at the moment?
18. What is my regular expenditure at the moment?
http://www.financial-planning.uk.com/consumer/askquestions/ask1.htm (1 of 2) [4/20/2002 6:06:05 PM]
19. What amounts are outstanding on my credit/debit cards?
index |

Taxation
1. Do I know at what rate I pay tax currently?
2. What are my current tax reliefs and allowances? Do I know how they are made up?
3. What is my current tax code? Do I know how it is made up?
4. Do I owe any tax?
5. Have I overpaid any tax?
6. Am I in any discussions with the Inland Revenue at the moment?
7. Do I have any tax free investment income?
8. Do I have any tax paid investment income?
9. Do I have any capital gains?
10. Do I have any capital losses?
11. Are there any forthcoming changes to my income (earned or unearned) that will affect my tax position?
12. Do I have a form P11D?
13. Do I have any employee benefits that are taxed as a benefit in kind?
14. Where are my P60 records?
15. How do my spouse and I split the various allowances we are entitled to?
16. How do we split the interest on joint accounts?
17. How do we split paying the bills?
18. Is the house in joint names
index |
General Finance
1. Do I have an interest producing current account?
2. What rate of interest do I pay on my credit/store card(s)?
3. What are the outstanding amounts on my credit cards? Is this usual or unusual?
4. What level of bank charges do I pay?
5. Does my cheque account pay interest on positive balances?
6. What do I have outstanding on my personal loans/hire purchase? What interest rate is payable? What
period remains of the payment term?
7. Do I have an overdraft? Is it authorised? What charges are levied if I go over the level agreed with the
bank?
8. Is my will up to date? Where do I keep my will?
9. Where are my other important documents? Who else knows?
10. Who are my solicitors and accountants?
index |

http://www.financial-planning.uk.com/consumer/askquestions/ask3.htm [4/20/2002 6:06:08 PM]
Life and Health Insurance

1. What life assurance policies do I have in force at the moment?
2. What medical expenses insurance do I have at the moment?
3. Will my mortgage and other loans be repaid by any of these policies?
4. What types of policy are they?
5. Do the premiums stay the same or increase each year?
6. Do I have to pay the premiums if I lose my job, or am away from work sick?
7. What options do they offer, and when?
8. Is dental work covered in any of the policies?
9. Are there any circumstances where the policies won't pay out?
10. When do they pay out?
11. What do they pay out for, and how much?
12. Do they pay income or lump sum?
13. Do they protect my income if I am sick or made redundant?
14. Will they pay for nursing and other care in my old age?
15. Are they appropriate to my current circumstances?
16. Are the premiums monthly or yearly, and how much is the total?
index |

Mortgages
1. What type of loan do I have?
2. When does it have to be repaid?
3. Is it appropriate to my current circumstances?
4. Am I planning to move in the near future?
5. What other policies do I have in force already that could be used to secure a larger loan, should I need
one?
6. Could I cash in my existing policies and pay off my mortgage?
7. Are there any penalties involved in repaying my loans earlier than agreed?
8. What happens to the loans if I should die before they are repaid?
9. Do I need to increase my mortgage?
10. Do I need to extend the loan period?
index |

Retirement
1. Do I qualify for a State pension?
2. What will I get as a State pension? How can I check the figure?
3. What company pensions do I qualify for at the moment? Do I know where I can find the details?
4. Do I have any pension entitlement from companies I have worked for in the past? Do I know where I
can find the details?
5. What am I doing at the moment to provide myself with retirement income?
6. Will my pension provide the level of income I will need in retirement? Is there a shortfall between what
my pensions provide and what I calculate I will need?
7. What are my options if I want to retire early?
8. What are my options if I want to defer my retirement?
9. What are my options if I want to retire gradually?
10. What are my options if I should get divorced?
index |

Savings and investment

1. Am I happy with my understanding of the differences between 'saving' and 'investing'?
2. Am I happy with my understanding of the difference between the concepts of investments, savings
accounts and deposit accounts?
3. To meet the demands of these financial milestones, do I need to save regularly? Borrow closer to the
time? Rearrange my current plans?
4. What can I afford to put aside, and when?
5. If I commit to a regular monthly payment, can I keep it up?
6. Apart from known spending occasions, what should I put aside for the 'rainy day'?
7. How secure do I want my money to be? Should everything be in relatively safe deposit accounts, or can
I afford to accept some risk for the chance of a better investment return?
8. If instant access to my money means a slightly lower return, how do I decide on the balance between
instant access and a better return?
9. Am I happy with any (relevant) investment or savings contract, or should I consider only ethical
investments?
index |
back page

FSEC FREE Financial Planning Information - Information contents page
INFORMATION
PROTECTION
SAVINGS AND INVESTMENT
PENSIONS
MORTGAGES
main index |
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http://www.financial-planning.uk.com/consumer/info/info.htm [4/20/2002 6:06:16 PM]
News - Financial Planning Information news - FREE from FSEC
NEWS
main index
back page
This area is undergoing a complete redesign. The things you may have missed in the financial press will be
here again soon.
Have you visited our notice board? CLICK HERE it's where we put the hot topics!
main index |
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http://www.financial-planning.uk.com/news/index.htm (1 of 2) [4/20/2002 6:06:19 PM]
News - Financial Planning Information news - FREE from FSEC
http://www.financial-planning.uk.com/news/index.htm (2 of 2) [4/20/2002 6:06:19 PM]
FPH Competion and Quiz pages for financial planning
So you think you know about.......

Test your financial knowledge of
Protection, Savings &
Investments, Pensions
Investments and Mortgage
products.
Protection (Life Assurance)

Savings & Investments
Pensions
These are interactive pages with

reference answer.
Or, try our monthy competion. We
give away a 20 voucher to the
first correct answer received each month.
Mortgages
Competion
main index |
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http://www.financial-planning.uk.com/consumer/quiz/index.htm [4/20/2002 6:06:21 PM]
Win a Bottle of Champagne with Financial Planning Horizons
MARCH
Each month we give away a
20 gift voucher
Answers must be received before the end of March....
1. By what date after the end of the tax

year must a tax return be sent to the
Inland Revenue if they are to
calculate the amount of tax due?
2. What is the higher rate tax rate for
2001/02?
3. What is the maximum earnings on
which pension contributions can be
paid into a personal pension in
2001/02?
Answers are all on this web site
Email your answers to us
The answers can all be found on the pages of this web site.
main contents |
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http://www.financial-planning.uk.com/consumer/quiz/quiz.htm [4/20/2002 6:06:23 PM]
FSEC Competition Email
Competition Email Form

Minimise this form so that it will be handy to paste in your answers. We do not pass details on to ANY third
parties. (Items marked+ are required)
For a gift voucher

worth
20
+ Name
+ E-mail Address
+ Postal Address
Telephone
For a gift voucher

worth
Country
20
For a gift voucher
worth
20
1) By what date after the end of the tax year must a

tax return be sent to the Inland Revenue if they are to
calculate the amount of tax due?
2) What is the higher rate tax rate for 2001/02?
For a gift voucher

worth
20
3) What is the maximum earnings on which pension

contributions can be paid into a personal pension in
2001/02?
SEND
Reset

http://www.financial-planning.uk.com/consumer/quiz/q-email.htm [4/20/2002 6:06:25 PM]
So you think you know about protection!
So you think you know about Protection!

No. of Questions= 10
1.
What is the minimum initial term for an Endowment Policy to meet the qualifying
rules?
a)
Varies depending on type of policy
b)
5 years
c)
10 years
d)
There is no minimum
Web Reference
2.
Qualifying policies attract Life Assurance Premium Relief if effected before
a)
13th March 1948
b)
13th March 1984
c)
13th March 1988
d)
13th March 1989
http://www.financial-planning.uk.com/consumer/quiz/fph_quiz_protection.htm (1 of 5) [4/20/2002 6:06:30 PM]
Web Reference
3.
Which is the cheapest form of life assurance given the same initial sum assured?
a)
Endowment
b)
Low cost endowment
c)
Conventional whole of life
d)
Decreasing term assurance
Web Reference
4.
When is the sum assured payable under a term assurance?
a)
On death within the specified term
b)
On death at any time
c)
On death outside the specified term
d)
On maturity
Web Reference
5.
What type of contract is Mortgage Protection Assurance?
a)
A Whole of Life Contract
b)
An Endowment Contract
c)
A Level Term Assurance Contract
d)
A Decreasing Term Assurance Contract
Web Reference
6.
If a level temporary assurance is effected today in connection with a mortgage

will tax relief on premiums be available?
a)
No
b)
Only for PEP mortgages
c)
Only for mortgages which do not exceed 30,000
d)
Only to a first-time buyer
Web Reference
7.
All of the following policies would be available on a with profits basis, except
one. Which one?
a)
Personal pension
b)
Term assurance
c)
Endowment assurance
d)
Whole life assurance
Web Reference
8.
When is the benefit payable under a family income benefit policy?
a)
On death within the specified term
b)
On death at any time
c)
On death outside the specified term
d)
On maturity
Web Reference
9.
When does Critical Illness policy provide capital sum?
a)
On death or partial disability
b)
On death by accident
c)
On diagnosis of an insured illness
d)
On death within a given period due to a critical illness
Web Reference
10.
A Family Income Benefit policy can be surrendered for cash
a)
after 2 years
b)
after the policy has run for three quarters of its term
c)
never
d)
at the discretion of the company
Web Reference
Start Over
Go to top of quiz
index |
page back

So you think you know about mortgages!
So you think you know about Savings and Investments!

1.
How much tax do higher rate taxpayers pay in total on bank interest?
a)
30%.
b)
35%.
c)
40%.
d)
45%.
Web Reference, ref-2
2.
Which of the following is essential for a savings policy to meet the qualifying
rules?
a)
Minimum initial term of 7.5 years
b)
Monthly premium collection
c)
Term of ten years or more
d)
A single premium investment
Web Reference
http://www.financial-planning.uk.com/consumer/quiz/fph_quiz_S&I.htm (1 of 5) [4/20/2002 6:06:35 PM]
3.
Which of the following investments are issued by the Government?
a)
Equities
b)
Gilts
c)
Bonds
d)
Futures
Web Reference
4.
All of the following can offer income free of tax EXCEPT ONE. Which one?
a)
Personal Equity Plans
b)
National Savings Certificates
c)
Unit Trusts
d)
TESSAs
Web Reference
5.
"A company whose sole business consists of buying, selling and holding
shares." This is a definition of:
a)
an investment trust
b)
a market maker
c)
a member firm
d)
a Business Expansion Scheme
Web Reference
6.
What is an annuity?
a)
An amount payable every year
b)
A type of life assurance contract
c)
A pension
d)
A term assurance
Web Reference
7.
What is the income tax position on a purchased life annuity?
a)
The annuity income is tax free
b)
The whole annuity income is assessable to Income Tax at Basic Rate
c)
The interest element is assessable to Income Tax at 23% only with the capital
content being subject to capital gains tax.
d)
The interest element is assessable to Income Tax at 20% with the capital
content being tax free
Web Reference
8.
How much can an individual contribute to a maxi ISA in 2001/2002?
a)
5,000
b)
3,000
c)
7,000
d)
10,000
Web Reference, Ref-2
9.
What is the minimum term for which TESSAs have to be held to benefit from
all the tax benefits?
a)
1 full policy year
b)
1 full financial year
c)
5 years
d)
There is no minimum period
Web Reference
10.
The sum assured is payable under endowment assurance:
a)
only on maturity
b)
only on death within the specified term
c)
on death whenever that occurs
d)
on death within the specified term, or on maturity
Web Reference
Start Over
Go to top of quiz
index |
page back

BUDGET 2001 - Income Tax
Budget - 2001
INCOME TAX
The basic rate remains at 22%. In 2001/2 income tax will be charged on
taxable income as follows:
Exceeding
Not
Exceeding
Band
Rate
Tax on
full band
1,880
1,880
10
188
1,881
29,400
27,520
22*
6,054
29,401
and above
40
The figures for 2000/1 were:

0
1,520
1,520
10
152
1,521
28,400
26,880
22*
5,914
28,401
and above
40
http://www.financial-planning.uk.com/consumer/budget-timeline/budget2001/b1.htm (1 of 2) [4/20/2002 6:06:37 PM]
BUDGET 2001 - Income Tax
*The rate for all savings income except dividends is 20%. Dividends are taxed
at 10% or 32%.
The 40% higher rate for 2001/2 applies to taxable income in excess of 29,400
(2000/1 28,400). For sighted persons this means that they pay 40% if total
income exceeds 33,935 (2000/1 32,785).

