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Dictionary of Financial Terms - P

Price/Earnings Ratio. Calculated by dividing the market price of a company's ordinary shares by its earnings per share figure.

The ratio reflects the market's expectation of the future earnings of a company in relation to its current earnings; in other words, its performance potential.
Paid Up Insurance
Insurance on which all required premiums have been paid.

Paid Up Scheme
A pension scheme where contributions have ceased, but which has assets that are held and used by an administrator in accordance with the scheme rules.

Partial Disability
A disability which is less than total (according to the particular definition relating to the contract in question) but still sufficient to hamper the individual in his or her occupation.

Pay-As-You-Earn method of income tax collection.

Payment holiday
A feature offered by some mortgages that allow you to miss monthly payments on your mortgage. Payment holidays are particularly useful if you have some other major expense - like a new baby or a wedding - to cater for!

Payout Requirement
Private foundations are required by law to pay out at least five percent of the fair market value of their assets each year in grants and administrative expenses.

A continuing income that is usually associated with the post-retirement period of a person's life.

Pension Scheme
A vehicle by which an individual can make pension provision. This may be either collective or individual and with or without the involvement (by means of contributions or otherwise) from the individual's employer.

Pension Schemes Office
A division of the Inland Revenue which oversees the approval of pension schemes for tax relief purposes.

Pensionable Earnings
The earnings on which benefits and/or contributions for a pension scheme are calculated.

Pensionable Service
The period of service with an employer that is used in calculating pension benefits from an occupational pension scheme.

Personal Equity Plan. Introduced in 1987 by the then Chancellor Nigel Lawson, over 3 million people in the UK invested in a PEP before they were replaced by ISAs in April 1999. Although you can no longer open invest in a new PEP you can still transfer your existing PEPs.

Per Capita
Per person, by or for each individual

Per Mille
Per Thousand. The Premium Rate for some types of group insurance is quoted per £1000 of benefit.

Permanent Health Insurance
Permanent Health Insurance will pay you an income if you become ill for a long period or if you become disabled and can't work.

Permanent Total Disability
Disability from which the individual is unlikely to recover at any time in the future. Some insurance contracts may specify that permanent is to be taken as meaning 'extending to normal retirement date'.

A term used to refer to the length of time insurance remains continuously in force with a company.

Personal Equity Plan
A Personal Equity Plan allows individuals to enjoy the profits from stockmarket-related investment free of income tax and capital gains tax. PEPs were introduced in 1987 but from 6 April 1999, new investment in PEPs is no longer possible. However, existing PEPs can continue in existence and for up to five years.

Personal Investment Authority
A Self-Regulating Organisation (SRO) set up under the Securities and Investment Board (SIB) with responsibility for regulating retail financial services.

Personal Lines
Insurance designed for individuals rather than businesses or organisations.

Personal Loan
An amount of money borrowed from a bank or other lender by an individual.

Personal Pension Plan
1. A pension plan which produces income and possibly a tax-free lump sum on retirement or death. Personal pensions commenced in July 1988 and are designed to allow anyone who is either employed but not a member of an occupational pension scheme or self-employed to make provision for a pension in retirement. Personal pensions can be used to 'contract out' of the State Earnings Related Pension Scheme. Employers can normally contribute to the personal pension of an employee. Employees who are members of an occupational scheme cannot contribute to their own personal pension plan. 2. Personal pensions are a way of making your own pension provision if you are not a member of an employer's scheme. The return from a personal pension or part of it can be used to pay off the capital sum of a mortgage at the end of the mortgage term usually 25 years or, sometimes, earlier. They have the benefit of being tax efficient but to find out if they are suitable you should discuss with your financial adviser

Philanthropic Advisor
An individual or firm which provides counseling and evaluative services to donors before and after grantmaking decisions.

The Personal Investment Authority, which regulates the way in which financial products are marketed, promoted and sold.

Public Limited Company. Denotes any company which has share capital of at least a fixed amount.

Private Medical Attendant's Report.

The requirement for a financial adviser to be either 'tied' to one financial product provider, or completely independent. A provision of the Financial Services Act.

The legal document issued by the insurance company to the policyholder, which states the terms and conditions of the insurance, it may also be called the policy contract or the contract.

Policy Reserves
The measure of the funds that a life insurance company holds specifically for fulfilment of its policy obligations.

Policy Term
The period of time for which an insurance policy provides coverage.

The person or organisation who owns an insurance policy.

Pooled Investment Fund
A vehicle for bringing together the investments of many people or organisations and using the combined funds to obtain economies of scale and investment management skills not available to individuals. Examples include unit trusts, investment trusts, etc.

All the interest rates in this range are portable. This means that if you move home during the discounted or fixed rate period, you can enjoy the same rate, on the amount outstanding on your original loan, for the remainder of the discounted or fixed rate period. Conditions apply - please ask for details.

Pound cost averaging
Pound cost averaging is a benefit of making regular savings in the stock market, especially when the market is volatile. In practice it means that you can get more for your money by investing in smaller, regular amounts.

Pre-existing Condition
Any physical or mental conditions that exist prior to the effective date of insurance coverage.

The single or regular periodic payment made to an insurance company in respect of an insurance policy.

Pre-tax Net Income
A corporation's annual net income before it has paid taxes. In the USA, The Internal Revenue Service currently allows corporations to deduct charitable contributions as much as 10 percent of their pre-tax net income.

Private Foundation
A foundation that receives most of its income from, and is subject to control of, an individual or other single or limited source. See Foundation. Also in the US, the technical IRS term for an organisation which is tax-exempt under Section 501(c)(3) and classified as a private foundation under the Internal Revenue Code. In the US, a private foundation is referred to as 'having a 501(c)(3) status'.

Private Operating Foundation
A legal classification for an endowed organisation which uses its income to operate a charitable activity, such as a school or camp, rather than to make grants.

Private Medical Attendant's Report
A report from an individual's own doctor ('Private Medical Attendant') which does not require a medical examination to be carried out. Used for underwriting purposes.

Private medical insurance
Pays towards private medical treatment if your condition is covered by the policy.

Processed Date
The date the contribution was credited to the account by the Charitable Gift Fund (USA).

The process by which the Will of someone who dies while living in England or Wales is validated. A local Probate Office will issue a Grant of Probate to validate a will and authorising the executors to administer the estate. This Grant has the status of a decree of the High Court. Hence anyone dealing in good faith with the executors named in the Grant has legal protection against any other party claiming to represent the deceased.

Professional Indemnity Insurance
Protects professionals against liability claims resulting from negligent work.

Pro Rata Premium
A rate charged for a period of insurance cover shorter than the normal period. For example, if an insured had cover for one quarter of a year, the Pro Rata premium might be only one quarter of the annual premium.

Pension Schemes Office.

Public Charity
In the USA, charitable organisations (those designated under Section 501(c)(3) by the Internal Revenue Code) that qualify as public charities, private operating foundations, or private foundations. A public charity as defined in Section 509 (identified by the Service as "not a private foundation") normally receives a substantial part of its income, directly or indirectly, from the general public or from government sources. The public support must be fairly broad, not limited to a few individuals or families.

Public Company
A company listed on the stock exchange and hence one whose shares are available for public investment.

Public Foundation
A nonprofit organisation that receives at least one-third of its annual income from the general public (including government agencies and foundations). Public foundations may make grants or engage in charitable activities.

Purchased Life Annuity
An income for life purchased from an insurance company. That part of the annuity that is deemed to be return of capital is tax-free but any balance is treated as interest and is subject to income tax.

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