Glossary - I | Skandia UK

ICVC

Investment Company with Variable Capital.
The generic term for an OEIC (Open Ended Investment Company) or similar investment vehicle where investors pool their contributions with those of other people, to create a portfolio of assets.

Illustration

An example of the potential growth rates a customer might expect to receive from an investment. The growth rates used are set by the Financial Services Authority, the industry’s regulator. It is important to remember that the actual return received could be higher or lower than those shown on the illustration.

IMA sectors

Grouping of funds for performance measurement by the Investment Management Association.

Income

Money received by an individual as a salary, or from investments. Cash deposits and bonds will provide income in the form of interest. UK shares will, in most but not all cases, provide income in the form of twice-yearly dividends.

Income drawdown

Enables people with certain types of pension plans to take income direct from their pension fund.

Income portfolio

A portfolio consisting of securities whose principal attractiveness lies in the steady income they provide.

Income tax

Tax paid by individuals on income received over a certain threshold. The amount paid will depend on the amount earned during a tax year period.

Income unit

Unit(s) held within a unit trust that pays out to investors as an income, instead of being reinvested.

Indemnity insurance

An insurance designed to compensate a policy holder for any loss suffered.

Index

In the stock market, an index is a device that measures changes in the prices of a basket of shares, and represents the changes using a single figure. The purpose is to give investors an easy way to see the general direction of shares in the index. Examples of stock market indices are the FTSE 100, FTSE All-Share, Nikkei and Dow Jones.

Index fund

A portfolio of securities structured in such a way that its value will closely follow a nominated market index, eg an equity index fund may be designed to track the FT/S&P All Share Index.

Index linked

A way of managing a fund. An index-linked fund simply follows as closely as possible the movement within a chosen market. It does not aim to outperform the market like active management does.

Index linked gilts

A UK government bond (gilt) whose redemption value and interest payments are linked to inflation (as measured by the Retail Prices Index).

Indexation

Making an adjustment to allow for the effects inflation can have on money, used to reduce the amount payable in Capital Gains Tax.

Another name for Index Tracking. An investment strategy designed to produce a rate of return in line with a specific financial index.

Inflation

An increase in the level of prices of goods and services in the economy. It is typically measured by examining a basket of goods and services.

Inheritance Tax (IHT)

IHT is a tax that is payable on your estate at a flat rate of 40% on assets over a certain limit (the IHT threshold) that you leave on your death. The Inheritance tax threshold for the 2012/2013 tax year is £325,000.

In-house

Referring to an activity which is conducted within an organisation rather than contracted out to an external party.

Initial charge

A charge made by an investment provider when you first take out an investment. This is to cover the cost of setting up the investment.

Initial price

This refers to the range of Skandia pension funds where the pricing includes an initial charge within the offer (buying) price.

Initial Public Offering

(IPO) The first sale of shares of a company to the public.

Insider trading

The illegal practice of trading in securities on the basis of 'inside' or secret information which is not available to the public at large.

Insurance bond

A single premium life assurance policy that allows you to invest in a variety of funds. Normally designed to produce long term capital growth, but can be used to generate an income.

Insurance premium tax

A tax levied on most non-life insurance policies.

Insured

A person covered by an insurance policy.

Insurer

A company that offers an insurance policy.

Interest

The return earned on funds which have been loaned or invested (ie the amount a borrower pays to a lender for the use of his/her money).

Interest coverage

A measure of a company’s ability to meet its interest obligations, calculated by dividing interest payments into income. The higher the ratio the better.

Interest rate

The amount of money a customer can earn on an investment. It is usually expressed as a percentage of the total sum invested.

Interest rate risk

The risk borne by fixed interest securities, and by borrowers with floating rate loans, when interest rates fluctuate. When interest rates rise, the market value of fixed interest securities declines and vice versa.

Interest rate sensitivity

The degree of movement in the price of a security, usually that of a bond, resulting from moves in interest rates.

International Monetary Fund (IMF)

An international organisation founded in 1947 to promote maintenance of equilibrium in the balance of payments among the various nations of the world. The functions of the IMF include the levying of quotas on member nations to create a pool of funds available to be loaned to nations facing balance of payments problems.

Inter-spouse transfers

A tax-free transfer between husband and wife or between civil partners under Inheritance Tax rules.

Intestate

A person who dies without a valid will.

Investment

An asset acquired for the purpose of producing income and/or capital gains for its owner.

Investment analyst

A financial expert trained to analyse the activities and future prospects and earnings of companies and securities for the purpose of investment.

Investment company

A company whose main business consists of specific activities relating to investments. For example stockbrokers and investment fund managers.

Investment environment

The general economic, political, legal and market conditions within which an investment is made.

Investment Grade Bonds

Bonds which have a credit rating which is sufficient for them to be purchased by most institutional investors.

Investment Management Agreement

A contractual agreement between an investor and an investment manager which states the terms and conditions applying to management of the stated assets.

Investment Management Regulatory Agreement (IMRO)

A regulatory organisation for the UK investment management industry.

Investment manager

An organisation or individual that specialises in the investment of a portfolio of securities on behalf of individuals and/or organisations, subject to the guidelines and directions of the investor.

Investment philosophy

The set of principles or systems used by investors to govern the way they manage portfolios. Sometimes confused with investment style, which tends to be more associated with the level of risk in the portfolio.

Investment trust

A company that invests in shares of other companies. When investing in an investment trust customers actually own shares in the investment trust rather than owning the shares it invests in. Investment trusts are closed-ended investment vechicles.

Investor

A person whose principal purpose is to invest money prudently and productively over the longer term with the objective of achieving a reasonable return relative to the investment risk involved The opposite of a Speculator, who will sacrifice safety of principal for the possibility of larger gains.

ISA

ISA Individual Savings Account

A savings vehicle that allows customers to invest in equities, life assurance policies, or save in cash, without having to pay tax on the returns gained from them.