2001 UK budget
Budget - 2001
6th MARCH 2001
Income Tax
Income Tax Rates
Allowances
Childrens' Tax Credit
Tax Payable
Company Cars 2001/2
Other Benefits In Kind
Employee Car Milage Allowance
Allowances For Other Transport
Stakeholder Pensions
Pension Contributions
Final Salary Pension Schemes
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2001 UK budget
Additional Voluntary Contributions (AVCs)
Enquiries Into Tax Returns
Transfers of Shares In Life Policies
Penalties And Enforcement
Evasion of Income Tax
Late PAYE Returns
Notification of Self Employment
Tax Informatoin Disclosure
National Insurance Contributions
Employees (CLASS 1 - PRIMARY)
Employers (CLASS 1 - SECONDARY)
Employers' NIC on Car and Fuel (CLASS 1A)
Self Employed (CLASS 2 and 4)
Voluntary (CLASS 3)
Business Taxation
Authors' Averaging
2001 UK budget
Energy Saving Investments
Business Profit Calculation
Limited Liability Partnerships
Allowance For Flats Over Shops
Business Gifts
Company Taxation
Rates of Tax
VCTs and EIS
Controlled Foreign Companies
EMIs and AESOPs
Taper Relief for Employees
Chargeable Gains of Groups
Intercompany Withholding Tax
Gains of Non-Resident Close Companies
Company Gains on Large Shareholdings
Tax Relief For Cleaning Up Land
Other Reforms to Company Tax
2001 UK budget
Tax Incentives To Fight Disease
Capital Gains Tax
Rates of Tax
Exemptions
Indexation and Taper Relief
Retirement Relief
Inheritance Tax
Rate
Inheritance Tax Reliefs 2001/2 and 2000/1
Value Added Tax
Rates of Tax
Registration Limits
Fuel Scale Charges
Small and Maedium Sized Businesses
Property
Multiple Supplies
Stamp Duty
2001 UK budget
Savings
Individual Savings Accounts (ISA)
Friendly Societies
Enterprise Investment Schemes
Venture Capital Trusts
National Insurance Benefits
Excise Dutes
Vehicle Excise Duties
General Betting Duty
Miscellaneous
Landfill Tax
Aggregates Levy
Climate Change Levy
Children's Tax Credit
Statutory Maternity Paay
2001 UK budget

BUDGET 2001 - Income Tax Rates
Budget - 2001
INCOME TAX RATES
2001-02
Taxable Income
Rate
Cumulative Tax
0 - 1,880
10%
188
1,881 - 29,400
22%
6,242
29,401 and above
40%
2000-01
Taxable Income
Rate
Cumulative Tax
0 - 1,520
10%
152
1,521 - 28,400
22%
6,066
28,401 and above
40%
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Savings rate except dividends is 20%. Dividends are taxed at 10%/32%.

40% tax rate is reached if income exceeds 33,935 (2000/01 32,785)
Personal allowances and reliefs
2001-02
2000-01
Personal allowance up to 65
years
4,535
4,385
Personal allowance 65 74
years*
5,990
5,790
Personal allowance over 75

years*
6,260
6,050
Childrens tax credit
5,200
Given at marginal rate of

income tax
Blind persons allowance
1,450
1,400
Rent-a-room tax-free income
4,250
4,250
5,365
5,185
Relief restricted to 10%
Married couples allowance
Age < 75, born pre 6/4/35*
Aged 75 and over*
5,435
5,255
*Age reliefs abated by 1 for

every 2 income over
17,600
17,000
Limits for other reliefs
Income Tax relief @ 20%
150,000
150,000
Capital gains tax deferral
Unlimited
Unlimited
Overall annual
subscription
7,000
7,000
Cash limit
3,000
3,000
Life insurance limit
1,000
1,000
2001-02
2000-01
Individual Savings Account

(ISA)
Inheritance Tax
Rates of tax
242,000
234,000
Death rate thereafter
40%
40%
Lifetime rate
20%
20%
Nil rate band
Major exemptions for gifts

to:
UK domiciled spouse
Spouse not-domiciled in UK
Charities
Unlimited
55,000
Unlimited
Annual gifts per donor
3,000
Small gifts to different

individuals
250 each
Recurring gifts out of income
Depends on income
On marriage
By parent
5,000
By remoter ancestor or
party to marriage
2,500
By other perso
1,000
Agricultural property relief
Vacant possession
obtainable within 12
months
100%
Landlords interest in let

farmland
50%
For new tenancies after

1/9/95
100%
Business property relief
Unincorporated
businesses
100%
Unquoted shares in
trading company
100%
Assets used for trade

carried on by donors
company
50%
Pension contributions
Self-employed and employees in non-pensionable employment
Age at start
Stakeholder
Personal
Retirement
of tax year
Pensions +
Pension plans
+
annuities
Under 36
17.5%*
17.5%*
17.5%
36-45
20.0%*
20.0%*
17.5%
46-50
25.0%*
25.0%*
17.5%
51-55
30.0%*
30.0%*
20.0%
56-60
35.0%*
35.0%*
22.5%
Over 60
40.0%*
40.0%*
27.5%
* Maximum earnings 95,400 (2000-01 91,800)

+ No earnings limit on first 3,600 of premium
Employees in occupational pension schemes
15% of earnings in year, or stakeholder pension up to 3,600 if earnings under
30,000
Capital gains tax
2001-02
Rates of tax
2000-01
Individuals
Added to income
Companies
Added to income
Trusts
34%
34%
Personal representatives
34%
34%
Individuals
7,500
7,200
Most trusts
3,750
3,600
Chattels (5/3 taxable on

excess)
6,000
6,000
50
50
100,000
150,000
100k - 400k
150k - 600k
Exemptions
Retirement Relief
Age threshold
Totally exempt
One half exempt from tax
Taper relief
Percentage of gain chargeable depends on number of complete years asset is
owned after 5/4/98:
No of
Years
Business assets
Non-business assets
% of gain
effective
% of gain
chargeable
tax rate*
chargeable
01
100%
40%
100%
40%
12
87.5%
35%
100%
40%
23
75%
30%
100%
40%
34
50%
20%
90%
38%
45
25%
10%
90%
36%
56
25%
10%
85%
34%
67
25%
10%
90%
32%
78
25%
10%
75%
30%
89
25%
10%
70%
28%
9 10
25%
10%
65%
26%
over 10
25%
10%
60%
24%
Owned
Effective tax
rate*
Assets held on 17 March 1998 qualified for a bonus year of taper relief which
from 6 April 2000 is only available for non-business assets.
Corporation tax
2001/02
First
10,000
at 10%
1,000
Marginnext
40,000
at 22.5%
9,000
Next
250,000
at 20%
50,000
Marginnext
1,200,000
at 32.5%
390,000
Above
1,500,000
at 30%
450,000
First
10,000
at 10%
1,000
Marginnext
40,000
at 22.5%
9,000
Next
250,000
at 20%
50,000
Marginnext
1,200,000
at 32.5%
390,000
Above
1,500,000
at 30%
450,000
2000/01
VAT
Rates
2001-02
2000-01
Standard rate
17%
17%
Reduced rate
5%
5%
Annual registration limit
54,000
52,000
Deregistration limit
52,000
50,000
Cash accounting entry limit
600,000
350,000
Cash accounting exit limit
750,000
437,000
Annual VAT returns entry limit
600,000
300,000
Annual VAT returns exit limit
750,000
355,000
VAT fuel scale charge

Cylinder
Capacity
Diesel
Petrol
Net scale
charge
VAT due
Net scale
charge
VAT Due
1400cc or less 191
33.51
205
36.04
1401-2000cc
191
33.51
261
45.72
Over 2000cc
243
42.59
385
67.46
Employee benefits
Car scale to 5/4/2002
Annual business mileage
Age at end of tax year
First car
Second car
< 4 years
>4 years
under 2,500
Under 18,000
35%
26.25%
2,500-18,000
Over 18,000
25%
18.75%
Over 18,000
15%
11.25%
Car fuel benefit

Engine size
Petrol
Diesel
2001/2
2000/1
2001/2
2000/1
Up to 1400cc
1,930
1,700
2,460
2,170
1401- 2000cc
2,460
2,170
2,460
2,170
Over 2000cc
3,620
3,200
3,620
3,200
Car benefit from 6/4/2002

Percentage of cars
price taxed
CO2 Emissions in grams per kilometre
2002/03
2003/04
2004/05
15*
165
155
145
16*
170
160
150
17*
175
165
155
18*
180
170
160
19*
185
175
165
20*
190
180
170
21*
195
185
175
22*
200
190
180
23*
205
195
185
24*
210
200
190
25*
215
205
195
26*
220
210
200
27*
225
215
205
28*
230
220
210
29*
235
225
215
30*
240
230
220
31*
245
235
225
230
32*
250
240
235
33**
255
245
240
34***
260
250
245
35***
265
255
Diesel supplements
add 3 per cent if car runs solely on diesel
**
***
****
maximum charge so no diesel supplement
Employers NIC
The above benefits are also subject to employers national insurance
contributions at 11.9% (2000/01 12.2%)
Mileage Allowances
For 2001/2 the rates will be:
Engine capacity
First 4,000 miles
Miles over 4,000
Less than 1500cc
40p
25p
1500cc to 2000cc
45p
25p
Over 2000cc
63p
36p
Single rate
42p
25p
Motorcycles
Bicycles
24p
12p (20p proposed 2002/03)
Stamp Duty
Rates
Stocks an marketable securities
Gifts
Nil
Intellectual property
Nil
Other assets (eg land, goodwill etc)

Price 60,000 or less
Nil
60,001 - 250,000
1% of total consideration
250,001 - 500,000
Over 500,000
National Insurance Contributions for 2001/02

Employee class 1 contributions
Weekly Earnings
Contracted in
Contracted out
First 72
Nil
Nil
72 - 87
Nil
Rebate 1.6%
87 - 575
10%
8.4%
Above 575
Nil
Nil
Employer class 1 contributions

Weekly Earnings
Contracted in
Contracted out
COSR*
COMP+
First 72
Nil
Nil
Nil
72 - 87
Nil
Rebate 3%
Rebate 0.6%
87 -575
11.9%
8.9%
11.3%
Over 575
11.9%
11.9%
11.9%
* COSR = Contracted out salary related schemes

+COMP = Contracted out money purchase schemes
Class 1A
Payable on benefits in kind
Class 1B
Payable on PAYE settlements if employer pays NIC on benefits, at a rate of
11.9% (2000/01 12.2%)
Class 2
Self-employed flat rate at 2.00 per week
Class 3
Voluntary rate of 6.75 per week (2000/01 6.55)
Class 4
7% of profits between 4,535 and 29,900 per annum (2000/01 band was
4,385 - 27,820)

BUDGET 2001 - Tax Allowances
Budget - 2001
ALLOWANCES
a. Given against income
2001/2
2000/1
Personal age up to 65
4,535
4,385
Personal age 65 to 74
*5,990
*5,790
Personal age 75 and over
*6,260
*6,050
Blind persons' allowance
1,450
1,400
Rent a room tax free home income
4,250
4,250
* increased allowance abated by 1 for every 2 income

over
17,600
17,000
Childrens tax credit
520
Married couples up to 65
NIL
NIL
Married couples 65 to 74
536
+519
+543
+526
207
200
NIL
200
17,600
17,000
b. Given as deduction from tax payable
Married couples 74 and over

Married couples- minimum amount
Widows Bereavement death before 6.4.00
+ Reduced in 2000/1 by 10p for every 2 of income over
The married couples allowance is only available if one spouse was born before
BUDGET 2001 - Tax Allowances
5 April 1935. Those attaining the age of 65 on 6 April 2000 or later will never be
able to claim the age related married couples allowance.

