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Dictionary of Financial Terms - I

Independent Financial Adviser.

Inheritance Tax.

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).

The Investment Management Regulatory Organisation which regulates the management of our unit trusts.

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.

  1. Payment to reimburse a specific quantifiable monetary loss or expense incurred
  2. (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.

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.

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.

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.

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.

A person or organisation covered by an insurance policy.

The party to the insurance contract who promises to pay losses or benefits, usually an insurance company.

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 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.

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.

Investment Management Regulatory Organisation (IMRO)
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.

Insurance Ombudsman Bureau See: Ombudsman.

Irrevocable Trust
A trust arrangement that cannot be revoked by the creator.

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.

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