We try to avoid jargon where possible. Here we explain the financial terms you may come across in plain English.
Click a term to view the definition.
Accrue
In terms of an equity release scheme this means the build up of interest associated with a loan.
Actuary
A business professional who deals with the financial impact of risk and uncertainty.
Alternatively secured pension
Alternatively secured pensions were abolished from 6 April 2011. They were a type of drawdown pension applicable to those aged over 75.
Annuitant
The person who receives the income from an annuity.
Annuity
An annuity is a product which pays a regular income in exchange for a lump sum.
Annuity protection
Should you die without having received the full value of your fund, this benefit allows the balance of your pension fund, minus any income you have received, to be paid to your beneficiaries (net of tax, currently at 55%). Also known as value protection.
Appropriate pension product
A UK registered pension scheme that will allow the receipt of any transfer from your Just Retirement Fixed Term Annuity.
APR
Annual percentage rates - an indication of how much interest will be charged on a loan including known charges associated with taking out the loan. APR rates can be used to compare similar types of credit, over similar periods.
Attorney
Person(s) appointed to act on behalf of another person (for example when someone is unable to look after his or her own affairs due to ill health). A formal legal document called a 'Power of Attorney' is used to appoint the attorney.
BACS
Bankers Automated Clearing System - a system for sending money electronically between two banks.
Bankruptcy
A legally declared inability of an individual or organisation to pay its creditors.
Benchmark interest rate
This is an interest rate (FTSE 15 YEAR Gilt Index) used by Just Retirement in calculating any early repayment charge.
Beneficiary
Someone who benefits from a will, a trust, a life insurance policy or death benefits from an annuity.
Building insurance
Insurance that covers physical damage to a building (as opposed to its contents) e.g. damage to walls caused by subsidence. Equity release plan holders are required to have buildings insurance appropriate to the value of their property, as stated in the survey.
Capped drawdown
A type of drawdown pension arrangement that has limits placed upon it by the government as to the maximum level of income that can be taken from it.
Carer
This refers to a live-in carer who looks after someone. If you need a carer to move in with you and you are an equity release customer, you must first get Just Retirement's written agreement.
Cash advance
An amount of money paid to a plan holder under the equity release plan.
Cash facility
The amount available to equity release planholders in excess of their initial cash advance for the life of their plan, subject to certain exceptional circumstances.
CHAPS
Clearing House Automated Payments System - a form of electronic payment transfer between two banks on the same day.
Compound interest
Roll-up lifetime mortgages have compound interest added, this means that any interest accrued is added to the loan amount and future interest is charged on top.
Contract out
You or your employer were given the option to opt out of the State Second Pension (formerly the State Earnings Related Pension Scheme) in exchange for lower National Insurance contributions (and higher pension contributions) or a rebate into your pension. From 6th April 2012, this is only available in Defined Benefit (Final Salary) schemes.
Conventional annuity
A conventional annuity is an annuity purchased with the proceeds of a pension plan, which pays a guaranteed, regular income for life. The income payable from this type of annuity is not linked to the performance of investments.
Conversion Feature
The Conversion Feature allows you to convert your Fixed Term Annuity, from Just Retirement, to another retirement income product, at any point during your Plan term, for any reason, if Plan protection was selected at outset and financial advice is given.
County Court Judgement (CCJ)
An order issued through court for payment of a debt. CCJs will appear on a credit file and will be marked as satisfied once the debt is repaid. Any CCJs must be declared when taking out equity release.
Credit agreement
This is a written contract between the lender and the customer. The lender will allow the customer to borrow money under the agreed terms and conditions.
Data Protection Act
The Data Protection Act 1998 is designed to safeguard personal data. It requires anyone who handles personal information to comply with a number of important principles. It also gives individuals rights over their personal information.
Deed of Consent
By signing a Deed of Consent a party living in a property is confirming that they are consenting to the mortgage, that any claim they may or may not have on the property will rate in priority behind that mortgage and that they can be evicted if the property is repossessed.
Deeds
Legal papers that establish who owns a property and names anyone who has an interest in its value.