BUDGET 2001 - Allowances - Childrens' Tax Credit
Budget - 2001
ALLOWANCES - CHILDRENS TAX
CREDIT
From April 2001 a new childrens tax credit of 5,200 will be introduced for
families who have one or more children under the age of 16 living with them.
The rate is increased to 10,400 for families in the year of the childs birth. Tax
relief at 10% will be given on the allowance. This allowance will be gradually
withdrawn if the person claiming it is liable to tax at the higher rate. These
people will lose 1 of tax credit for every 15 of income above the point they
start to pay higher rate tax.
From June 2001 the child care tax credit will be increased to 135 and 200 for
families with one and two children respectively who incur child care costs.

http://www.financial-planning.uk.com/consumer/budget-timeline/budget2001/B3.HTM [4/20/2002 6:06:52 PM]
BUDGET 2001 - Allowances - Tax Payable
Budget - 2001
ALLOWANCES - TAX PAYABLE
The following table sets out the effect of the budget changes on the tax payable
by a married man under 65 with no other allowances:
Total income
Income tax payable

2001/2
2000/1
1999/0
1998/9
10,000
977
1,053
908
921
20,000
3,177
3,253
3,211
3,221
30,000
5,377
5,453
5,511
5,521
40,000
8,668
8,952
9,114
9,301
50,000
12,668
12,952
13,115
13,301

http://www.financial-planning.uk.com/consumer/budget-timeline/budget2001/b4.htm [4/20/2002 6:06:54 PM]
BUDGET 2001 - Allowances - Company Cars
Budget - 2001
ALLOWANCES - COMPANY CARS: 2001/2
The existing system continues until 5 April 2002.

Rises in the list price of cars increase the tax yield as the taxable benefit is
based on the list price of the car at the time it is first registered plus the price of
extras provided with the car (excluding mobile telephones) subject to an
overriding limit of 80,000. If the employee makes a contribution to the capital
cost of the car, this can be deducted up to a limit of 5,000.
Some employers are withdrawing company cars entirely and arranging for
employees to hire a car for a day or two if they have to do a business journey of
over say 100 miles.
The percentage of the list price taxed as additional income was increased from
6 April 1999. The following rates apply until 5 April 2002:
Annual business mileage
First car
Second car
Age at end of tax year

< 4 years
>4 years
Under 2,500
Under 18,000
35%
26.25%
2,500-18,000
Over 18,000
25%
18.75%
Over 18,000
15%
11.25%
Fuel Benefits: The taxable benefits for cars are:

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BUDGET 2001 - Allowances - Company Cars
Petrol
Diesel
Engine size
2001/2
2000/1
2001/2
2000/1
Up to 1400cc
1,930
1,700
1,930
2,170
1401- 2000cc
2,460
2,170
2,460
2,170
Over 2000cc
3,620
3,200
3,620
3,200
National insurance and income tax are payable if any private fuel is paid for
during the tax year. Thus the optimum date to withdraw the fuel benefit is 5
April. Employees may then reclaim the cost of business fuel at a fixed rate per
mile agreed with the Inland Revenue - perhaps 12p to 20p per business mile
depending on the fuel consumption of the car.

BUDGET 2001 - Allowances - Other Benefits In Kind
Budget - 2001
ALLOWANCES - OTHER BENEFITS IN
KIND
Vans: There is a benefit in kind assessable on the employee if a van under 3.5
tonnes is available for private use. The benefit, which includes any fuel
provided by the employer, depends on the age of the van. The rates for both
2001/02 and 2000/01 are:
Less than four years old at the end of tax year
500
Over four years old
350

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BUDGET 2001 - Allowances - Employee Car Mileage
Budget - 2001
ALLOWANCES - EMPLOYEE CAR
MILEAGE
A major change has been announced in the rates accepted by the Inland
Revenue of reimbursement paid to employees for using their private cars on
business which does not involve a taxable benefit in kind.
Some employers reimburse all employees at the same rate irrespective of the
engine size of the employees car. In such circumstances the Inland Revenue
accept the single rate.
The reimbursement rates are based on the engine size of the car as follows:
1997/8 to 2000/1
First 4,000 miles
Miles over 4,000
Less than 1000cc
28p
17p
1001 to 1500 cc
35p
20p
1501 to 2000 cc
45p
25p
Over 2000 cc
63p
36p
Single rate
40p
22.5p
2001/2
First 4,000 miles
Miles over 4,000
Less than 1500cc
40p
25p
1500cc to 2000cc
45p
25p
Over 2000cc
63p
36p
Single rate
42.5p
25p
From 6 April 2002
First 10,000 business miles
Additional business miles
All sizes of car
40p
25p
The 2001/2 change significantly increases the reimbursement rate for smaller
cars.
The rates from 6 April 2002 will make the owners of larger cars significantly
worse off.
A car owner doing less than 4,000 business miles will be either 5p or 23p per
mile worse off in 2002/3 compared to 2001/2.
An owner of a car with an engine size of over 2000cc who drives 10,000 miles
per annum on business can be paid 4,689 tax free to cover motoring costs up
to 5 April 2002 but this will reduce to only 4,000 thereafter.
Business miles in excess of 10,000 will attract 11p less tax free per mile.
In addition to the above figures an employee can claim the business proportion
of any interest paid on a loan to acquire the vehicle, but only until 5.4.2002.
Any employee who is reimbursed at the single rate may make a claim for tax
relief on the higher reimbursement rates if his car is 1501cc or bigger.
Employees will also be able to claim a tax refund if their employers pay them a
round sum car allowance, which will have been put through the PAYE system
together with a low reimbursement rate per mile. The refund can be calculated
using the above table.

BUDGET 2001 - Allowances for Other Transport
Budget - 2001
ALLOWANCES - FOR OTHER
TRANSPORT
The Inland Revenue also accepts that there is no tax liability for the following reimbursements:
Motorcycles
24p per mile
Bicycles
12p per mile
From 6 April 2002 the reimbursement for bicycles will increase to 20p per mile.
WORKS BUSES
If an employer provides a bus to transport employees between home and work there is no benefit in kind
provided the bus can seat 9 passengers previously 12.

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BUDGET 2001 - Allowances - Stakeholder Pensions
Budget - 2001
ALLOWANCES - STAKEHOLDER
PENSIONS
Stakeholder pensions will be launched in April 2001. These are low cost,
flexible personal pension plans. The Government expects employers to play a
major role in the promotion and distribution of Stakeholder pensions to their
employees. Employers will have to offer a Stakeholder pension scheme to its
employees, unless it can satisfy one of the following exemptions:
there is an Occupational Pension Scheme in place, available to all staff,

or
there is a Group Personal Pension Plan in place, with the employer
offering to contribute at least 3% of earnings for all employees, and there
are no early transfer penalties, or
the employer has fewer than five employees
Employers not exempt from offering a Stakeholder pension will have six months
in which to choose a suitable scheme, promote it to the employees and set up a
facility to collect employee contributions through the payroll system. Further
information and advice can be obtained from our Financial Planning Division.

BUDGET 2001 - Allowances - Stakeholder Pensions
BUDGET 2001 - Allowances - Pension Contributions
Budget - 2001
ALLOWANCES - PENSION
CONTRIBUTIONS
The maximum earnings on which pension contributions can be paid into

personal pension plans in 2001/2 will be 95,400 (2000/1 91,800).
This limit does not apply to additional premiums paid into retirement annuities
taken out before 1 July 1988.
For 2001/2 the maximum contribution which will qualify for tax relief is a
percentage of net relevant earnings and is set out in the table:Age at start
Stakeholder
Personal
Retirement
of tax year
Pensions +
Pension Plans +
Annuities
Under 36
17.5%*
17.5%*
17.5%
36-45
20.0%*
20.0%*
17.5%
46-50
25.0%*
25.0%*
17.5%
51-55
30.0%*
30.0%*
20.0%
56-60
35.0%*
35.0%*
22.5%
Over 60
40.0%*
40.0%*
27.5%
* Subject to earnings cap 95,400 (2000/1 91,800)

+ Individuals may pay total premiums of up to 3,600 in 2001/2 without
reference to earnings limits, provided they are not over 75. Minors as well as
adults with no earned income can take out pensions for the first time. Also
employees in an Occupational Pension Schemes can pay 3,600 into a PPP or
Stakeholder without reference to the contribution into the Occupational scheme
provided their remuneration is less than 30,000.
From 6 April 2001 it will not be possible to pay PPP or Stakeholder premiums
by reference to past earnings. However premiums can be carried back from
one tax year to the previous tax year if paid before 31 January.
FINAL SALARY COMPANY PENSION SCHEMES
Employees who join a final salary company pension scheme after 16 March
1987 will have their tax free lump sum restricted to a deemed final salary of
100,000 even if their actual salary is higher.
ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVCs)
Employees who are members of an Occupational Pension Scheme (i.e. an
employers scheme) may pay up to 15% (2000/1 15%) of their earnings as an
AVC to an Occupational Pension Scheme or into a free standing AVC scheme.
This 15% is reduced by any contributions by the employee to the employers
scheme. Contributions in respect of earnings of a tax year must be made by
the end of that tax year.
ENQUIRES INTO TAX RETURNS
The closure of enquiries is to be simplified.
TRANSFERS OF SHARES IN LIFE POLICIES
Where an interest in a life policy is transferred, for example on divorce, an
income tax charge can arise. The law is being clarified so that the seller or
donor is liable to pay the tax. Life companies will have a notification
requirement.

BUDGET 2001 - Penalties and Enforcement
Budget - 2001
PENALTIES AND ENFORCEMENT
EVASION OF INCOME TAX

From 1 January 2001 a new criminal offence has been introduced of being
knowingly concerned in the fraudulent evasion of income tax. It may be tried
summarily in the Magistrates Court or on indictment in the Crown Court.
The penalty can be a fine or imprisonment or both:
Imprisonment
Fine
Magistrates Court
Crown Court
6 months
7 years
5,000
Unlimited
The Inland Revenue has allocated 50 staff to these prosecutions.

A press release states that the offence will include:
Persistent failure to submit tax returns;
Persistent and deliberate failure to operate the PAYE scheme;
Joint prosecutions of those who defraud the Benefits Agency and Inland
Revenue at the same time.
BUDGET 2001 - Penalties and Enforcement
LATE PAYE RETURNS

In the last year the Inland Revenue has been determining automatic penalties
on employers who fail to submit PAYE year end returns on time. The penalty is
100 per month for each 100 employees for late P35s, P14s and P38 (due on
19 May) a further 100 per month for each 100 employees for late P11Ds /
P9Ds (due 6 July).
Employers should ensure that PAYE returns arrive with the Inland Revenue
before the deadlines.
NOTIFICATION OF SELF EMPLOYMENT
A new 100 penalty is proposed for failing to notify self-employment within three
months unless the new business estimates trading profits to be below the NI
Small Earnings exemption of 3,825 p.a.
TAX INFORMATION DISCLOSURE
Until now it has been a fundamental principle that information provided to the
Inland Revenue and Customs & Excise was confidential and could not be
released to other persons.
The new Criminal Justice and Police Bill gives the Inland Revenue and
Customs a statutory power to disclose information to the police and other law
enforcers to aid their criminal investigations.
Additional powers to remove items found on a premises search are also being
given.

