Acronym for Bankers Automated Clearing System, a process for sending money electronically between banks. A BACS payment happens when money is sent electronically from one bank account to another.

If someone has a history of defaulting on repayments, they may be considered a bad credit risk for further borrowing.

A fund that aims to provide capital growth through investments in a diversified portfolio of collective investments. Generally low to medium risk investments.

This is the interest rate set by the Bank of England which is used as a benchmark by UK lenders.

This is the retirement pension the Government pays to people who have paid enough national insurance contributions. Some people may receive a reduced basic state pension because they have not paid enough contributions.

A measure often used in describing small percentages. Each basis point is equal to 0.01%, 25 basis points equals 0.25%.

Someone who benefits from a will, trust, pension fund or a life assurance policy.

If an employee or a director gets benefits (perks) from their work, such as a company car, the benefits are called benefits in kind. They may have to pay tax on the value of the benefit in kind.

This is the price you get when you sell shares, bonds or units in a unit trust. The price you buy shares, bonds or units in a unit trust is known as the Offer (Buying) Price. The difference between the two is often referred to as a Bid Offer Spread.

A bond is a written promise to repay a debt at an agreed time and to pay an agreed rate of interest on that debt. They are low to medium risk loans, generally to the government or large companies, that pay a fixed rate of interest.

Investment funds which are specialised in some way. This will be either through the expertise needed to manage the portfolio or because it has an unusual theme. Also, may be a collection of funds under one fund manager.
‘Boutique’ funds are typically offered by smaller, niche firms rather than large investment management companies.

A short-term loan to cover the shortfall between buying one property and selling another. They are commonly used when you find a house you want to buy before managing to sell your current home. They’re very costly and should be avoided unless you can repay quickly, within six months or so.

A bond issued by the British Government. Also known as a Gilt, as the original bond certificates were gilded around the edges.

The price at which you can buy shares, bonds or units in a unit trust.

Glossary of Personal Financial Terms

AAA Rating

In short, AAA ratings (‘triple-A‘ ratings) are the highest credit rating available for an investment, such as a bond or company.

AAA ratings are issued to investment-grade debt that has a high level of creditworthiness with the strongest capacity to repay investors.

Similarly, the AA+ rating is issued by S&P (Standard and Poor) and is similar to the Aa1 rating issued by Moody’s. It comes with very low credit risk and indicates the issuer has a strong capacity to repay.