Defined benefit pension (also known as a final salary scheme)
With this type of pension, the amount of retirement income an employee gets is set in advance. The amount of income they get is based on the number of years they have worked for their employer and their salary.
Defined contribution pension (also known as a money purchase scheme)
Also known as a money purchase pension or scheme. This is a term given to a pension which you and/or your employer contribute into, and can be either a personal pension or an occupational pension. The amounts you and your employer pay into your pension fund while you are working are set. The value of the pension fund at the time you plan to retire is not set and may carry investment risk.
Dependant
Someone who is financially dependent on you, typically a partner. Annuity providers often require proof of this - such as a joint utility bill or mortgage/bank statement.
Dependant's pension annuity
An option when buying an annuity that means, in the event of death, your annuity income may continue to be paid to a surviving spouse, civil partner, or dependant. If you choose for your annuity to be paid to a dependant, they may be asked to prove that they are financially dependent upon you.
Drawdown (as relating to equity release)
Drawdown in equity release terms is the process of taking an additional cash advance from your pre-agreed cash facility. This is done after the initial advance is paid. Only when drawdown is taken does the interest start being charged on that amount.
Drawdown pension
A type of retirement income product that allows you to draw an income directly from your pension fund. Also known as income drawdown.
Drawdown lifetime mortgage
A lifetime mortgage that allows you to draw down funds in stages as and when required. You only pay interest on the amount borrowed at any one time.
Early repayment charge
A fee applied by some companies should you choose to repay your mortgage early. This charge is only applicable in certain instances and will vary from provider to provider.
Earmarking order
As part of a division of assets following a divorce or dissolution of a civil partnership, an earmarking order allows a percentage of one party's (the member's) pension income to be paid to the other party, whilst still remaining in the name of the member.
Enduring Power of Attorney (EPA)
A legal document giving the attorney the power to make decisions on behalf of someone else, which continues should that person lose their mental or physical capacity in the future. If they become mentally incapacitated, this document needs to be registered with the court of protection. In October 2007, EPAs were replaced by Lasting Powers of Attorney (LPA), however existing EPAs continue to be valid.
Enhanced annuity
An enhanced annuity is an annuity that pays a higher income to an individual if aspects of their lifestyle (such as smoking and drinking alcohol) or medical history may shorten life expectancy.
Equity
Equity is the value of your home minus any outstanding mortgage or other debts secured against it.
Equity release
An equity release plan allows you to release tax free cash from your home in the form of a cash lump sum or regular payments, and usually with no monthly repayments to make. The loan and the accumulated interest is repayable when you die or move into long term care.
The Equity Release Council
The Equity Release Council is the industry body for the equity release sector. Each member of the Council that provides equity release products is signed up to the Equity Release Council’s Code of Conduct which puts in place a number of safeguards and guarantees for consumers. Prior to May 2012 this organisation was known as Safe Home Income Plans (SHIP).
Escalation / inflation linking
This describes the way in which an annuity income can grow each year - you may choose to have no increase (level annuity) or increase your annuity each year at a fixed rate (say 3% per year) or in line with the change in a measure of inflation, such as the Retail Prices Index (RPI) for example.
Estate
Your estate is the name for everything you own, including your home, possessions and any savings or investments.
Executive pension plan (EPP)
Executive pension plans are pension plans arranged with an insurance company which usually provide pension benefits for the controlling directors of a company. They are similar to Small Self Administered Schemes.
Final salary scheme
Also known as a defined benefit scheme. With this type of pension, the amount of retirement income an employee gets is set in advance. The amount of income you get is based on the number of years you have been a member of the scheme and your salary.
Financial adviser
A professional who provides financial advice to meet a customer’s needs and objectives. In doing so they will offer the most suitable and competitive product from the range of providers available to them.
Financial intermediary
A professional who provides financial advice to meet a customer’s needs and objectives. In doing so they will offer the most suitable and competitive product from the range of providers available to them.
Fixed rate
All of our lifetime mortgages have fixed rates, which may vary for different advances. This means that the interest rate on each advance will never change throughout its term.