BUDGET 2001 - National Insurance Contributions
Budget - 2001
NATIONAL INSURANCE CONTRIBUTIONS
The final phase of the major change in the structure of national insurance starts
on 6 April 2001. The changes align the national insurance threshold to the
income tax threshold. The government has increased the upper contributions
earnings limit for employees contributions significantly this year so that
employees earning more than 27,820 will have an increase in national
insurance deductions from their pay but the limit still does not coincide with the
starting point of the 40% higher rate of income tax. The new 87 threshold
coincides with the income tax personal allowance of 4,535 for 2001/2. The full
rates are:
EMPLOYEES (Class 1 - primary)
Prior to 6 April 1999 employees paid national insurance on all their pay 2% on
the first 64 per week and 10% on earnings between 64 and 485. From 6
April 2001 they will pay no national insurance on the first 87 of earnings. The
full rates are:
Weekly Earnings
Contracted in
Contracted out
First 72
Nil
Nil
72 - 87
Nil
Rebate 1.6%
87 - 575
10%
8.4%
Above 575
Nil
Nil
The maximum national insurance contribution payable by an employee in

2001/2 for a 52 week year will be 2,537 which is reached when earnings reach
29,900. The contributions in earlier years would have been:
2001/02
2,537
1996/97
2,112
2000/01
2,386
1995/96
2,046
1999/01
2,256
1994/95
2,000
1998/99
2,256
1993/94
1,762
1997/98
2,160
1992/93
1,700
EMPLOYERS (Class 1 secondary)

From 6 April 2001 the main employer rate is reduced from 12.2% to 11.9% (a
0.25% decrease). This reduction needs to be compared to the increase on 6
April 1999 from 10% to 12.2% (a 22% increase). The 2001/2 rates are:
Weekly Earnings
Contracted in
Contracted out
COSR*
COMP+
First 72
Nil
Nil
Nil
72 - 87
Nil
Rebate 3%
Rebate 0.6%
87 -575
11.9%
8.9%
11.3%
Over 575
11.9%
11.9%
11.9%
* COSR = Contracted out salary related schemes +COMP = Contracted out

money purchase schemes
EMPLOYERS NIC ON CAR AND FUEL (Class 1A)

The benefit assessed on employees for income tax purposes is subject to
employers national insurance contributions. The rate for 2000/1 is 12.2% and
payments will be payable on 19 July 2001. For 2001/2 the rate will be 11.9%.
SELF EMPLOYED (Class 2 and 4)
The class 2 weekly contribution will continue to be 2 per week. The small
earnings exemption is increased to 3,955 for 2001/2 from 3,825.
The class 4 rate remains at 7%. The earnings band widens to 4,535-29,900
from 4,385-27,820. This widening of the band means that a self-employed
persons liability changes as follows:
Earnings
2001/2 NIC
Change
5,600
179
Saving
10
10,000
487
Saving
10
15,000
837
Saving
10
20,000
1,187
Saving
10
25,000
1,537
Saving
10
29,900 and above
1,880
Increase 136
The maximum contributions paid by the self employed in recent years have
been:2001/02
1,880
1998/99
1,404
2000/01
1,744
1997/98
1,350
1999/01
1,449
1996/97
1,323
VOLUNTARY (Class 3)
The weekly rate has been increased from 6.55 to 6.75 for 2001/2. The
additional annual cost is 10.40 a year.

BUDGET 2001 - Business Taxation
Budget - 2001
BUSINESS TAXATION
AUTHORS' AVERAGING
Authors can spread the income from certain types of copyright over a number of
years for tax purposes. The Government plans to simplify the spreading of
income. Instead, authors will be able to elect to average the profits of two
consecutive years. (Farmers already have the option to do this.)
ENERGY SAVING INVESTMENTS
Businesses will be able to claim 100% of the cost of investment in certain
energy-saving plant and machinery, rather than add it to the capital allowances
pool. It only applies for use in the purchasers own trade, and leasing does not
count. The criteria for deciding what assets qualify are on the internet at
www.eca.gov.uk.
BUSINESS PROFIT CALCULATION
At present a businesss accounts profits are often very different from its
accounts profits, because of the way the tax legislation prescribes the
calculation of tax liabilities. It is proposed (and consultation will follow) to try to
align the tax profit more closely with the accounts profit.
LIMITED LIABILITY PARNERSHIPS
Limited Liability Partnerships will become available from 6 April 2001. They will
still be taxed as partnerships. New rules will ensure that non-trading LLPs are
not unfairly tax-advantaged.
ALLOWANCE FOR FLATS OVER SHOPS
BUDGET 2001 - Business Taxation
To encourage redevelopment of urban centres, spending on improvements to

pre-1980 flats over shops will qualify for 100% capital allowances.
BUSINESS GIFTS
Currently, gifts that cost less than 10 and which carry an advertisement (and
which are not food or drink) are tax-deductible. The limit will go up to 50 per
gift.

BUDGET 2001 - Company Taxation
Budget - 2001
COMPANY TAXATION
RATES OF TAX
Corporation tax rates for the financial year 2001 (i.e. from 1 April 2001 to 31
March 2002) are the same as for the previous year and are:
First
10,000 at 10%
1,000
Marginnext
40,000 at 22.5%
9,000
250,000 at 20%
50,000
Marginnext
1,200,000 at 32.5%
390,000
Above
1,500,000 at 30%
450,000
Next
The limits of 10,000, 300,000 and 1,500,000 in the above table are reduced
proportionately for accounting periods of less than twelve months. If the
company has one or more active associated companies (ie in the same 50%
group or controlled by the same shareholders) these figures are divided by the
number of such companies plus one.
VCTs and EIS
Venture Capital Trusts and Enterprise Investment Scheme companies provide
tax relief on investment by individuals. There are a number of improvements in

the rules that will make them more flexible:
The company will now have longer to invest the proceeds of the investment
Certain anti-avoidance rules will be relaxed
If an EIS company becomes quoted, the relief given will no longer be lost
CONTROLLED FOREIGN COMPANIES

Where a UK company has a large stake in a foreign company (based in a tax
haven), the foreign company is called a Controlled Foreign Company and there
are rules that tax its profits in the hands of its UK shareholders. Complicated
avoidance schemes have cropped up, and new rules will block these schemes.
EMIs AND AESOPs
Enterprise Management Incentives allow employees to participate in the
success of the companies for which they work. Employees are granted options
to buy shares at a predetermined price. When the options are exercised, there
is usually no tax to pay. For CGT purposes the shares are treated as owned
since the date of the grant of options.
Budget changes improve the scheme:
Up to 3m of shares can now be under option
The limit on the number of participating employees has gone
Employees no longer have to be key
Advance clearance procedures are now to be available
The stamp duty charge when an employee buys shares through an All
Employee Share Plan (AESOP) will go.
TAPER RELIEF FOR EMPLOYEES
Employee shareholdings in all companies (not just trading companies) will
qualify for business asset taper relief where the employee owns less than 10%
of the company.
CHARGEABLE GAINS OF GROUPS

The Finance Act 2000 changed the rules for capital gains in companies, but
there were problems that will be fixed in the 2001 Finance Bill.
INTERCOMPANY WITHHOLDING TAX
When a UK company pays interest or royalties to another UK company, it has to
deduct tax at source, and the recipient company is treated as receiving income
net of tax. The requirement to deduct tax at source will end.
GAINS OF NON-RESIDENT CLOSE COMPANIES
Close companies are generally companies controlled by 5 or fewer people.
Where a foreign close company makes capital gains, it is possible to tax those
gains on UK-resident individual shareholders, even if they do not receive any of
the proceeds. The rules will ease so that some shareholders will no longer be
caught. The exceptions are:
Shareholders who own 10% or less will not be caught

Where the gain arises on an offshore asset used in an offshore trade, it
will be exempt
If the gain would be attributed to an exempt pension scheme, again it will
not be caught
COMPANY GAINS ON LARGE SHAREHOLDINGS

Where a company owns a substantial stake (to be 20%, previously 30%) in
another trading company for at least 12 months (previously it was 2 years), and
then sells it for a gain, by reinvesting the gain it will be possible to defer it.
These rules are improvements to changes introduced last year.
TAX RELIEF FOR CLEANING UP LAND
Where companies spend money in cleaning up contaminated land, they will be
able to deduct not only the cost of the cleaning up but an extra 50% as well, in
calculating their business profits.
OTHER REFORMS TO COMPANY TAX
Consultation will begin allowing for changes to the tax system for large
businesses and mutinationals.
Tax relief may be available for the purchase of certain intangible assets
(eg goodwill or intellectual property)
The research and development tax credit introduced in the 2000 Budget
for small companies may be extended to large businesses following
consultation
Improvements to Double Tax Relief will allow companies more flexibility
TAX INCENTIVES TO FIGHT DISEASE

There will be a consultation on the design of a new tax credit to encourage
research into the development of vaccines and drugs to combat certain killer
diseases. Companies will be able to deduct not just 100% of the cost but an
extra 50% as well in calculating their taxable profits.

BUDGET 2001 - Capital Gains Tax
Budget - 2001
CAPITAL GAINS TAX
RATES OF TAX
a) Individuals: Gains are treated as the top slice of savings income to
calculate the rate of tax payable, so the tax rate will be either 10% or 20% when
total income and gains are below the basic rate limit, and 40% where they
exceed the limit.
b) Trustees: Trustees of Interest in Possession trusts, Accumulation and
Maintenance trusts, Discretionary trusts and personal representatives pay
capital gains tax at a flat rate of 34%.
c) Companies: Companies are not entitled to an annual exemption or taper
relief, but still claim indexation allowance up to the month of disposal.
EXEMPTIONS
a) Individuals: An individuals annual exemption for capital gains is increased
to 7,500 for 2001/2 (2000/1 7,200). Each spouse is entitled to the exemption,
so it is possible for a married couple to enjoy tax free gains of 15,000 in the
year. The exemption is not transferable between spouses and cannot be
carried forward or back.
b) Trustees: Most trustees enjoy exemption on gains of up to 3,750 (2000/1
3,600).
c) Companies: There are no exemptions for companies.
INDEXATION AND TAPER RELIEF
Individuals and trustees continue to be able to claim Indexation relief (i.e. relief
for inflation) by reference to increases in Retail Prices Index up to April 1998.
They may also reduce the gross capital gain by taper relief according to the
number of complete years the asset has been owned since 6 April 1998. Non
business assets owned on 17 March 1998 qualify for an extra years taper
relief. The rates are as follows:
No of Years Business assets
Owned
Non-business assets
% of gain
chargeable
Effective tax
rate*
% of gain
chargeable
Effective tax
rate*
01
100%
40%
100%
40%
12
87.5%
35%
100%
40%
23
75%
30%
100%
40%
34
50%
20%
95%
38%
45
25%
10%
90%
36%
56
25%
10%
85%
34%
67
25%
10%
80%
32%
78
25%
10%
75%
30%
89
25%
10%
70%
28%
9 10
25%
10%
65%
26%
over 10
25%
10%
60%
24%
* Based on 40% main tax rate
Business Assets include:
assets used in a trade carried on by an individual or a partnership in

which he is a partner,
assets used in a trade carried on by, or a subsidiary of, a qualifying
company, and
shares in a qualifying company.
A qualifying company is defined to include:
a quoted company in which the individual owns 5% of the shares,
a quoted company of which the individual is an officer or employee,
an unquoted trading company, and
a non-trading company where the employees interest is 10% or less.
The above rules are adapted for personal representatives and trustees.
The widened definition of business asset from 6.4.2000 means that some
assets will qualify which did not previously. For such assets the gain is time
apportioned and the higher taper relief rate is due only on the post 5 April 2000
gain.
RETIREMENT RELIEF
This is being phased out at 5.4.2003 but may be partly compensated for by the
taper relief. The figures for qualifying gains are:
Disposal date
Exempt for gains up to
Half gain taxed on next
6.4.00 5.4.01
150,000
450,000
6.4.01 5.4.02
100,000
300,000
6.4.02 5.4.03
50,000
150,000
After 5.4.03
Nil
Nil

BUDGET 2001 - Inheritance Tax
Budget - 2001
INHERITANCE TAX
RATE
There is no change to the inheritance tax rates, but the threshold is raised to
242,000 (2000/1 234,000). The calculation of tax is:
Cumulative chargeable transfer (gross)
Tax rate on gross
0 to 242,000
0%
Above 242,000
40%
Tax is payable at 20% on lifetime gifts which do not qualify as Potentially

Exempt Transfers.
On an Estate of a deceased person which does not qualify for any exemptions
or reliefs, the tax payable will be:
Size of estate:
IHT payable
2001/2
2000/1
242,000
Nil
3,200
3,200
6,400
250,000
500,000
103,200
106,400
750,000
203,200
206,400
1,000,000
303,200
306,400
2,000,000
703,200
706,400
INHERITANCE TAX RELIEFS 2001/2 and 2000/1

Gift to spouse domiciled in UK
Unlimited
Gift to non-domiciled spouse
55,000
Charities
Unlimited
Annual exempt total
3,000
Small gifts to different persons

Regular gifts out of income
250 each
Based on income
Agricultural property relief
Vacant possession available in 2 years
100%
Landlords interest in let farmland

(but new tenancy after 1.9.95)
50%
100%
Business property relief
Unincorporated business
100%
Any holding in unquoted company
100%
(Recently the Inland Revenue has been querying the

relief claimed on shares in unquoted companies which
have surplus cash in their balance sheets)
Land, machinery or plant used by a company controlled
by transferor or a partnership in which he is a partner
50%
Gifts on marriage
By parent
5,000
By remoter ancestor
2,500
By party to marriage
2,500
By other persons
1,000
Tapering Relief: If an individual dies within 7 years of making a lifetime gift on

which the inheritance tax was deferred, the full tax liability on death is reduced
for each complete year as follows:
Year
Reduction
Year
Reduction
03
NIL
56
60%
34
20%
67
80%
45
40%
Over 7
100%

