Glossary of Investment Terms (P)
Glossary of Investment Terms (P) |
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Package Trade This refers to the purchase of a basket of investments and is often related to derivatives dealing, index tracking or some kind of arbitrage trade. Paid-up Benefits These are preserved benefits in a pension arrangement where contributions have ceased. Passive Management Also known as index tracking this is a form of investment management which basically mirrors a pre-determined index. Penny Shares Often associated with high risk investments, penny shares are traditionally valued at under £1 a share. Pension In basic terms a pension is an income plan to be taken in retirement. Pension Annuity Upon retirement many people will purchase an annuity (in simple terms, an insurance policy) which guarantees them a certain level of income for the rest of their lives. Pension Fund General term used to describe the investment fund built up in a pension plan and used at retirement to create an income stream. Pension Transfers As more and more people move between employers, pension transfers have become more common place. It is vital that advice is taken before any pension transfers are carried out as benefits may be lost or reduced. Pensionable Earnings Earnings on which benefits and contributions in a pension scheme are calculated. Pensions Ombudsman The Pensions Ombudsman deals with disputes about entitlement and complaints about maladministration from members of occupational pension schemes and personal pension schemes. Pensionable Service Period of service with a company that is used in the calculation of pension benefits Pensioneer Trustee Pensioneer Trustees are a mandatory requirement for small self-administered pension schemes. Their role is to safe guard pension investments and to ensure that all actions are carried out to the letter of the law. Performance Management In simple terms this is the process by which different funds and different fund manager performances are compared. However, as different funds and different fund managers work to different investment guidelines it can be fairly complex to calculate in some circumstances. Performance to date The performance of an investment over a given period of time. Performance Since Launch The performance of an investment from inception up to the current date. Persistency A measure of how long a policy holder keeps their policy with an insurer, often seem as a measure of the success of the insurance company, i.e. how well they retain their customers. Personal Allowance The level of income above which income tax starts to be levied. Personal Equity Plan (PEP) Introduced in 1987 Personal Equity Plans (PEPs) were simple, flexible investment plans investing in the stockmarket and benefiting from special tax advantages. There was no minimum or maximum period for which investments were held. These plans were replaced by ISAs from April 1999 although PEPs remaining in force after that date automatically became Stocks and Shares ISAs on 6 April 2008. Personal Pension Plan This is an arrangement into which individuals can make contributions without the need for employer contributions. Policy This is a document which gives all of the details of the agreement between the insured and the insurer. Policy Conditions The ‘small print ‘of a policy, which sets out the rights and responsibilities of the parties involved. Policy Fee This is an administration fee usually charged monthly or annually. Policy Holder This is the person who owns a specific policy. Political Risk As oppose to market risk, political risk relates to the risk that governments around the world may amend their regulations which could have a detrimental effect on some investors. Pooled Investments Also known as collective investments, pooled investments are investment vehicles where investor funds are “pooled” together to buy a spread of investments to which investors are allocated units. Portfolio This is a collection of investment assets which can include cash, shares, government bonds, etc. Portfolio Manager A person or organisation engaged to manage investment portfolios and make investment decisions on behalf of others. Also known as an Investment Manager. Portfolio Optimisation The process of selecting an investment portfolio that minimises risk for a given level of return – directly connected to the investment strategy of the underlying investor. Position A summary of an option trader’s open contracts in a particular underlying security Potentially Exempt Transfer Gifts on which Inheritance Tax will not be payable unless the donor dies within seven years. Pound Cost Averaging This is a term used to describe an investment into which funds are invested on a regular basis which illuminates the risk of investing a one of lump sum at the “wrong time”. Power of Attorney A Power of Attorney is a legal document whereby one person gives a third person or third party the power to act on their behalf. Preference Shares Shares which rank before ordinary shares in the event of liquidation of the issuing company and often attract a fixed rate of income but do not necessarily benefit from any increase in company profits. They are often regarded as “safer” than ordinary shares, which are far more volatile. Premium The amount of money an individual pays into a saving or investment product, as either a lump sum or a regular payment. Premium Frequency This is the frequency at which a regular investment is made, i.e. monthly, annually, etc. Present Value The current value of an investment after taking into account future income, interest rates, discounted rates of return, etc. Preserved Benefits When leaving employment after at least two years as a member of an Occupational Pension Scheme, pension benefits accrued to date must be preserved within the scheme or transferred to another pension scheme. If less than two years ‘service, members of the pension scheme can take a refund of any personal contributions, less certain deductions. Price-Earnings Ratio (PR) This is a common measurement of the “value” of a share and is the current share price divided by the profit attributed to each share (i.e. total profits divided by number of ordinary shares in issue). Primary Market The market in which securities are sold at the time they are first issued. (As opposed to Secondary Market). Private Sector This is a vital area of the UK economy which is owned/operated by corporations and individuals outside of the public sector. Privatisation The sale of a Government trading body (e.g. a statutory authority) to investors, e.g. British Gas, which was seen by many as the beginning of the privatisation trend in the UK. Profit and Loss Account This is a financial statement showing the income and outgoings of a company over a specific period. This is very different from a company’s balance sheet which summarises the assets and liabilities of a company. Program Trading A block or package trading program such as index arbitraging. Often used to expose an anomaly in the market where there may be a small “risk free” profit to be made. Protected Rights If you're employed you can normally contract out of State Second Pension. One option is to contract out using a Personal Pension, Stakeholder Pension or a Money Purchase Occupational Scheme. This means that you give up your right to benefit from State Second Pension for the period you are contracted out. As a result, your State Second Pension benefit will be reduced. In return, the Inland Revenue sends your selected pension provider a rebate of part of your own and your employer's National Insurance contributions. These are invested in your plan and the fund that this produces is called Protected Rights. There are special rules about the benefits you can get from Protected Rights and when they can be taken e.g. you cannot usually take your Protected Rights benefits before age 60. Protection Overlay This is a process by which the value of an investment fund can be protected to a varying extent, using options and derivatives for example. Similar in many ways to an insurance policy. Proxy This is a written authorisation, given by a shareholder, to allow someone else to vote on behalf of them at a shareholder’s meeting. Public Sector The public sector is controlled by the UK government and includes essential services such as health, education, transport and defence. Purchased Life Annuity An Annuity bought with private savings (not pension savings). Part of the Annuity is deemed to be interest paid on the capital and is taxed. The other part is considered to be a return of capital and so escapes tax. Put Option This is an option which gives the holder the right, but not the obligation, to sell an asset at a specified price over a specified period. See also Call Option.
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