Fixed term annuity (FTA)
A type of capped drawdown arrangement that offers a guaranteed income (within government limits) for a fixed term and a guaranteed maturity amount at the end of the term. The Government Actuary’s Department (GAD) limits the maximum amount of income that can be taken from capped drawdown arrangements, which must be reviewed every three years (annually from age 75) to ensure that any income being taken remains within these government prescribed limits.
FSA
The Financial Services Authority - the UK’s financial regulator set up by the government to regulate financial services and protect your rights. This means they set standards that financial services firms have to meet and take action if they don’t.
Further cash advance
A further cash advance is an additional payment made to equity release plan holders in excess of the cash facility agreed at the start of the policy.
Gilt
A gilt is a bond issued by the UK government which provides a certain return over a set period of time.
Gilt yield
The level of interest payable to investors holding government bonds.
Government limits
The Government Actuary’s Department (GAD) limits the maximum amount of income that can be taken from capped drawdown arrangements. This is to try and ensure that those who invest in these plans leave enough left in their fund to support a reasonable level of income for the rest of their retirement.
Guarantee period
An annuity income is payable for as long as the annuitant - the person receiving the annuity - lives. If they die soon after purchasing an annuity, they may feel that they won’t have had the best value. They can therefore choose a guarantee period (typically 5 or 10 years), which means that, if they die within that guarantee period, the annuity will continue to be paid for the remainder of that period. Annuitants can nominate anyone to receive the income from their guarantee period, either directly to the annuity provider or through their will.
Guaranteed maturity amount
The lump sum you receive at the end of the term of a Just Retirement Fixed Term Annuity. You can reinvest this money into any appropriate pension product of your choice.
Guaranteed Minimum Pensions (GMP)
This is the part of pension benefit built up in defined benefit schemes, which relates to contracting out between 1978 and 1997 and is roughly equivalent to the amount of State Earnings Related Pension Scheme (SERPS) which would have been paid for that period. This is the minimum pension payable under the scheme. As GMP is a replacement of a state benefit, certain restrictions apply to the income you receive from it.
HMRC
In 2005, the Inland Revenue and Her Majesty's Customs and Excise merged to form Her Majesty's Revenue & Customs.
Home reversion plan
A form of equity release, where you sell all or part of your home in return for a cash lump sum and continue to live in your home for as long as you wish.
Immediate vesting pension (IVP)
There are two different types of immediate vesting pensions: 1) A pension fund is transferred to an annuity provider's pension plan, where it is immediately converted into an annuity. The annuity follows the rules of the annuity provider's pension plan and any Pension Commencement Lump Sum (PCLS) is paid by the annuity provider. This is the type of IVP offered by Just Retirement. 2) An individual pays a lump sum of their savings outside of pensions into an annuity provider's pension plan, tax relief is added and the total is then converted into an annuity. The amount you can pay into this type of IVP is dependent on your earnings. This type of policy is not offered by Just Retirement.
Impaired annuity
An impaired annuity is an annuity that pays a higher income than a standard / conventional annuity for those who have significantly lower life expectancy due to an existing medical condition.
In advance / in arrears
You can choose whether your annuity payments start as soon as your annuity has been set up (in advance) or at the end of your chosen payment frequency (in arrears).
Income drawdown
A type of retirement income product that allows you to draw an income directly from your pension fund.
Inflation
Inflation is a term used to describe the average increase in the price of goods and services.
Inheritance
This is the value of an estate that is left to beneficiaries upon a person's death.
Inheritance tax
Inheritance tax is a tax that is potentially payable upon death depending on the value of your estate.
Initial cash advance
The amount paid to plan holders at the start of their equity release plan.
Insolvent
If you are bankrupt and have insufficient assets to cover your debts, you are insolvent.
Investment linked annuity
The income payments from this type of annuity may fluctuate in value as they are linked to the performance of an investment fund(s). Income from an investment-linked annuity has some guarantees attached to it so it's worth checking what these are and how these work with the provider. If investment returns are good, your annuity income payments may rise. If investment returns are poor, then your annuity income payments may fall, so they are not without risk. Two types of investment linked annuity you may have heard of are the with-profits annuity and unit-linked annuity.