BUDGET 2001 - Value Added Tax
Budget - 2001
VALUE ADDED TAX
RATES OF TAX
The standard rate continues to be 17%. The reduced 5% rate is being
extended to apply to childrens car seats and certain urban regeneration
measures.
The VAT fraction remains 7/47ths of the VAT inclusive price for the standard
rate.
REGISTRATION LIMITS
The current registration limit of 52,000 is increased to 54,000 from 1 April
2001. The deregistration limit increases to 52,000 on the same date.
The registration and deregistration thresholds for acquisitions from other EC
countries will also be increased from 52,000 to 54,000 on 1 April 2001.
FUEL SCALE CHARGES
Registered traders who reclaim VAT on petrol or diesel bought for private
mileage must adjust their VAT returns for a deemed supply to the employee or
business owner.
The VAT due listed for each car should be added to output VAT for the quarter.
The net scale charge should be added to outputs for the quarter. Those
making monthly VAT returns should account for one-third of the amounts
quoted. The new reduced scales should be used from the start of the first
accounting period beginning on or after 6 April 2001.
Cylinder Capacity
Diesel
Petrol
Net scale
charge
VAT due
Net scale
Charge
VAT Due
1400cc or less
191
33.51
205
36.04
1401-2000cc
191
33.51
261
45.72
Over 2000cc
243
42.59
385
67.46
SMALL AND MEDIUM SIZED BUSINESSES

1
Cash Accounting
The turnover limit for entry into the scheme will increase to 600,000 from 1
April 2001. Cash accounters enjoy cash flow benefits and automatic bad debt
relief.
2
Annual Returns
The limit for entry to annual rather than quarterly VAT Returns is to be
increased to 600,000 from 1 April 2001.
PROPERTY
To encourage urban regeneration a reduced rate of 5% is proposed for some
residential refurbishments. Zero-rating will be extended to cover the sale of
renovated houses that have been empty for ten years or more.
MULTIPLE SUPPLIES
As a result of the European Court decision in the Card Protection Plan case,
Customs & Excise have directed businesses which make multiple supplies to
readdress their current arrangements by 1 June 2001. Businesses thought to
be affected are Dispensing Opticians, Learned Societies who split their
subscriptions, and organisations such as Museums which split their admission
charges to take account of printed matter, although there maybe an extrastatutory concession for membership subscriptions to non-profit making bodies.

BUDGET 2001 - Stamp Duty
Budget - 2001
STAMP DUTY
The stamp duty payable at 0.5% on transfers of stocks and shares has not been
changed.
The rates of duty on transfers of other property, such as the conveyance of land
and buildings, goodwill, debtors, creditors, trade marks, lease premiums, etc,
are:
0 - 60,000
Nil
60,000 - 250,000
1%
250,000 - 500,000
3%
Over 500,000
4%
New interest and penalty provisions were introduced on 1 October 1999.

There will be a complete stamp duty exemption for all property transactions in
areas designated as the most disadvantaged parts of the UK.
BUDGET 2001 - Stamp Duty

BUDGET 2001 - Savings
Budget - 2001
SAVINGS
INDIVIDUAL SAVINGS ACCOUNTS (ISA)

The maximum subscription to an ISA remains at 7,000 until April 2006.
Investors can therefore contribute the full allowance into the stock / share Maxi
ISA, or split the allowance into the three components ( within the Maxi ISA ) as
follows:
3,000
Cash
1,000
Life assurance
3,000
Stocks & shares
Alternatively, Mini ISAs can be effected with a separate ISA manager for each
component, subject to the same limits. From April 2001 the 3,000 cash ISAs
will be available to individuals over 16 years of age (previously 18 years).
FRIENDLY SOCIETIES
Up to 25 per month (270 per annum) can be paid into a 10 year endowment
policy with a Friendly Society. No tax is payable on the income or gains of the
fund and there is no tax payable on maturity.
ENTERPRISE INVESTMENT SCHEMES
These are investments in unquoted trading companies. Income tax relief at
20% is available for investments up to 150,000 and capital gains can be held
BUDGET 2001 - Savings
over against the investment so that the total tax relief on the investment can be
as high as 60%.
VENTURE CAPITAL TRUSTS
These are quoted investment trusts which invest in a number of unquoted
trading companies. 20% income tax relief is available on investments of up to
100,000. Again capital gains tax liabilities can be held over against the
investment. Dividends paid by the venture capital trust are exempt from income
tax. There is also an exemption from capital gains tax on the disposal of
ordinary shares via the VCT.

BUDGET 2001 - National Insurance Benefits
Budget - 2001
NATIONAL INSURANCE BENEFITS
All benefits have been uprated in line with inflation, and the following weekly
rates will apply from April 2000. Revised rates of payment include:
2001/2
2000/1
Weekly
Annual
Weekly
Annual
72.50
3,770
67.50
3,510
Both contributors each
72.50
3,770
67.50
3,510
Wife not a contributor

addition
43.40
2,257
40.40
2,101
13
25p
13
Retirement pension
Single person
Married couples
Age addition (over 80)
25p
Minimum income guarantee
Single pensioner
91.15
4,740
140.55
7,309
72.50
3,770
67.50
3,510
69.75
3,627
67.50
3,510
Higher rate
14.65
761
14.20
738
Lower rate
7.35
382
7.10
369
First or only child
15.50
806
15.00
780
Each extra child
10.35
538
10.00
520
Under 18 single
31.95
1,661
31.45
1,635
18-24 single
42.00
2,184
41.35
2,150
25 and over single
53.05
2,758
52.20
2,714
Couples
Widows benefit
Incapacity benefit
Long term
Increase for age:
Child Benefit
Job Seekers Allowance

BUDGET 2001 - Excise Duties
Budget - 2001
EXCISE DUTIES
The duty on unleaded petrol has been reduced by 2p per litre to 46.82p.
Other rates of duty include:
Excise Duty
VAT
Total Price
Tax as % of
price
Beer (pint)
0.26
0.33
2.20
27%
Wine (75cc)
1.16
0.53
3.50
48%
Spirits (bottle)
5.48
1.84
12.40
59%
Cigarettes (20)
2.74
0.63
4.23
80%
VEHICLE EXCISE DUTIES

Cars
Standard rate remains at 155
Reduced Rate remains at 100 currently for cars up to 1100cc
BUDGET 2001 - Excise Duties
from 1 July 2001 up to 1500cc

A band of four amounts of duty is introduced from 1 March 2001 for new cars.
This is based on carbon emissions.
Lorries
A review of excise duties is being carried out.
GENERAL BETTING DUTY
The current 6.75% duty on total stakes will be abolished by 1 January 2002 and
replaced with a 15% tax on bookmakers gross profits.

BUDGET 2001 - Miscellaneous
Budget - 2001
MISCELLANEOUS
LANDFILL TAX
From 1 April 2001 the standard rate will increase from 11 to 12 per tonne.
AGGREGATES LEVY
This new levy will be introduced in April 2002. The levy will be paid by those
who commercially exploit aggregates in the UK.
CLIMATE CHANGE LEVY
This levy will be introduced on 1 April 2001 and will be paid by suppliers of
energy. Supplies of energy from renewable sources will be exempt from the
levy.
Domestic use, non-business use by charities and small quantities will be
excluded from the charge.
Reduced rates will apply to energy intensive users and certain horticultural
producers.
CHILDREN'S TAX CREDIT
Childrens tax credit will be increased to 10 a week from the original proposal
of 8.50 per week, from the date of introduction in April 2001. From April 2002
the childrens tax credit will be increased to 20 a week for the first year of a
childs life.
BUDGET 2001 - Miscellaneous
STATUTORY MATERNITY PAY

Statutory maternity pay and maternity allowance rises to 75 a week from April
2002 and 100 a week from April 2003. From April 2003 the period of maternity
pay is extended from eighteen to twenty-six weeks, and in addition there will be
a right to two weeks of paid paternity leave for working fathers, also at the rate
of 100 a week. There will be an equivalent paid adoption leave when a child is
first placed with a family.
The small employer relief threshold for reclaiming statutory maternity pay in full
doubles to 40,000 from April 2002.
index | page back

So you think you know about pensions!
So you think you know about Pensions!

1.
Payments of pension from a Personal Pension are
a)
not taxable provided no tax free cash has been taken;
b)
subject to basic rate tax only
c)
subject to higher rate tax only
d)
treated as earned income and subject to basic and higher rates of taxes where
appropriate
Web Reference
2.
What is the maximum percentage of salary which an employer may pay as a

contribution to an occupational pension scheme?
a)
The maximum contribution relates to the benefits to be provided
b)
15%
c)
17.5%
d)
Zero
http://www.financial-planning.uk.com/consumer/quiz/fph_quiz_pensions.htm (1 of 5) [4/20/2002 6:07:52 PM]
Web Reference
3.
Mr Brights pays 4% of his salary towards the company pension scheme. What %
of his total remuneration can he contribute to an AVC?
a)
5%
b)
9%
c)
10%
d)
11%
Web Reference
4.
Who is entitled to a full basic state pension?
a)
Everyone who has reached state retirement age
b)
Everyone who has reached state retirement age and who has paid the required
contributions
c)
Only those who have been employed and have paid the required contributions
d)
Everyone who has paid National Insurance contributions
Web Reference
5.
David James works for a small engineering company. His employers are
contributing 100 per month to an executive pension scheme. What type of
scheme is this?
a)
Personal pension
b)
Defined benefits
c)
Money purchase
d)
Final salary
Web Reference
6.
Which of the following is true of a Final Salary Scheme?
a)
The contributions automatically rise in line with the Retail Prices Index
b)
The benefits payable are known when the member enters the scheme
c)
The contributions rise in line with the average earnings index
d)
There is no need to review the premiums
Web Reference
7.
In order for an individual to contribute to a Personal Pension Plan on a regular

basis, a prospective client must have
a)
taxable earnings
b)
income from employment taxed under Schedule E
c)
an employer who is willing to contribute
d)
agreement from his employer
Web Reference
8.
How much is the earnings cap in 2000/2001?
a)
90,000
b)
91,000
c)
100,000
d)
200,000
Web Reference
9.
What is the maximum tax free cash which can be taken from a personal pension
plan effected today?
a)
1.5 times final earnings
b)
150,000
c)
2.25 times the policyholder's starting pension
d)
25% of the accumulated fund, excluding protected rights
Web Reference
10.
What is the maximum pension which can be provided by a personal pension at

retirement?
a)
Two thirds of earnings at end of tax year during which retirement occurs
b)
One and a half times final earnings
c)
There is no maximum
d)
Two thirds of the fund accumulated at retirement
Web Reference
Start Over
Go to top of quiz
index |
page back


