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Dictionary of Financial Terms - B

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

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.

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.

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).

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.

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.

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)

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

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.

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.

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

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.

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

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