Joint life annuity (also called dependant's pension / annuity)
In the event of your death, your annuity income may continue to be paid to a surviving spouse, civil partner or dependant if you have selected a joint life annuity. If you choose this option, the dependant may be asked to prove that they are financially dependent on you.
Key facts document
Important information set out in a standard way, so you can compare service, product and costs.
Key features illustration
Important information set out in a standard way, so you can compare service, product and costs.
Lasting Power of Attorney (LPA)
Lasting Powers of Attorney replaced Enduring Powers of Attorney in October 2007. An LPA is a legal document giving the attorney the power to make decisions on your behalf about your property and/or financial affairs and/or your health and welfare. This legal document can be used should you lose your mental or physical capacity in the future and needs to be registered with the court of protection.
Lifetime allowance
The lifetime allowance is the maximum value of pension savings an individual is allowed to draw without incurring tax penalties. The amount is set by the government and is £1.5 million from 2012/13. Whenever you draw benefits from a pension scheme, these are tested against the lifetime allowance and your pension provider will tell you the percentage of the lifetime allowance used.
Lifetime annuity
A lifetime annuity is an annuity, payable for life, purchased with the funds from a pension scheme.
Lifetime mortgage
A loan secured on your home. No repayments are usually made on the loan until the death of the last surviving policy holder or their entry into long term care.
Limited price index
This is a measure of inflation, calculated as the Retail Price Index (RPI) or Consumer Prices Index (CPI) with some limits. LPI has a cap in the growth of RPI of 2.5% or 5% each year and also a floor of 0%, which the measure will not fall under.
Loan to value factor
A figure showing the maximum percentage of the value of your property that can be obtained as a loan against your property. For instance, if the loan to value factor is 20%, you can obtain a maximum of 20% of the value of your property. This figure is calculated after deduction of any outstanding debt secured on the property.
Maisonette
A self-contained apartment on either one or two floors in a larger house and often with its own entrance from the outside.
Material fact
A material fact is any information that could affect an underwriter's assessment of the risk, such as details of a particular medical condition.
Money purchase pension
Also known as a defined contribution pension. This is a term given to pensions which you and/or your employer contribute into, and can be either a personal pension or an occupational pension. The amounts you and your employer pay into your pension fund are set. The value of the pension fund at the time you plan to retire is not set and may carry investment risk.
No negative equity guarantee
A guarantee of our equity release plans that ensures you will never owe more than the value of your property and no debt will ever be left to the estate.
Normal retirement date
This is the date at which your pension scheme expects you to retire. This is often your 65th Birthday but it can vary from scheme to scheme.
Occupational pension
A pension provided by your current or previous employer(s). It can be either a defined benefit pension or a defined contribution pension - contact your employer(s) or pension scheme(s) for more information.
Open market option
The ability for you to shop around and buy an annuity from any annuity provider, not just the company that provides your pension. This option enables you to search for the best annuity rate for you.
Open market value
The value of a property should it be sold on the open market.
Opting out
If an employee leaves an occupational pension scheme, or chooses not to join one, it is called opting out.
Overlap
Overlap is only relevant if you choose both a joint life option and a guarantee period option with your pension annuity. If you die within the guarantee period, the term with overlap means that your surviving spouse's, civil partner's or dependant's annuity income payments will start immediately and will be paid in addition to the annuity income payment due in the remaining guarantee period. Without overlap means that your surviving spouse's, civil partner's or dependant's annuity income payments will not start until after the guarantee period.
Payment frequency
You can choose to have your annuity income paid monthly, quarterly, half-yearly or yearly. The frequency of payments that you choose will depend upon your personal circumstances.
Pension annuity
A pension annuity, often referred to simply as an annuity, is a product purchased with the proceeds of a pension plan which pays a guaranteed, regular income for life. The income payable from this type of annuity is not linked to the performance of investments.