1.
Who benefits from the insurance provided by the payment of a mortgage

indemnity guarantee premium?
a)
The borrower
b)
The lender
c)
The purchaser
d)
The seller
Web Reference
2.
When was MIRAS abolished?
a)
6 April 2000
b)
5 April 2000
c)
31 January 2000
d)
31 September 2000
Web Reference
http://www.financial-planning.uk.com/consumer/quiz/fph_quiz_mortgage.htm (1 of 5) [4/20/2002 6:07:57 PM]
3.
Special MIRAS provisions continue to apply to home income plans but only if
they were in force before what date?
a)
6 April 2000
b)
10 March 1999
c)
1 January 1999
d)
6 April 1999
Web Reference
4.
The following can all be utilised as a repayment vehicle for a mortgage,

except for one. Which one?
a)
Personal Pension
b)
Company Pension
c)
Term Assurance
d)
PEP
Web Reference
5.
An interest only mortgage means that:
a)
the capital is repaid at the end of the mortgage term
b)
a single payment of interest is made at the end of the mortgage term
c)
capital and interest is repaid throughout the mortgage term
d)
interest is paid at a fixed rate throughout the term
Web Reference
6.
What type of policy is usually taken out to cover the liability under an
ordinary repayment mortgage (capital and interest payment mortgage)?
a)
Endowment
b)
Flexible Endowment
c)
Convertible Term Assurance
d)
Decreasing Term Assurance
7.
What rate of stamp duty is payable up to 250,000?
a)
1% on that part of the purchase price in excess of 60,000
b)
1% of the purchase price
c)
1% of the purchase price where this exceeds 60,000
d)
1% of the mortgage amount if it exceeds 60,000
Web Reference
8.
The variable rate of interest charged to mortgage accounts
a)
changes when the bank base rate changes
b)
varies between 6% and 16%
c)
is fixed annually for mortgage holders at the time of their annual statement
d)
incorporates the lender's costs, expenses and profit
Web Reference
9.
What does a capped mortgage rate mean?
a)
The interest rate is fixed
b)
The interest rate is variable
c)
The interest rate is variable but will not fall below a set rate.
d)
The interest rate is variable but will not exceed a set rate
Web Reference , ref-2
10.
Which is the best type of mortgage to have?
a)
It depends on individual circumstances
b)
Endowment
c)
Repayment
d)
PEP
Start Over
Go to top of quiz
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Useful Addresses & Telephone Numbers FREE Financial Planning Information
CONTACTS - Useful Addresses & Telephone Numbers
accountancy
Inland
Revenue
actuary
insurance
arbitrators
investment
auctioneers
law
banking
mortgage
building society
ombudsman
consumer
pensions
estate agents
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http://www.financial-planning.uk.com/consumer/info/contacts/index.htm (1 of 2) [4/20/2002 6:08:04 PM]

http://www.financial-planning.uk.com/consumer/info/contacts/index.htm (2 of 2) [4/20/2002 6:08:04 PM]

accountancy | actuary | auctioneers | banking | building society | consumer | estate agents | financial services |
government services | Inland Revenue | insurance | investment | law | mortgage | pensions | surveyors | trusts
TO CONTACTS INDEX PAGE
ACCOUNTANCY
Association of Chartered Certified Accountants: 29 Lincoln's Inn Fields, London, WC2A 3EE.
Tel: 020 7242 6855 (general enquiries); 020 7396 5900 (members).
Fax: 020 7831 8054 (general enquiries); 020 7396 5959 (members).
E-mail: services.enquiries@acca.co.uk
Web site: http://www.acca.co.uk
Institute of Chartered Accountants in England and Wales: PO Box 433, Chartered Accountants'
Hall, Moorgate Place, London EC2P 2BJ.
Tel: 020 7920 8100. Fax: 020 7920 0547.
Web site: http://icaew.co.uk
Institute of Chartered Accountants in Ireland: Chartered Accountants' House, 87-89 Pembroke
Road, Dublin 4, Republic of Ireland.
Tel: 00 353 1 668 0400.
Web site: http://www.icai.ie
Institute of Chartered Accountants in Scotland: 27 Queen Street, Edinburgh, EH2 1LA.
Tel: 0131 225 5673. Fax: 0131 225 3813.
Web site: http://www.icas.org.uk
RETURN
ACTUARY
Association of Consulting Actuaries: 1 Wardrobe Place, London, EC4V 5AH.
Tel: 020 7248 3163. Fax: 020 7236 1889.
Web site: http://www.aca.org.uk
http://www.financial-planning.uk.com/consumer/info/contacts/contacts.htm (1 of 7) [4/20/2002 6:08:06 PM]
Institute of Actuaries: Staple Inn Hall, High Holborn, London, WC1V 7QJ.
Tel: 020 7242 0106. Fax: 020 7405 2482.
E-mail: institute@actuaries.org.uk
Web site: http://actuaries.org.uk
RETURN
BANKING
Bank of England: Threadneedle Street, London, EC2R 8AH.
Tel: 020 7601 4878 (public enquiries). Fax: 020 7601 5771.
Web site: http://www.bankofengland.co.uk
For prospectuses for new issues of British Government stocks: Bank of England, Registrar's
Department, Southgate House, Southgate Street, Gloucester, GL1 1WW.
Tel: 01452 398000. Fax: 01452 398020
Banking Ombudsman: 70 Grays Inn Road, London, WC1X 8NB.
Tel: 0345 660902. Fax: 020 7405 5052.
Web site: http://www.interrid.co.uk/obo
Financial Services Authority (regulates financial services, fund managers, unit trusts and portfolio
managers):
Gavrelle House, 2-14 Bunhill Row, London, EC1Y 8RA.
Tel: 020 7676 1000 Fax: 020 7382 5900
Web site: http://www.fsa.gov.uk
Money Management National Register of Fee-based Advisers:
Tel: 0117 976 9444
RETURN
FINANCIAL SERVICES
banking | friendly societies | insurance | mortgages | ombudsmen | pensions | regulators | trade bodies
RETURN
BUILDING SOCIETIES, FRIENDLY SOCIETIES / MORTGAGE
Building Societies Commission: Victory House, 30-34 Kingsway, London WC2B 6ES.
Tel: 020 7663 5000. Fax: 020 7663 5060.
Building Societies Ombudsman: 35-37 Grosvenor Gardens, London, SW1X 7AW.
Tel: 020 7931 0044. Fax: 020 7931 8485
The Building Societies Association: 3 Savile Rowe, London W1X 1AF.
Tel: 020 7437 0655
Friendly Societies Commission: Victory House, 30-34 Kingsway, London, WC2B 6ES.
Tel: 020 7663 5000. Fax: 020 7663 5060.
Registry of Friendly Societies: Victory House, 30-34 Kingsway, London, WC2B 6ES.
Tel: 020 7663 5000. Fax: 020 7663 5060.
Mortgage Code Arbitration Scheme: Chartered Institute of Arbitrators, 24 Angel gate, City Road,
London, EC1V 2RS.
Tel: 020 7837 4483. Fax: 020 7837 4185.
E-mail: 71411.2735@compuserve.com
Web site: http://www.arbitrators.org
Council of Mortgage Lenders (CML): 3 Savile Row, London, W1X 1AF.
Tel: 020 7437 0655.
Tel: 020 7440 2255 (consumer information line - recorded). Fax: 020 7734 6416.
RETURN
ESTATE AGENTS
National Association of Estate Agents: Arbon House, 21 Jury Street, Warwick, CV34 4EH.
Tel: 01926 496800. Fax: 01926 400953.
E-mail: nea@dial.pipex.com
Web site: http://www.propertylive.co.uk
Ombudsman for Corporate Estate Agents: Beckett House, 4 Bridge Street, Salisbury, Wiltshire, SP1
2LX.
Tel: 01722 333306. Fax: 01722 332296.
RETURN
AUCTIONEERS
Incorporated Society of Valuers and Auctioneers (ISVA): 3 Cadogan Gate, London, SW1X 0AS.
Tel: 020 7235 2282. Fax: 020 7235 4390.
E-mail: hq@isva.co.uk
Web site: http://www.isva.co.uk
RETURN
SURVEYORS
Royal Institute of Chartered Surveyors (RICS): 12 Great George Street, Parliament Square,
London, SW1P 2AD.
Tel: 020 7222 7000. Fax: 020 7222 9430.
Web site: http://www.rics.org.uk
RETURN
CONSUMER
Chartered Institute of Arbitrators: 24 Angel Gate, City Road, London, EC1V 2RS.
Tel: 020 7837 4483. Fax: 020 7837 4185.
Citizens Advice Bureau (CAB): Please check for your local branch in your telephone directory under
Citizens Advice Bureau. There may also be advertisements for the Citizens Advice Bureau in your local
newspaper(s).
The Complaints Bureau and Arbitration Scheme: Cottons Centre, Cottons Lane, London, SE1 2QB.
Tel: 020 7378 9000. Fax: 020 7403 7569.
Web site: http://www.sfa.org.uk
National Consumer Council: 20 Grosvenor Gardens, London, SW1W 0DH
Tel: 020 7730 3469
Consumers Association: 2 Marylebone Road, London, NW1
Tel: 020 7830 6000
RETURN
GOVERNMENT SERVICES
Department of Social Security (DSS) / Benefits Agency: Your local office can be found in your
telephone directory either under "Social Security - Department of" or under "Benefits Agency".
National Savings: Sales Information Unit, FREEPOST BJ881, Lytham St Anne's, Lancashire, FT0 1BR.
Tel 0645 645000 (Calls at local rate).
Interest Rates:
London: 020 7605 9483
Blackpool: 01253 723714
Glasgow: 0141 632 2766
Department of Trade and Industry (Insurance Directorate): 1 Victoria Street, London, SW1H
0ET.
Tel: 020 7215 0200. Fax: 020 7215 0196.
RETURN
INLAND REVENUE
Inland Revenue Tax Offices and enquiry centres: See telephone directory for your local tax office.
Web site: http://www.open.gov.uk
Inland Revenue Capital Taxes Office:The Capital Taxes Office deal with, among other
taxes,Inheritance Tax.
England and Wales: Ferrers House, PO Box 38, Castle Meadow Road, Nottingham, NG2 1BB.
Tel: 0115 974 2400. Fax: 0115 974 2432
Minford House, Rockley Road, London
Tel: 020 7603 4622.
Scotland: Mulberry House, 16 Picardy Place, Edinburgh, EH1 3NF.
Tel: 0131 556 8511. Fax: 0131 557 2886
Northern Ireland: Dorchester House, 52-58 Great Victoria Street, Belfast, BT2 7QL.
Tel: 028 90315556. Fax: 028 90331001.
The Adjudicator (Inland Revenue and VAT Ombudsman): 3rd Floor, Haymarket House, 28
Haymarket, London, SW1Y 4SP
Tel: 020 7930 2292
RETURN
INSURANCE
Association of British Insurers (ABI) (Insurers Trade Body):
51 Gresham Street, London, EC2V 7HQ.
Tel: 020 7600 3333
Web site: http://www.abi.org.uk
British Insurance & Investment Brokers Association (BIIBA) (Trade body for insurance
brokers, including National brokers): 14 Bevis Marks, London, EC3A 7NT.
Tel: 020 7623 9043
Institute of Insurance Brokers
(Trade body for insurance brokers - mainly smaller firms than BIIBA - although many small brokers also belong
to BIIBA):
Higham Business Centre, Midland Road, Higham Ferrers, Northants, NN9 8DW.
Tel: 01933 410003
Insurance Ombudsman Bureau: City Gate One, 135 Park Street, London SE1 9EA.
Tel: 020 7928 7600. Fax: 020 7902 8197.
Insurance Brokers Registration Council (IBRC): 63 St Mary Axe, London, EC3A 8NB.
Tel: 020 7621 1061. Fax: 020 7621 0840.
Personal Insurance Arbitration Service (PIAS): Chartered Institute of Arbitrators, 24 Angel Gate,
City Road, London, EC1V 2RS.
Tel: 020 7837 4483. Fax: 020 7837 4185.
0ET.
Tel: 020 7215 0200. Fax: 020 7215 0196.
RETURN
INVESTMENT
Investment Managers Regulatory Organisation (IMRO): Lloyd's Chambers, 1 Portsoken Street,
London, E1 8BT.
Tel: 020 7390 5000. Fax: 020 7680 0550.
Web site: http://www.imro.co.uk
Investment Ombudsman: 6 Frederick's Place, London, EC2R 8BT.
Tel: 020 7796 3065. Fax: 020 7726 0574.
Investors Compensation Scheme (ICS): Gavrelle House, 2-14 Bunhill Row, London, EC1Y 8RA.
Tel: 020 7628 8820. Fax: 020 7382 5901.
Personal Investment Authority (PIA): 1 Canada Square, Canary Wharf, London E14 5AZ.
Tel: 020 7538 8860. Fax: 020 7418 9300.
Personal Investment Authority Ombudsman: Hertsmere House, Hertsmere Road, London, E14
4AB.
Tel: 020 7216 0016. Fax: 020 7895 8579.
Securities and Futures Association (SFA): Cottons Centre, Cottons Lane, London, SE12QB.
Tel: 020 7378 9000. Fax: 020 7403 7569.
Web site: http://www.sfa.gov.uk
RETURN
LAW
The Law Society: 113 Chancery Lane, London, WC2A 1PL. Tel: 020 7242 1222.
Web site: http://www.lawsociety.org.uk
The Law Society of Northern Ireland: Law Society House, 98 Victoria Street, Belfast, BT1 3JZ.
Tel: 028 90231614. Fax: 028 90232606.
The Law Society of Scotland: Law Society Hall, 26 Drumheugh Gardens, Edinburgh, EH3 7YR.
Tel: 0131 226 7411. Fax: 020 7225 2934.
E-mail: lawscot@lawscot.org.uk
RETURN
PENSIONS
Occupational Pensions Advisory Service (OPAS): 11 Belgrave Road, London, SW1V 1RB.
Tel: 020 7233 8080. Fax: 020 7233 8016.

