An estimation of the returns you might get from an investment, based on
standard growth rates and taking charges into account. The actual returns you get may be higher or lower than this.
Immediate Annuity
An annuity under which payments commence straight away, in contrast to a
deferred annuity, under which the payments do not commence until later (possibly many years later).
IMRO
The Investment Management Regulatory Organisation which regulates the
management of our unit trusts.
In Advance
Beforehand; in front.
In Arrears
Total unpaid debt, debts not paid by the due date
Income Draw-Down
An option available to members of small self-administered pension schemes,
personal pension schemes and recently extended to occupational scheme members with money purchase benefits or AVC's. An
annuity does not have to be purchased at retirement and can be delayed up to age 75. In the meantime the individual can
'draw down' income from his pension investment. This can be a high-risk approach to pension provision and is subject to
PSO regulation.
Income Policy
A Life Insurance contract that provides income on a monthly or other periodic
basis, as opposed to a policy which pays proceeds in a lump sum.
Income Protection Insurance
Income Protection Insurance (also known as Permanent Health Insurance or PHI)
provides a monthly income during periods of long-term illness or disability.
Income tax
This is tax you pay on the income you earn each year above a certain amount. As
well as your salary, income tax is also charged on interest and dividends you receive. The amount of tax you pay
depends on the amount of money you earn and on your allowances.
Indemnity
Payment to reimburse a specific quantifiable monetary loss or expense
incurred
(Of commission) Paid in full at commencement of a contract on the
assumption that this will remain in force for at least a certain minimum period. If the contract is terminated within
this period part of the commission may be required to be refunded.
Independent Financial Adviser
A broker or other intermediary authorised to sell or advise on the policies
offered by any insurance company, as well as other financial service providers.
Independent Foundation
A private foundation that is no longer controlled by the original donor or
donor's family.
Index
A means of continually measuring the movement of a particular set of statistics
over periods of time. Most unit trust fund managers measure their fund's performance against that of an appropriate
'benchmark' index with the aim of at least matching its progress or, better still, beating it.
Index Linked
Insurance where the level of cover increases in line with an index of prices or
earnings.
Index Tracking
An index tracking fund aims to follow a particular index as closely as
possible. It does not aim to beat it. It invests only in the companies that make up that index. Index tracking removes
the need to employ fund managers, which means charges tend to be lower.
Indexation
A method by which benefits are increased at periodic intervals by a factor
derived from an index of prices or earnings.
Individual Savings Account
A means of saving which gives exemption from tax on benefits. Savings can be
through cash, stocks and shares or insurance but must be arranged through one or more 'ISA manager(s)'. There are
limits to the amounts which can be contributed.
Industrial Insurance
Whole of life and endowment insurance with relatively low value (under
£1000 sum assured). Historically, the premiums were collected by an insurance company agent at the policyholder's
home. However, these may now be paid by monthly bank transfer. The legislation governing this type of insurance is less
formal than for 'ordinary branch' and if an insurance company transacts both types of business it is required to keep
them segregated.
Inflation
The amount in percentage terms by which prices rise or fall year on year. In
the UK, the primary measure of this is the Retail Price Index (RPI); the underlying rate of inflation is
the RPI with mortgage repayment figures stripped out.
In Force Business
Life or Health Insurance that is current and for which premiums are being paid
or for which premiums have been fully paid.
Inheritance Tax
This tax is payable at the time of death, on any items (money or otherwise)
where ownership changes on death or within 7 years before. There is no inheritance tax on the first portion of the
deceased person's estate and transfers between husband and wife are exempt. There are other exemptions and the rules
governing these can be complex.
In-kind Contribution
Support in the form of goods or services rather than a cash
contribution.
Inland Revenue
The Inland Revenue is the government department responsible for the assessment
and collection of direct taxation on income, capital gains, stamp duties, corporation tax and inheritance tax.
Inland Revenue Limits
Limitations on benefits and contributions applied to an approved occupational
pension scheme in return for tax relief.
Instant access
Accounts where you don't lose interest even though you withdraw money without
giving the bank notice. The One account gives you instant access to your funds. All you have to do is write a cheque,
arrange a transfer or use your Switch or VISA cards.
Insurable Interest
A principle of insurance that states that someone may only take out insurance
if they stand to suffer a financial loss from an event covered by a policy.
