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Glossary of financial terms
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EXPLANATION OF FINANCIAL TERMS

Imro


The Investment Management Regulatory Organisation (IMRO) regulates about 1,100 fund management firms including portfolio managers, pension fund managers, unit trust managers and trustees, investment trust managers and managers of unregulated collective investment schemes.

Income drawdown

Also referred to as pension fund withdrawal. This allows investors to delay buying an annuity and to take an income direct from their pension fund at retirement. Only advisable for pensioners with funds of at least £100,000 or other income.

Income Tax

Tax paid on any income earned over your personal allowance (£4,195 for the 1998/99 tax year). The first £4,300 of taxable earnings incurs 20 per cent tax, from £4,301 to £27,100 incurs 23 per cent tax, and over £27,100 incurs 40 per cent tax

Income units

Holders of income units receive regular dividend cheques. The price of their units is lower than accumulation units where the dividend is not paid but rolled up into the price.

Indemnity

The basic principle of insurance.The payment that you receive after a mishap leaves you in the same financial position as you were before you suffered the loss.

Index-tracker

These investment funds back shares but are relatively low risk. The fund managers simply spend the money on shares in a popular stockmarket index such as the FTSE 100. Over the longer term main market indexes such as the FTSE show a reasonable rise.

Individual Savings Account

ISA is the new tax-saving plan available from April 6, 1999. It will replace Peps and Tessas, enabling investors to protect shares, unit and investment trusts, cash deposits and some life insurance policies from tax.

Inheritance tax

Up to £223,000 - the current inheritance tax exemption - of a deceased person's estate can be transferred to beneficiaries free of tax. Any assets above this will be taxed at the rate of 40 per cent.

Instant access

Following a ruling by The Advertising Standards Authority, any account which describes itself as instant access must allow for immediate withdrawals to be made in cash. This limits instant accounts to either branch based or cash machine.

Insurance premium tax

A tax imposed by the Government on many non-life insurance products such as travel insurance.

Investment trust

An investment fund which pools investors' money and invests it on their behalf, usually in shares. It differs from a unit trust in that investors hold their stake as shares in the trust rather than units. An investment trust is set up as a listed company with a limited number of shares that investors can buy and sell on the stock market. The trust's shares may trade at a price higher or lower than the value of its underlying assets - trading at a premium or discount.

Isa

The individual savings accounts is to be introduced on 6 April 1999 by the Government to replace Tessas and Peps.


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