E-mail: cd83@iclnet.co.uk.opas
Pensions Ombudsman: If applicable, you must go to OPAS first (see above). 11 Belgrave Road, London,
SW1V 1RB.
Tel: 020 7834 9144. Fax: 020 7821 0065.
Pensions Schemes Registry: Occupational Pensions Regulatory Authority, PO Box 1NN, Newcastleupon-Tyne, Tyne and Wear, NE 99 1NN.
Tel: 0191 225 6393. (A-Je by scheme name)
Tel: 0191 225 6391 (Jf-Z by scheme name). Fax: 0191 225 6390
Web site: http://www.opra.co.uk
Occupational Pensions Regulatory Authority (OPRA): Invicta House, Trafalgar Place, Brighton,
East Sussex, BN1 4DW.
Tel: 01273 627600. Fax: 01273 627688.
E-mail: helpdesk@opra.co.uk
RETURN
TRUSTS
Association of Investment Trust Companies (AITC): Durrant House, 8-13 Chiswell Street, London,
EC1Y 4YY.
Tel: 020 7431 5222. Fax: 020 7282 5556.
Web site: http://www.iii.co.uk/aitc
Association of Private Client Investment Managers and Stockbrokers (APCIMS): 112
Middlesex Street, London, E1 7HY.
Written enquiries only.
Web site: http://www.apcims.org
Association of Unit Trusts and Investment Funds (AUTIF): 65 Kingsway, London, WC2B 6TD.
Tel: 020 8207 1361 (unit trust information service 8am to 11pm daily).
Fax: 020 7831 9975
main index |
back page

FINANCIAL SERVICES CONTACTS - Useful Addresses & Telephone Numbers

banking | friendly societies | insurance | mortgages | ombudsmen | pensions | regulators | trade bodies
BANKING
Bank of England: Threadneedle Street, London, EC2R 8AH.
Tel: 020 7601 4878 (public enquiries). Fax: 020 7601 5771.
Web site: http://www.bankofengland.co.uk
FRIENDLY SOCIETIES
Friendly Societies Commission: Victory House, 30-34 Kingsway, London, WC2B 6ES.
Tel: 020 7663 5000. Fax: 020 7663 5060.
Registry of Friendly Societies: Victory House, 30-34 Kingsway, London, WC2B 6ES.
Tel: 020 7663 5000. Fax: 020 7663 5060.
RETURN
INSURANCE
Institute of Actuaries: Staple Inn Hall, High Holborn, London, WC1V 7QJ.
Tel: 020 7242 0106. Fax: 020 7405 2482.
E-mail: institute@actuaries.org.uk
Web site: http://actuaries.org.uk
IFAs specialising in annuities
The Annuity Bureau, Enterprise House, 59-65 Upper Ground, London, SE1 9PQ.
Tel: 020 7620 4090. Fax: 020 7261 1888.
E-mail: peter@annuity-bureau.co.uk
Annuity Direct, 27 Paul Street, London, EC2A 4JU.
Tel: 020 7588 9393. Fax: 020 7684 5001
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managers):
Tel: 020 7676 1000 Fax: 020 7382 5900
IFA Promotion (for a list of financial advisers and insurance brokers in your area):
17-19 Emery Road, Brislington, Bristol, BS4 5PF.
Central Number: 0117 971 1177 Fax: 0117 972 4509.
Tel: 020 7600 3333
Tel: 020 7623 9043
to BIIBA):
Tel: 01933 410003
Tel: 020 7928 7600. Fax: 020 7902 8197.
Tel: 020 7621 1061. Fax: 020 7621 0840.
Personal Insurance Arbitration Service (PIAS): Chartered Institute of Arbitrators, 24 Angel Gate,
City Road, London, EC1V 2RS.
Tel: 020 7837 4483. Fax: 020 7837 4185.
0ET.
Tel: 020 7215 0200. Fax: 020 7215 0196.
Tel: 020 7538 8860. Fax: 020 7418 9300.
4AB.
Tel: 020 7216 0016. Fax: 020 7895 8579.
RETURN
MORTGAGES
Building Societies Commission: Victory House, 30-34 Kingsway, London WC2B 6ES.
Tel: 020 7663 5000. Fax: 020 7663 5060.
Tel: 020 7931 0044. Fax: 020 7931 8485
The Building Societies Association: 3 Savile Rowe, London W1X 1AF.
Tel: 020 7437 0655
Mortgage Code Arbitration Scheme: Chartered Institute of Arbitrators, 24 Angel gate, City Road,
London, EC1V 2RS.
Tel: 020 7837 4483. Fax: 020 7837 4185.
Council of Mortgage Lenders (CML): 3 Savile Row, London, W1X 1AF.
Tel: 020 7437 0655.
Tel: 020 7440 2255 (consumer information line - recorded). Fax: 020 7734 6416.
RETURN
OMBUDSMEN
Banking Ombudsman: 70 Grays Inn Road, London, WC1X 8NB.
Tel: 0345 660902. Fax: 020 7405 5052.
Web site: http://www.interrid.co.uk/obo
Tel: 020 7931 0044. Fax: 020 7931 8485
Ombudsman for Corporate Estate Agents: Beckett House, 4 Bridge Street, Salisbury, Wiltshire, SP1
2LX.
Tel: 01722 333306. Fax: 01722 332296.
Tel: 020 7928 7600. Fax: 020 7902 8197.
Investment Ombudsman: 6 Frederick's Place, London, EC2R 8BT.
Tel: 020 7796 3065. Fax: 020 7726 0574.
4AB.
Tel: 020 7216 0016. Fax: 020 7895 8579.
SW1V 1RB.
Tel: 020 7834 9144. Fax: 020 7821 0065.
The Adjudicator (Inland Revenue and VAT Ombudsman): 3rd Floor, Haymarket House, 28
Haymarket, London, SW1Y 4SP
Tel: 020 7930 2292

RETURN
PENSIONS
Occupational Pensions Advisory Service (OPAS): 11 Belgrave Road, London, SW1V 1RB.
Tel: 020 7233 8080. Fax: 020 7233 8016.
E-mail: cd83@iclnet.co.uk.opas
SW1V 1RB.
Tel: 020 7834 9144. Fax: 020 7821 0065.
Occupational Pensions Regulatory Authority (OPRA): Invicta House, Trafalgar Place, Brighton,
East Sussex, BN1 4DW.
Tel: 01273 627600. Fax: 01273 627688.
E-mail: helpdesk@opra.co.uk
RETURN
REGULATORS
managers):
Tel: 020 7676 1000 Fax: 020 7382 5900
Tel: 020 7538 8860. Fax: 020 7418 9300.
4AB.
Tel: 020 7216 0016. Fax: 020 7895 8579.
Securities and Futures Association (SFA): Cottons Centre, Cottons Lane, London, SE12QB.
Tel: 020 7378 9000. Fax: 020 7403 7569.
Web site: http://www.sfa.gov.uk
London, E1 8BT.
Tel: 020 7390 5000. Fax: 020 7680 0550.

Tel: 020 7628 8820. Fax: 020 7382 5901.
London, E1 8BT.
Tel: 020 7390 5000. Fax: 020 7680 0550.
Tel: 020 7628 8820. Fax: 020 7382 5901.
Tel: 020 7621 1061. Fax: 020 7621 0840.
The Law Society: 113 Chancery Lane, London, WC2A 1PL. Tel: 020 7242 1222.
Web site: http://www.lawsociety.org.uk
The Law Society of Northern Ireland: Law Society House, 98 Victoria Street, Belfast, BT1 3JZ.
Tel: 028 90231614. Fax: 028 90232606.
The Law Society of Scotland: Law Society Hall, 26 Drumheugh Gardens, Edinburgh, EH3 7YR.
Tel: 0131 226 7411. Fax: 020 7225 2934.
E-mail: lawscot@lawscot.org.uk
Institute of Chartered Accountants in England and Wales: PO Box 433, Chartered Accountants'
Hall, Moorgate Place, London EC2P 2BJ.
Tel: 020 7920 8100. Fax: 020 7920 0547.
Web site: http://icaew.co.uk
Institute of Chartered Accountants in Scotland: 27 Queen Street, Edinburgh, EH2 1LA.
Tel: 0131 225 5673. Fax: 0131 225 3813.
Web site: http://www.icas.org.uk
Institute of Chartered Accountants in Ireland: Chartered Accountants' House, 87-89 Pembroke
Road, Dublin 4, Republic of Ireland.
Tel: 00 353 1 668 0400.
Web site: http://www.icai.ie
RETURN
TRADE BODIES
Money Management National Register of Fee-based Advisers:

Tel: 0117 976 9444
The Independent Financial Advisers Association: 41-43 Praed Street, London, W2 1NR
Tel: 020 7298 1800. Fax: 020 7262 2675
email: ifaassoc@msn.com
Web site: http://www.ifaa.org.uk
IFA Promotion (for a list of financial advisers and insurance brokers in your area):
17-19 Emery Road, Brislington, Bristol, BS4 5PF.
Central Number: 0117 971 1177 Fax: 0117 972 4509.
Association of Investment Trust Companies (AITC): Durrant House, 8-13 Chiswell Street, London,
EC1Y 4YY.
Tel: 020 7431 5222. Fax: 020 7282 5556.
Web site: http://www.iii.co.uk/aitc
Association of Private Client Investment Managers and Stockbrokers (APCIMS): 112
Middlesex Street, London, E1 7HY.
Written enquiries only.
Web site: http://www.apcims.org
Association of Unit Trusts and Investment Funds (AUTIF): 65 Kingsway, London, WC2B 6TD.
Tel: 020 8207 1361 (unit trust information service 8am to 11pm daily).
Fax: 020 7831 9975
Tel: 020 7600 3333
Tel: 020 7623 9043
to BIIBA):
Tel: 01933 410003
National Association of Estate Agents: Arbon House, 21 Jury Street, Warwick, CV34 4EH.
Tel: 01926 496800. Fax: 01926 400953.
E-mail: nea@dial.pipex.com
Web site: http://www.propertylive.co.uk
RETURN
main index |
back page


OMBUDSMAN
The Financial Ombudsman Service
South Quay Plaza
183 Marsh Wall
London
E14 9SR
Tel: 0845 080 1800
Fax: 020 7964 1001
e-mail: enquiries@financial-ombudsman.org.uk
Website: www.financial-ombudsman.org.uk
Pensions Ombudsman
11 Belgrave Road
London
SW1V 1RB
Tel: 020 7834 9144
Investment Ombudsman
6 Frederick's Place
London
EC2R 8BT
Tel: 020 7796 3065
Office of the Pensions Advisory Service (OPAS)
11 Belgrave Road
London
SW1V 1RB
Tel: 020 7233 8080
Web site: www.opas.org.uk
RETURN
ARBITRATORS
Mortgage Code Arbitration Scheme
The Chartered Institute of Arbitrators
24 Angel Gate
City Road
London
http://www.financial-planning.uk.com/consumer/info/contacts/ombudsman.htm (1 of 2) [4/20/2002 6:08:10 PM]
EC1V 2RS
Tel: 020 7837 4483
Web site: www.arbitrators.org.uk
The Consumer Credit Trade Association Arbitration Scheme
Tennyson House
159/163 Great Portland Street
London
W1N 5FD
Tel: 020 7636 7564
The Finance and Leasing Association Arbitration Scheme
Imperial House
15-19 Kingsway
London
WC2 6UN
Tel: 020 7836 6511
main index |
back page

http://www.financial-planning.uk.com/consumer/info/contacts/ombudsman.htm (2 of 2) [4/20/2002 6:08:10 PM]
Financial Planning Tools provided by FPH
TOOLS FOR YOU

We have collected a number of tools to assist you making your financial plans.....
Calculator - with memory functions
Calculator - with a receipt function
Repayment calculator
Personal Diary - for you
Amortization Calculator - loans
Calulations - formulae
Currency Converter
main index |
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http://www.financial-planning.uk.com/consumer/tools/index.htm [4/20/2002 6:08:12 PM]
Your Personal Calendar - from Financial Planning Horizons
Your Personal Calendar
help file
Bookmark your calendar page
Click on a date to add / review your data

