Financial Glossary

Financial Glossary

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CCJ: County Court Judgement. A decision reached in the County Court which can be for not paying debts. If you pay off the debt, the CCJ is satisfied and a note is put on your records to say this.
CML: Council of Mortgage Lenders. Building societies and most banks and other lenders are members of this trade organisation.
Cancellation Clause: A provision in an insurance contract that permits the insurer or the insured to cancel a policy at any time before its expiration date.
Capacity: The largest amount of insurance or reinsurance available from a company. It can also refer to the largest amount .of insurance or reinsurance available in the marketplace

Capital: A lump sum of money. This usually refers to the amount you invest in a fund at the outset - e.g. your original capital.
Capital and interest: Your monthly payments are partly to pay the interest on the amount you borrowed and partly to repay the outstanding mortgage. Also known as a repayment mortgage.

Capital Campaign: An organized drive to raise substantial funds to finance major needs of an organization, including construction, renovations, or endowment.

Capital and Interest Mortgage: Your monthly payments are partly to pay the interest on the amount you borrowed, and partly to repay the amount you borrowed. At the end of the mortgage, the capital and the interest is all completely repaid. It is also known as a repayment mortgage.

Capital Claims: An organized drive to raise substantial funds to finance major needs of an organization, including construction, renovations, or endowment.

Capital Gains Tax: A tax on the realised value of capital gains. Applies only to individuals (a company may be liable to Corporation Tax on such gains).
Capital Grant: Grant to provide funding for buildings, construction, or equipment, rather than program or operating expenses.
Capitalized Cost: The agreed-upon price.
Capitalized Cost Reduction: Any up-front or down payment that reduces the capitalized cost, thereby reducing monthly payments.
Capitalised Value: Used in relation to group life policies that provide a pension for the spouse or other dependant of a member. The capitalised value is used for underwriting purposes and is an approximation of the lump sum that would be required to secure the pension.

Capped rate: 1. Like a fixed rate, but the rate is guaranteed not to go above a certain level for a set period of time. It can, however, move downwards. 2. An arrangement that caps your mortgage rate for a specified period of time. On the first day of the month following expiry of the capped rate period, the interest rate will change to the then prevailing Standard Variable Rate.
Carpet-bagger: A person who joins a mutual organisation (usually a building society or an insurance company) in the hope that the organisation may be converted to a limited company owned by shareholders and that in this event he will realise a substantial profit by receiving a cash amount or selling any shares allocated to him. (See also 'de-mutualisation')
Carry Back: Contributions to a Personal Pension Plan or Retirement Annuity Contract can be treated for tax purposes if they had been made in the preceding tax year (carried back). If insufficient Net Relevant Earnings were made in the preceding year to permit the Carry Back, then it may be possible to elect to have the payment treated for tax purposes as if it had been paid in the year prior to that, effectively carrying back 2 tax years.
Carry Forward: In the event of an individual wishing to make a payment to a Personal Pension Plan or Retirement Annuity Contract which is greater than the maximum contribution entitlement for that year, the individual may be able to utilise unused contribution entitlement from the previous 6 or 7 years. This utilisation of unused previous years entitlement is known as Carry Forward.

Cashback: A payment (either a fixed or a percentage of the mortgage amount) offered by some lenders as an incentive to borrow from them. Sometimes there are redemption penalties associated with these types of deals.
Cash ISA: An Individual Savings Account that invests in Cash. The definition of cash can include Bank & Building Society accounts, Cash Unit Trusts, National Savings products (excluding National Savings certificates and Premium Bonds) and Money Market deposits. An ISA is free of all taxes.
Cash Sum at Retirement (Commutation): The giving up of a portion of retirement income benefits in return for receipt of a tax free cash lump sum at retirement.

Cash Surrender Value: The amount of money received when a policyholder surrenders a life insurance policy with cash value.
CAT ISA: The Treasury has drown up guidelines on Charges, Access and Terms known as CAT Standards.CAT marked ISA's are ISA's which comply with the CAT standards and have been awarded a CAT mark.The CAT marked ISA does not represent a government endorsement of that product and the CAT standards guidelines are voluntary for ISA providers.