Pension Commencement Lump Sum (PCLS)
You can normally take up to 25% of your pension fund as a lump sum, which is currently tax-free. This is now known as a Pension Commencement Lump Sum, but may also be referred to as a tax-free lump sum or tax-free cash. The Pension Commencement Lump Sum is yours to do with as you see fit.
Pension fund
The value of the pension plan that you have built up over the years from your pension contributions, those of your employer, tax relief that has been added to contributions and any national insurance contribution rebates. At retirement your pension fund can be converted into retirement benefits, such as an annuity and/or tax free cash or Pension Commencement Lump Sum (PCLS).
Pension sharing order
As part of a division of assets following a divorce or dissolution of a civil partnership, a pension sharing order allows a percentage of one party's pension benefits to be transferred to the other party. The benefit transferred is known as a pension credit.
Personal illustration
This is a quote tailored to your situation - showing you the potential costs and benefits of a financial product.
Personal pension
Within a personal pension, you build up a pension fund by investing your and / or your employer's pension contributions with an insurance company. Your contributions build up to provide you with an individual pot of money with which to secure a pension income, usually in the form of an annuity.
PLA6
An HMRC tax form that allows part of your income under a purchased life annuity to be paid free of tax.
Plan Protection
A lump sum death benefit available with the Just Retirement Fixed Term Annuity. This not only allows you to pass on the balance of your fund to your beneficiaries should you die during the term of the Plan, but also includes an Enhanced Annuity Conversion Feature. The conversion feature allows you to convert your Fixed Term Annuity to a Just Retirement enhanced annuity should your health deteriorate during the Plan term (subject to Just Retirement’s underwriting criteria).
Portability
The ability to transfer your equity release policy to another property providing it meets the lender's criteria (this may involve some expense on your part).
Proportion
Proportion is only relevant if you choose to receive your annuity income payments in arrears. If you choose with proportion, a final proportionate payment will be made to cover the period between your last payment and the date of your death. If you choose without proportion, your final annuity income payment will be the last normal payment before you die.
Protected rights
This is the part of a defined contribution pension fund which relates to contracting out of the State Earnings Related Pension Scheme (SERPS) and State Second Pension (S2P). Protected rights cease to exist from 6th April 2012. Former protected rights will be treated, after 6th April 2012, in the same way as ordinary pension funds.
Purchase price
The price you paid for your property.
Purchased life annuity
A type of annuity bought with savings, rather than your pension. It provides you with an income in a similar way to a pension annuity. They are sometimes purchased with money raised through an equity release scheme or using the Pension Commencement Lump Sum (PCLS) from a pension.
Redemption statement
A statement that outlines the monetary amount to be repaid if you wish to redeem your mortgage. This figure will include the accrued interest and any early redemption charge that may apply.
Regular payment
Pre-agreed annual cash advances made to equity release planholders from the cash facility they have been granted.
Retail Prices Index (RPI)
This is a commonly used measure of inflation, published by the Office for National Statistics. You can link an annuity to this measure so each year your annuity is adjusted to ensure it is kept in line with inflation.
Roll-up Lifetime Mortgage
The Just Retirement Roll-up Lifetime Mortgage is a loan secured against your home. No repayments are made on the loan until the death of the last surviving policy holder or their entry into long term care. Interest accrues when you take out the loan at a fixed rate agreed at the time. Any further loans attract interest at a fixed rate agreed at the time. Interest is 'rolled-up', ie it accrues and is only repaid when you die or the last surviving partner dies or goes into long term care.
Salary-related occupational pension scheme
Also known as a defined benefit or final salary scheme. With this type of pension, the amount of retirement income an employee gets is set in advance. The amount of income you get is based on the number of years you have been a member of the scheme and your salary.
Scheme administrator
The person(s) who is responsible for the day-to-day running of the pension scheme.
Scheme pension
The pension provided by a registered pension scheme in the form of an annual income. It can be paid direct from the scheme or by an insurance company selected by the scheme. Defined benefit pensions are always paid as scheme pensions, but defined contribution schemes can also provide these.