Insurance
An agreement under which individuals, businesses, and other organisations, in
exchange for payment of a sum of money (a premium), are guaranteed indemnity for losses resulting from certain events
or conditions specified in a contract (policy).
Insurance Premium Tax
UK tax imposed on most non-life insurance premiums.
Insured
A person or organisation covered by an insurance policy.
Insured Scheme
A pension scheme which uses an Insurance Policy as the long term investment
vehicle, as opposed to a Managed Fund Policy.
Insurer
The party to the insurance contract who promises to pay losses or benefits,
usually an insurance company.
Intermediary
A person or organisation that offers advice and arranges policies for clients.
Under UK regulations, intermediaries must be either (1) "Tied", whereby they represent only one company in the case of
life business or a limited number of companies for general business, or (2) "Independent", whereby there is no limit on
the number of companies with which they can deal.
Interest
The charge made for borrowing a sum of money. The rate of interest is the
charge made, expressed as a percentage of the total sum loaned, for a stated period of time (usually one year). Thus, a
rate of interest of 15% per annum means that for every £100 borrowed for one year, the borrower has to pay a
charge of £15, or a charge in proportion for longer or shorter periods.
In simple interest, the charge is
calculated on the sum loaned only, thus I = Prt, where I is the interest, P is the principal sum, r is the rate of
interest, and t is the period. In compound interest, the charge is calculated on the sum loaned plus any interest that
has accrued in previous periods. In this case I = P [(1 + r) to the nth power – 1], where n is the number of
periods for which interest is separately calculated. Thus, if £500 is loaned for 2 years at a rate of 12% per
annum, compounded quarterly, the value of n will be 4 × 2 = 8 and the value of r will be 12/4 = 3%. Thus, I = 500
[(1.03) to the 8th power – 1] = £133.38, whereas on a simple-interest basis it would be only £120. In
general, rates of interest depend on the money supply, the demand for loans, government policy, the risk of
nonrepayment as assessed by the lender, and the period of the loan.
In economics, interest has two functions to
perform: (i) to make the amount saved by households equal the amount that firms wish to borrow for investment; (ii) to
make the amount of credit demanded equal the supply of credit. The rate of interest that achieves this equilibrium is
known as the natural rate of interest. First defined by K. Wicksell (1851–1926), it implies that an actual
interest rate below the natural rate will cause a rise in the prices of consumer goods, which will fuel inflation and
lead to an inadequate rate of savings. The general theory of Maynard Keynes, built around Wicksell’s concepts, saw
a role for governments in controlling credit by means of restricting the money supply.
Interest only method
One of two ways used to pay off your mortgage, the other being the Repayment
method. Your monthly payments are solely used to pay off the interest you owe on your borrowings. This means, you'll
have to make provision to pay off the amount you actually borrowed at the end of your mortgage term, for example using
an ISA, a pension or an endowment.
Internal Revenue Code
The laws governing taxation in the United States, administered by the Internal
Revenue Service.
Internal Revenue Service
(IRS) The federal agency in the United States with responsibility for
regulating public charities and foundations, as part of its authority under the Internal Revenue Code.
Intestate
Dying without having made a Will. If a UK resident dies intestate there are
rules as to the distribution of the estate, which have to be followed whether or not they coincide with what the
deceased person would have wished.
Investment Income
The portion of a company's or an individual's income which is derived from its
investments, including interest and dividends on stocks and bonds.
A regulatory body which governs the way investors money is handled and
invested.
Investment Trust
Unlike a unit trust, which is 'open-ended', an investment trust is effectively
a company which, for a management fee, invests the pooled money of small investors in securities for stated investment
objectives. An investment trust is 'closed-end' in that it has a fixed number of shares that are traded like stock,
often on many different exchanges. Visit the Flemings website for more details.
IOB
Insurance Ombudsman Bureau See: Ombudsman.
Irrevocable Trust
A trust arrangement that cannot be revoked by the creator.
ISA
Stands for Individual Savings Accounts which the Government introduced
on 6th April 1999. ISAs replaced PEPs and TESSAs - no further investments are allowed into the latter, though you can
retain existing investments within them tax-free. ISAs offer similar tax-free benefits to PEPs but you can hold a wider
range of investments.