CAT Marked: CAT Marked ISAs adhere to a set of voluntary standards drawn up by the Treasury (Government). Companies can choose to adopt these for their ISAs. CAT stands for Charges, Access and Terms. An ISA that meets or betters the Standards is awarded a CAT mark.
CAT standards: CAT stands for low Charges, easy Access and fair Terms. The standards were brought in by the government as an incentive to offer savers an even better deal, and to make it easier for you to spot the best value ISAs.

Caveats: Conditions attached to an insurance quotation.
Cede: To transfer all or part of a risk written by an insurer to a reinsurer.
CGT: Capital Gains Tax.

Challenge Grant: A grant that is made on the condition that other funding be secured, either on a matching basis or by some other formula, usually within a specified period of time, with the objective of encouraging expanded fundraising from additional sources.

CHAPS (clearing house automatic payment system) payment: An electronic transfer of money between two bank accounts that will clear the payee's account on the same working day provided instructions are received before 3.15 pm.

Charges: Companies can charge for financial services in different ways, some more straightforward than others.

CII

Chartered Insurance Institute. A body controlling professional standards (educational, ethical etc) in the insurance industry.

Claim

Notification to an insurance company that payment of an amount is due under the terms of a policy.

Claims Experience

The relationship of claims to premiums for a period. Usually expressed as a percentage or ratio.

Claims Reserve

Amounts set aside by an insurer to meet costs of claims incurred but not yet settled.

Clawback

A practice whereby a pension scheme will offset an amount equivalent to the state pension against a target pension so as to arrive at the amount payable by the scheme.
If commission is paid to an intermediary by a financial institution for the introduction of business and this does not stay in force for a certain pre-determined period a part of the commission may be repayable to the institution. This is known as 'clawback'. The practice is more prevalent among insurance companies.

Co-insurance

An arrangement by which a number of insurance companies cover a particular risk.

Collective investment: Investments such as unit trusts and investment trusts schemes

Commercial Lines: Insurance for businesses, professionals, and commercial establishments.
Commission: An amount paid by a financial institution to an intermediary for the placing of business. Normally calculated as a percentage of the amount paid (i.e. of the premium for an insurance policy or of the amount invested in a fund or used to purchase securities). Commission is also payable in a number of other situations where the payment for a service is a proportion of the value of the transaction (eg the provision of foreign currency, the sale of a house, etc).
Committed Funds: A portion of a donor's budget that has already been pledged for future allocation.
Commutation: The giving up of part or the entire pension that would be paid at retirement in exchange for a lump sum. Applied to any exchange of a series of payments to which someone is entitled for a lump sum. In the case of approved pension arrangements the amount that is commutable is strictly limited.
Commutation Factors: Factors used to determine the amount of pension to be given up in exchange for a lump sum benefit.

Community Funds: A type of foundation formed by broad-based community support from multiple sources: trusts, endowments, individual contributions, private foundations, or corporate grants. A community foundation generally makes grants only within a specified geographic area and is governed by a board representing the community it serves. Some community foundations offer donor-advised funds to contributors.

Company representative: A financial adviser who can only advise on their own company's products.
Completion: When the sale and purchase of the property are finalised, and you become the owner of the house or flat.

Compound interest

Compound interest is interest earned on interest and makes a huge difference to the value of long term savings. Say you've invested £100, which is earning 10% interest each year.

Year 1, you earn 10% on £100 = £110

Year 2, instead of earning another 10% on your £100, you earn 10% on £110 = £121

Year 3, you earn 10% on £121 = £133.10

And so on, so longer you leave it, the more you benefit from compounding.

Compulsory purchase: An annuity you buy with the fund built up in your personal pension scheme annuity

