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Glossary of financial terms



Accumulation units

A type of unit trust for investors who do not want to receive income. The income is rolled up into the price of the units. Holders of income units, on the other hand, receive regular dividend cheques so the price of their units is lower.

Added years

A pension term. Some final-salary pension schemes allow members to top up benefits through buying extra years of service. Employees get a good deal because the employer gives a guaranteed benefit and takes the investment risk.

Affinity cards

A credit card that rewards you with points or a bonus for use. Some cards pay the reward into a charity.

Appropriate personal pensions

Plans in which National Insurance contributions are invested by employees who have opted out of Serps, the State Earnings Related Pensions Scheme.

Advanced Corporation Tax

The 20 per cent tax that companies are required to pay on dividends when they are paid to shareholders. Tax efficient schemes such as Peps and pension funds currently reclaim this tax, but ACT is due to be axed from April 5, cutting investors' returns.


The annual equivalent rate is new jargon to be found in the advertising of interest-bearing accounts. It will show the advertised interest rate as if it were paid and compounded once a year. It is intended to allow customers to compare products more easily. From 1 January 1999 every advert has had to include an AER.


Annual general meeting for shareholders. An opportunity to ask the board questions about company performance.


The Alternative Investment Market is run by the London Stock Exchange for smaller, often more high risk companies.


An income guaranteed for life paid in return for handing over a lump sum. An annuity is bought at retirement by holders of most personal pension plans and members of money-purchase company schemes.


Association of Private Client Investment Managers and Stockbrokers. The official body for stockbrokers and fund managers specialising in private clients.


Buying in one market and selling in another to take advantage of technical price differences.

Arrangement fees

May also be called application, lenders' or completion fees. Arrangement fees come in two forms. Some lenders treat them as a success fee payable when the mortgage goes through. Beware of lenders who treat them as a booking fee that prospective borrowers pay to secure a mortgage. If the deal collapses, this fee is forfeited even though the failure lies outside the borrower's control.

Associated company

More than 20 per cent but less than 50 per cent held by another company.


An accident, sickness and unemployment policy will cover the monthly mortgage repayments for a limited period, usually a year, if the borrower cannot work because of injury, ill-health or job policies. Compare these to a mortgage protection policy that will pay off the whole of the outstanding loan if a borrower dies.


Additional voluntary contributions allow company pension scheme members to make extra savings towards their pension. Employees can contribute the difference between their ordinary contributions, typically 5 per cent of earnings, and a maximum of 15 per cent.


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