We do not store any personal data on this site. The information on this page is stored on your
PC in the form of a cookie.
Bookmark your calendar page so that you can easily return to this page.
or
Click here to make this your homepage
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http://www.financial-planning.uk.com/consumer/tools/calendar1/calendar.html [4/20/2002 6:08:13 PM]
Loan Calculation and Amortization
Loan Amount
Calculate
Loan Calculator
Yearly Interest Rate

Calculate
Loan Period (in months)
Calculate
This will calculate the amortization table

for the parameters to the left. Fill in any
three and press Calculate to calculate
the fourth value. Click the
Amortization Table button to create
the amortization table.
Payment
Calculate
Amortization Table
It takes a moment for the Amortization

schedule to appear after clicking the
Amortization Table button. Please
be patient!
Prepared by Dave Wedwick
http://www.financial-planning.uk.com/consumer/tools/amortization/amortize_frame.htm [4/20/2002 6:08:15 PM]
Calculations
For those of you without laptop computers or programmable calculators, the following might be of use.
1. Annual Percentage Rate
e.g.
What is the APR on a loan where interest is charged at 2% per month?
APR = 26.824%
2. Percentage change in value
http://www.financial-planning.uk.com/consumer/tools/calculations/calculations.htm (1 of 4) [4/20/2002 6:08:18 PM]
e.g.
A painting purchased for 430 is now worth 520. What is the percentage change
in value?
Percentage change = 20.93%
3. Simple Interest
e.g.
What is the total of interest earned if 1000 is invested for 4 years at 6% ?
Interest = 240
4. Compound Interest
e.g.
What is the total of interest earned if 1000 is invested for 4 years at 6% per
annum compound?
A = 1262.48
5. Regular Investment
e.g.
If 1000 is invested each year for 4 years at 6% per annum compound, what will
be the final value?
A = 4633.33
index |
back page

Financial Planning - Wills, an introduction
Introduction to Wills
It is not the purpose of this brief introduction to explain

how to draw up a legal and valid will. As a will forms such an
essential part of the financial planning process, however,
some guidance on the essential elements may be useful prior
to contacting someone with suitable experience in will
drafting - please, do get professional advice before
making or re-drafting your will.
Certain formalities are required in the making of a will to
help ensure that the potential for fraud and forgery is limited,
and that the testator makes a will without duress. None of the
requirements are onerous, but the volume of cases which
have come before the courts over the years have made it
clear that where money is concerned, even where the
existence of 'rules' do not guarantee a thing, it is better to
follow the 'red tape'.
The main requirements in summary
Tax Considerations on Variations
Intestacy
Discretionary Wills
Wills after Death
Precatory Trust
Will Variations
Secret Trusts
Disclaimers
Mutual Wills
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Financial Planning - Wills, an introduction

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Financial Planning - Introduction summary to Wills
The main requirements in summary are:

1. It must be in writing (but see later), and where the text goes onto another sheet of
paper, it must be clear which sheets follow, and once executed, pages must not be added.
Although there is no rule to say that it must be written on paper, it is better to be practical.
2. It must be signed, usually with your normal signature, even if this is a cross or
thumbprint. It is also possible to get someone else to sign, provided you are present.
3. It must be clear that the testator intended to make the will. By this it is
meant that it should be apparent and without doubt that the testator wishes to validate the
whole of the will. Signatures elsewhere than at the end of the will, or extra clauses obviously
added afterwards, would cast doubt on the testator's intentions.
4. It must be witnessed, generally by two witnesses, neither of whom are beneficiaries.
The purpose of the witnesses is to confirm that they have seen the testator sign the will, so
both witnesses must be present to see the testator sign. (Having said this, there are situations
where it is possible for the witnesses to sign together without witnessing the testator's
signature, provided the testator confirms to them that the signature is genuine).
5. The testator must be of sound mind, because the general legal principle is that
where someone is incapable of understanding the nature of a document, any signature
purporting to validate the document would not be valid.
6. The pages of a will should be sewn together, so that it is clear that pages have
not been detached or inserted.
Once completed, the will should be stored securely but not hidden away, as it should be reviewed as
often as the individual's financial plans. To save the executor's time, it would be useful to store with it
lists of possessions, contacts, location of documents, and so forth, which will be needed to administer
the estate effectively.
NOTE Do not take any action without first consulting your professional adviser. This information and that
of the linked pages is not intended to suggest any particular course of action.
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Financial Planning - Wills, Intestacy
Intestacy
Many people die intestate i.e. without having made a will. In such circumstances it is
likely that the court will distribute the estate in accordance with the rules in the Intestate Estates Act
1952, as amended.
To summarise, in England and Wales, these rules state:
1. In the event of the spouse only surviving, the spouse would be entitled to the
whole estate.
2. Where the spouse and children are left, the spouse is entitled to the deceased's
personal chattels, up to 125,000 of the value of the estate, plus a life interest i.e. income
only, in half of the balance. The children take half of the balance between them at 18, or if
they marry before age 18, the balance goes to them on the death of the surviving parent.
3. Where the survivors are spouse and family but no children, the spouse may
take the personal chattels, up to 200,000 of the estate's value, plus half of the balance. The
remainder is distributed among other surviving family members.
4. Where there is no spouse, the children inherit the whole estate; where no children, it
would go to the parents. Precedence then follows through blood relatives only; brothers and
sisters if the parents are not alive; nephews and nieces, half brothers and half sisters or their
children; then grandparents or uncles and aunts if none, then half uncles and half aunts, or
their children. Children include adopted and illegitimate children, but not step children. Exspouses, through divorce or legal separation, do not share.
5. If there is no one to claim, the estate goes to the crown, the Duchy of Lancaster or the
Duchy of Cornwall.
6. 'Common law' wives can obtain benefit under the intestacy rule.
In Northern Ireland, point (i) above is followed. point (ii) changes so that the surviving spouse
takes income only from half the residue of the estate where there is only one child, but income from
one third where there is more than one child. Point (iii) above remains the same, as do points (iv) and
(v).
In Scotland, intestacy is governed by Statutory Prior Rights and Legal Rights, with Prior Rights
taking priority. The rules are intended to ensure that the surviving spouse is left with house and cash,
and cannot be overridden by a will.
1. Prior Rights entitle the surviving spouse to the house or a cash sum of up to 110,000, and
furniture up to the value of 20,000, plus 50,000 cash where there are no children, or
35,000 where there are children.
2. Legal Rights affect movable property not distributed under Prior Rights. Where spouse only
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Financial Planning - Wills, Intestacy
survives, he/she qualifies for half of the remainder of the movable property after deducting
outstanding debts, funeral and certain administration expenses. Where children only survive,
they are entitled to half of the moveable estate. Where children and spouse survive, the
surviving spouse gets one third of the movable estate, the children one third, the remainder
becoming 'free estate', which is distributed to remaining family, or the Crown if no one
qualifies.
If this exercise has been avoided until retirement, then retirement must be the time to get this and other
things in order.
The will document often uses the phrase "last will and testament". A testament, strictly speaking, deals
only with the testator's personal property, not any land that forms part of the estate.
Informal or nuncupative wills may merely be spoken by the testator, providing it is in the presence of a
credible witness, and provided it is clearly an unforced expression of wish, clearly intended to have
testamentary effect. Such 'wills' may constitute the will of people in the armed forces, provided they are
on active service away from barracks, whether aged 18 or not.
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Financial Planning - Wills after death
Wills after Death
It must be made clear immediately that whilst it is possible to reorganise the deceased's estate after
death, whatever the will may say, it is a task which should be undertaken only with professional legal
and tax advice.
Variations to the will are likely to be required because of:
1. poor tax planning prior to the will, or
2. family dissatisfaction with the way the estate has been distributed.
In either case, the potential for problems is evident - do get advice.
index |

Financial Planning - Wills, Variations
Will Variations
The Inheritance Tax Act 1984 enables beneficiaries under a will or on intestacy to change the split of
the deceased's estate as directed by the will or intestacy rules.
So although we talk of varying a will, this is not in fact the case, the relevant sections of the Act merely
override the will or intestacy rules.
Section 142 or the Act makes two important points:1. The change must be made within two years of death, and
2. The required changes must be by 'an instrument in writing' which, whilst usually taken to be a
deed, need not necessarily be so.
It is necessary to notify the Revenue, currently the Capital Taxes Office, in writing within six months of
the date of the 'instrument', otherwise the variation will not be recognised.
No beneficiary should have had 'enjoyment' of the property subject to a variation between the date of
death and the date of the deed. Otherwise they will be treated as having made a transfer for IHT
purposes if they subsequently relinquish their interest.
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Financial Planning - Wills - Disclaimers
Disclaimers
A disclaimer is a refusal to accept a lifetime or testamentary gift because the inherited asset could
cause an IHT/CGT problem for the recipient.
A person need not accept a gift, and such a situation is often linked to a variation as covered briefly
above. The main difference is a disclaimer made unilaterally by the intended recipient and does not
need the agreement of other beneficiaries.
Section 142 mentioned above applies to disclaimers also, so a 'disclaimed' gift or legacy is deemed to
come from the deceased.
The disclaimer, to have effect,
1. Must be written within two years, and
2. Must be before the recipient has received or taken any benefit from the legacy.
For a variation to a will to be successful, therefore, although two years is the timing in the Act, in
practice it will be necessary to move faster to have everyone's agreement to the variation before they
make use of their legacies.
Where a disclaimer is made, the asset disclaimed is treated as never having been conferred for IHT
and CGT purposes.
index |

Financial Planning - Wills, Tax Considerations on Variations
Tax Considerations on Variations
Any redirection of legacies will be treated for IHT purposes as though the variation had been made by
the deceased immediately prior to death, and be charged IHT accordingly.
Section 62(1) of the Taxation of Chargeable Gains Act 1992 effectively says that no CGT is payable on
death by using the legal fiction that the deceased's estate is acquired on death by the personal
representatives at market value - but not deemed to have been disposed of by the deceased.
Section 62 also deals with variations and disclaimers in similar ways to IHT, especially regarding timing
and separate elections to the Revenue.
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Financial Planning - Wills, Discretionary Wills
Discretionary Wills
Some wills may contain a clause conferring on executors overriding powers of appointment in favour of
a specified class of beneficiary.
This power is perhaps more useful and flexible than variations, which apply usually only to adult
beneficiaries, and only with their consent.
Discretionary wills provide the executors with time (2 years) to consider how much is available in the
estate and how best to distribute in the light of that knowledge.
Best suited for individuals who require maximum flexibility in determining the eventual beneficiaries of
an estate.
index |

Financial Planning - Wills, Precatory Trust
Precatory Trust
Similar to the discretionary will, this allows an expression of wish in a will to be exercised as though it
were written in the will itself.
For example, in writing a will, the testator may leave chattels or a collection of items to one individual
expressing the wish that they be distributed fairly by that person among certain others.
Inheritance Tax Act 1984, S143, makes clear that this does not constitute a gift for IHT purposes if
carried out within two years of death.
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Financial Planning - Wills, Secret Trusts
Secret Trusts
Whilst wills are a useful method of outlining one's wishes whilst alive, as to the disposition of one's
estate after death, they are not 'secure' documents. By this is meant that they are published for public
scrutiny, and can be altered by beneficiaries.
To avoid such actions, the testator may wish to execute a secret trust.
Such a trust may occur where property is left to someone in a will, having been primed by the testator
that, in fact, the property is intended for a different recipient, but whose name must be kept hidden.
Provided that the person agrees to pass on the property, this is a perfectly valid trust in equity.
Alternatively, the property may be left in trust to someone, without revealing the ultimate destination.
Both should be effective if agreed among all parties before making the will.
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Financial Planning - Mutual Wills
Mutual Wills
Such wills, made in each other's favour, usually by husband and wife, usually include an agreement
that neither will revoke without the other's consent.
Such agreements generally are taken to be a form of constructive trust in that once one of them has
died, any attempt to revoke the agreement could result in the court holding the agreement to be good
and insisting that any agreed distributions be made.
index |
back page

Case studies - Introduction, Mortgages, School Fees
CASE STUDIES
Introduction
Mortgages
School Fees
main index |
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Case studies - Introduction, Mortgages, School Fees

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Financial Terms Glossary

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Financial Terms Glossary

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Financial Terms Glossary -a- (provided by FSEC Ltd)

A Shares. Ordinary shares that do not have voting rights.

Abatement. A proportionate reduction in payments payable or receivable.

Account. A record of monetary transactions forming part of an accounting system.

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