SHIP
Standing for Safe Home Income Plans, an organisation dedicated to the protection of consumers entering the equity release market. As of May 2012 SHIP became The Equity Release Council. Membership is voluntary but companies who are members of The Equity Release Council follow a code of conduct to ensure customers are treated fairly when entering into an equity release contract.
Small Self Administered Scheme (SSAS)
Small Self Administered Schemes are occupational schemes usually with up to 11 members, generally set up for the controlling directors of a company. SSASs are subject to special rules surrounding investments and the benefits that can be taken from them.
Stakeholder pension
A type of personal pension that has to meet certain standards set by government. They can be taken out by an individual or through an employer.
State benefits
The state provides some financial help for most situations. The amount of some state benefits e.g. pension credits is based on the amount of income received and capital held. As such, your state benefits could be affected if cash is released from your home. A financial adviser or the Department for Work and Pensions will be able to help find you out if this is the case.
State Earnings Related Pension Scheme (SERPS)
The State Earnings Related Pension Scheme is an additional State Pension for employees on top of the Basic State Pension. It was launched in 1978 and was replaced by the State Second Pension (S2P) in 2002. The amount payable depends on National Insurance contributions.
State pension age
The age you have to reach to be entitled to draw your state pension. This is currently 65 for men and 60 for women born on or before 5 April 1950 but will be changing. Please visit www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension to calculate your state pension age.
State Second Pension
The State Second Pension is an additional State Pension for employees on top of the Basic State Pension. It replaced the State Earnings Related Pension Scheme (SERPS) in 2002. The amount payable depends on National Insurance contributions.
Surrender value
The cash amount offered to the policy owner by the insurance company upon cancellation of a policy outside of the cancellation period. Annuities do not normally have a surrender value.
Survey
An inspection of your property by a surveyor. It details the condition and value of the property and its suitability to lend against.
Tax code
A tax code is used to calculate the amount of tax to deduct from your pay or pension. If you have the wrong tax code you could end up paying too much or too little tax. Tax codes are calculated by HMRC and if you think you have the wrong tax code, you should contact HMRC.
Tax free cash
You can normally take up to 25% of your pension fund as a lump sum, which is currently tax free. This is now known as a Pension Commencement Lump Sum (PCLS), but may also be referred to as a tax-free lump sum or tax-free cash. The Pension Commencement Lump Sum is yours to do with as you see fit.
Tax recovery charge
A one-off tax charge that can be applied in some cases to lump sum death benefits paid from pension schemes by Her Majesty’s Revenue and Customs (HMRC). For the tax year 2011/12, this tax charge is 55%.
Tax year
The tax year starts on 6 April and finishes on 5 May and is split up into 12 monthly periods with each month starting on the 6th and finishing on the 5th of the following month.
Title deeds
These are the documents which prove who owns a property and under what terms.
Trivial commutation (Triviality)
You may be able to take your entire pension as a lump sum, rather than buy an annuity. This applies as long as you are aged 60-75 years and the value of all your pension funds falls within the trivial commutation limit (£18,000 in tax year 2012/13). Trivial commutation payments from all your plans must be taken within a 12 month period. 25% of each payment is tax free and the rest subject to income tax.
UK registered pension scheme
A pension scheme that has been registered with Her Majesty’s Revenue and Customs (HMRC).
Underwriting
Annuity providers assess the annuitant's life expectancy and it is the underwriting process that uses this information to determine how much income to provide.
Valuation fee
A fee paid to the lender to cover their inspection of the property.
Value protection
Should you die without having received the full value of your fund, this benefit allows the balance of your pension fund, minus any income you have received, to be paid to your beneficiaries (net of tax, currently at 55%). See Plan Protection for those with a Fixed Term Annuity.
Will
A legal document that sets out what you would like to happen to your affairs after your death.
Witness
A person who oversees the signing of a document who must be over 18 years old and of sound mind, and not related to the policy/plan holder. The witness does not need to read the document, but does need to see it being signed. The witness should not be party to the transaction and needs to be sure that the signatory is not signing under duress.