Compulsory Purchase Annuity: Some approved occupational pension schemes produce a benefit at retirement that is expressed in cash terms rather than pension. The cash sum produced must then be used to purchase an annuity known as a 'Compulsory Purchase Annuity' (but see Commutation).
Conditions: Provisions in an insurance contract that state the rights and duties of the insured and of the insurer.
Confirmation: (in Scotland) A court order confirming the validity of a Will and the identity of Executors. The equivalent under English law is Probate.
Consequential Loss: A financial loss occurring as the result of some other loss. Also known as an indirect loss. (eg a shop is destroyed by fire. The loss of the building, stock etc is a direct loss. The loss of ongoing profit because of the inability to continue trading is a consequential loss).
Contents insurance: Insurance cover for your possessions. This may include cover against loss or damage away from the home.
Continuation Option: Allows employees to continue their group insurance coverage under certain conditions after their employment has terminated (much less common today).
Continuing Professional Development: A formal procedure by which a professional body ensures that its members keep their expertise up to date with current developments. Applies to doctors, lawyers, accountants, financial advisers etc.
Contract: A legally enforceable agreement between two parties
Contracted In: This describes a member of an occupational or personal pension scheme who is also a member of SERPS (or the scheme itself).
Contracted Out: This describes a member of an occupational or personal pension scheme who is not a member of SERPS (or the scheme itself).
Contracted Out rebate: The reduction in National Insurance Contributions to employees who are Contracted Out of the State Earnings Related Pension Scheme in favour of an Occupational Pension Scheme.In the case of Personal Pension Plans, the equivalent reduction is paid to the Personal Pension.
Contract Out: The opting out of the State Earnings Related Pension Scheme, in favour of a Personal Pension Scheme or Occupational Pension Scheme
Contribution Limits: Restrictions which limit the maximum amount that can be paid to Occupational Pension Schemes, Personal Pension Plans and Retirement Annuity Contracts.
In the case of Occupational Pension Schemes, this limit is expressed as a percentage of earnings.
For Personal Pension Plans and Retirement Annuity Contracts, the limit is also expressed as a percentage of earnings, but the limits vary according to the age of the individual.
Contributions Committee: A corporate group organized to make grant decisions usually with the guidance of a corporate foundation or contributions administrator. Typical responsibilities include setting and interpreting policy, approving an annual budget, and reviewing grant requests.
Controlling Director (20% Director): A company director who owns or controls more than 20% or more of the ordinary share capital of a company.
Convertible Term Insurance: Term insurance which can be changed into a permanent policy without further evidence of insurability or medical examination.

Conveyancing: The legal process involved with buying and selling of a property.

Cooling Off Period: A period allowed in certain circumstances during which a person who has entered into a contract (for example, an insurance policy or a personal loan) may cancel it without incurring any penalty.

Corporate Bond: Companies issue bonds to raise money and pay interest on the bonds. Usually bonds expire on a fixed date, when the company repays you. You can buy and sell bonds easily (like shares). Bond prices tend to change when interest rates change and are usually not as risky as shares because a company will pay off all it's debts (including bonds) before the shareholders get anything.

Corporate Contributions: A general term referring to charitable contributions by a corporation. Usually used to describe cash contributions only, but may also include other items, such as the value of loaned executives, products, and services.

Corporate Foundation: A foundation that receives its income from a profit-making company but is a legally independent entity. Usually this type of foundation carries the name of the parent company. Corporations may fund these foundations with a donation of permanent assets or with periodic contributions. (Also called a company-sponsored foundation)
Corporate Giving Programme: (Also called a corporate contributions program - see above.) Funding that is distributed directly by a corporation, rather than through a foundation. Often such a program is handled by the Public Affairs or Public Relations office.

Corporation Tax: A tax payable by companies on their profits.
Cost Adjusting Factor: Used in relation to group insurance in reference to rate-adjusting factors calculated by actuaries and based on claims experience, occupation, location etc.
Cover Note: A temporary certificate confirming that an insurance policy is in force. Used in motor insurance for taxation/registration purposes and in some other contexts such as life assurance to confirm that cover is effective on a temporary basis while further information is being gathered.
CPD: Continuing Professional Development.
Credit Card: A credit card gives you the power to buy goods or services now and pay for them later. It represents an approval by a bank or company to use their money. Credit card issuers are usually banks, even though the card may bear another company name or logo. The name of the issuer appears somewhere on the card.
Trade names such as VISA and MasterCard are not actually card issuers. They are termed "membership associations." Banks use them for their payment processing services, policy setting and marketing assistance. Many different banks can package their own cards and different terms of credit using the logo and services of an association membership.
Credit search: A check the lender makes with a specialist company to find out whether you have any County Court Judgements or a record of not paying loans, credit-card bills and so on.
Credit scoring: A lender's way of assessing whether you are a good risk to lend a mortgage to.
Critical Illness Policy: A Critical Illness policy will provide a lump sum payment to the insured should he or she be diagnosed as having one of a number of specified illnesses, conditions or diseases.
Custom Excise: A government department responsible for the collection of duties on imports, VAT and other taxes including Insurance Premium Tax.

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