Financial Glossary

A | B | C | D | E | F | G | H | I | J | K | L | M
N | O | P | Q | R | S | T | U | V | W | X | Y | Z

BBA

British Bankers Association. This is the trade organisation of the banks.

Balloon Lease

Balloon leases or loans are those in which repayments are not made in a regular manner, but are made, as funds become available, in balloons.

Balloon Payment

A large sum repaid as an irregular instalment of a loan repayment. This is similar to the 'residual value' but normally where you, the customer, can control the amount (only down from the 'residual value') so you can customise the control to suit your requirements.

Bancassurer

A company or group offering a range of financial services to its customers. Usually applied to banks having subsidiary insurance companies.

Bank

A business that holds money for its clients, lends money at interest and trades generally in money.

Bank Giro Credit (BGC)

A one-off cash or cheque payment to an organisation or individual. Processing a payment made using a Bank Giro Credit takes three working days.

Bankers' draft

A guaranteed payment delivered to your home address by registered post. If we receive the request before 4 pm we'll send the draft to you on the same day.

Base Rate

the base interest rate determined usually by a country's central bank (such as the Bank of England) upon which all other lending or savings interest rates are based.

Basic State Pension

The standard pension which individuals over retirement age receive from the state (subject to National Insurance contribution conditions). The Basic State Pension is a fixed amount, not connected to earnings.

Bear Market

A market which is experiencing a consistent fall in share prices.

Bed Breakfasting

The former practice of selling shares one day and buying them back the following day so as to establish a realised loss (or gain) for tax purposes. The tax advantages were removed by the Finance Act 1997.

Beneficiary

The person who is or will be the ultimate recipient of a benefit. Examples could be someone named to receive a legacy under a Will or an individual nominated to receive benefit from a trust fund.

Benefit Basis

The benefit structure of a group insurance policy or pension arrangement. It defines the type and level of benefits for each category of membership. For example, life assurance cover for one category of employees might be 3 x salary and for another category of employees it might be 4 x salary (the categories must be clearly defined groups in terms of jobs carried out so as to ensure there is no illegal discrimination).

Benefits

The monetary amounts payable by the insurance company to a claimant, assignee, or beneficiary under the terms of an insurance policy.

Benefits In kind

Benefits other than cash, provided to a person through their employment (for example, cars, or private medical insurance). These benefits are usually subject to tax. Inland Revenue rules normally allow their value to be included in the calculation of maximum pension benefits.

Bequest

A sum of money or other property available upon the donor's death.

Bid Offer

Shares, units in unit trusts and other investment vehicles are bought at one price and sold at another. The higher price is called the 'offer price' since this is the price at which the unit trust company or other institution offers the security for sale. The lower price is called the 'bid price' and is the price at which the investor can sell the security back to the institution in question.

Bid-Offer Spread

the difference between the prices at which you buy units from us and sell them back to us. The buying (offer) price is usually higher than selling (bid) price and the difference between them may vary within the limits of a formula laid down by the Financial Services Act 1986. Both offer and bid prices are quoted for each of our funds on the Daily Prices page.

Bid price

The price at which you can sell a security or a unit in a unit trust.

Bonds

otherwise known as fixed-interest securities, bonds are basically IOUs which are issued by governments, financial institutions and companies. Generally, the issuer undertakes to pay investors a fixed rate of interest for a fixed number of years (e.g. 7% for 5 years). The fact that the interest rate is fixed makes bonds attractive because their return is so predictable. Bonds are traded in open markets, in the same way as shares. (See also Gilts)

Bonus

1. An amount added to a basic figure. For instance bonus is added each year to a with-profit life insurance policy, thus increasing the amount ultimately payable when a claim arises. See also: Dividend. 2. These are payments that a life assurance company adds to a 'with-profits' policy. Bonuses are usually added at the end of each year, and there may be a final (terminal) bonus when the policy comes to the end of its term. This normally coincides with when you have to repay the mortgage. Bonuses aren't guaranteed and the amount awarded can change each year. However, once a bonus is made by the life company, they can't take it away.

Bridging Loan

If a house purchase arrangement involves the sale of one property and the purchase of another it will normally be most convenient if the two deals are concluded simultaneously. If this is not possible and the purchase of the second property is to be concluded before the sale of the first is completed then additional financing may be necessary. This is a 'bridging loan' & it bridges the gap between the two transactions.

Broker

An agent who brings two parties together, enabling them to enter into a contract to which he is not a principal. His remuneration consists of a brokerage, which is usually calculated as a percentage of the sum involved in the contract but may be fixed according to a tariff. Brokers are used because they have specialized knowledge of certain markets or to conceal the identity of a principal, in addition to introducing buyers to sellers.

BSA

Building Societies' Association. This is the trade organisation of the building societies.

Building Campaign

A drive to raise funds for construction or renovation of buildings.

Building Society

A financial institution owned by its members (rather than by shareholders) which pays interest on deposits and lends money on the security of property to enable members to buy their own homes. The distinction between building societies and banks (which have historically offered a much wider range of financial services but often at a higher cost) is now much reduced and the main difference is often the question of ownership.

Buildings insurance

This covers the cost of rebuilding or repairing the structure of the property. Lenders insist you have enough buildings insurance before they give you a mortgage. With leasehold properties, it is the freeholder's responsibility to arrange buildings insurance, although the freeholder will usually pass on the charges to the leaseholder.

Buildings and contents insurance

This is combined insurance, which may be cheaper than one policy for buildings insurance and another separate policy for contents insurance.

Bulk Transfer

The transfer of a group of pension scheme members and their scheme assets from one occupational pension scheme to another.

Bull Market

A market which is experiencing a consistent rise in share prices.

Buy Back

1) A payment made to reinstate into SERPS a person belonging to a contracted out pension scheme.

2) Reinstatement of life assurance cover after a claim has been paid on critical illness under a policy that provides cover against critical illness and death. (Normally a policy of this type will cease on the claim being paid; the life assurance cover is then automatically cancelled.)

Buy Out

The purchase of an insurance policy for a pension scheme member in lieu of benefits from the scheme following the termination of pensionable service.

Buy Out Policy (Section 32 Policy)

Used for the purpose of transferring pension entitlement from an Occupational Pension Scheme to a stand-alone policy.
Unlike a Personal Pension Plan, a Section 32 Policy guarantees that if a transfer payment includes an element relating to the contracting out of the State Earnings Related Pension Scheme (GMP element) then a minimum GMP will be provided at Retirement Age.
Unlike a Personal Pension Plan, benefits in retirement from a Section 32 Policy are subject to maximum limits based on the limits laid down in the Occupational Pension Scheme from which the entitlement was transferred.

Buy-to-let

This is when you buy a property to rent it out rather than live in.

A | B | C | D | E | F | G | H | I | J | K | L | M
N | O | P | Q | R | S | T | U | V | W | X | Y | Z