Accident, sickness and unemployment (ASU) cover
A type of insurance which provides a regular income if you’re off work through an accident, sickness or if you become unemployed through no fault of your own. Also known as short-term protection insurance.
Annual
An annual insurance policy usually lasts for 12 months from the date of inception.
Annual Allowance
The total amount that can be paid into a Defined Contribution pension scheme each year before a tax charge is applied. The current limit is £40,000 each tax year. This may be reduced if your annual earnings exceed £200,000 or if you have already started to access your pension savings. For members of defined benefit schemes, a formula is used to calculate the value of any increase in benefits each year.
Annual Equivalent Rate (AER)
All accounts are required to show an AER. This is a way of expressing the account’s interest rate over a one year period and includes the impact of any compound interest and bonus that may be received. The AER is a useful way of comparing the interest rate of two different savings accounts.
Annuity
An insurance product that enables you to use your pension savings at retirement to guarantee an income for the rest of your life. These products can offer a number of additional features, including an income to a dependant on your death.
APR
Annual Percentage Rate (APR) is the figure that includes interest rates and any associated charges such as administration or redemption fees that may be applied to money you borrow. The APR shows the cost for comparison of borrowing money over a 1 year period. This figure can be used to compare costs between different lenders.
ATOL protection
UK law says your holiday must be protected if you book a package holiday. ATOL is a UK financial protection scheme and it protects most air package holidays sold by travel businesses that are licensed in the UK.
Authorised Overdraft
These are arranged in advance with the bank or building society that provide your current account. Your bank or building society will allow you to borrow money up to a limit. Fees and interest are often charged and you should review the terms of the overdraft before using it.
Automatic Enrolment
A policy that applies to all UK employers and requires them to enrol their employees into a workplace pension. There are certain employees that are exempt from being automatically enrolled into a pension. All employees have the option to opt out once they have been enrolled.
Balance Transfer
Transferring either all or part of the money owed on one credit card over to another credit.
Balloon Payment
A large payment due at the end of a loan contract. If you wish to buy your car at the end of a PCP agreement, you will need to make a balloon payment.
Beneficiary
A person or group of people that you would like to receive your pension savings or inheritance in the event of your death or the benefit in the event of an insurance claim. You can indicate who you would like to be the beneficiary of your pension and change this at any time.
Bonds
The word bond is often used to refer to either corporate bonds or government bonds. Both are a type of investment that involves lending money to either a large company or government for a defined period of time at a fixed interest rate. Returns are normally expected to exceed the interest from a savings accounts but this is not guaranteed. There is always the risk of default i.e. companies may not be able to meet their debt obligations.
Bonus account
A type of savings account that offers a bonus payment after a certain period of time. This is often in addition to an interest rate that may be paid. You will normally miss out on the bonus if you withdraw your savings before the end of the specified savings period.
Buildings insurance
Insurance for home owners or landlords which covers the actual building and main fixtures and fittings like the bathroom or kitchen.
Car insurance
An insurance product which offers varying levels of cover and can protect a number of scenarios such as your car or someone else’s in the event of a fire, theft or accident.
Cash lump sum
This refers to receiving part or all of your pension in the form of a cash lump sum. The first 25% of your pension savings can normally be taken tax-free but tax is applied to the remainder (at the plan holder’s highest rate). In relation to an insurance pay out, this means receiving part or all of the benefit claim as a cash payment.
Civil partner
Each member of a couple who have formed a Civil partnership.
Civil partnership
A legally recognised union of a couple, with rights similar to those of marriage.
Claimant
The person making an insurance claim is known as the claimant.
Contents insurance
Insurance which covers the contents of a home.
Contracted Out (National Insurance Contributions)
Members of a pension scheme who were ‘Contracted Out’ paid lower National Insurance contributions and, in return, didn’t earn the Additional State Pension. It is no longer possible to be ‘Contracted Out’ however; members with historic periods of ‘Contracting Out’ may receive a lower State Pension as a result.
CPI
The Consumer Price Index (CPI) is an index that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
Credit Card
A credit card can be used in a similar way to a debit card. Unlike a debit card, which is linked to your current account, a credit card allows you to pay for goods or services on credit. Each month you’ll be sent a statement showing all of your credit card purchases. You can choose to pay off the debt immediately or pay it off over a period of time. If you don’t pay it off immediately you will normally be charged interest, which can be high.
Credit Default
Failure to make an agreed repayment on time. For example a borrower failing to make the monthly repayments.
Credit Score / Credit Rating
A number that indicates whether you may be considered a high or low risk by credit providers such as banks and other lenders. This number is based on information including your previous credit history and applications.
Critical illness insurance
A type of insurance which provides a tax-free lump sum payment if you’ve been diagnosed with a critical illness such as cancer or a heart attack. What you’re covered for varies amongst policies.
Death Benefits
The benefits that are paid from a pension scheme in the event of your death.
Decreasing term insurance
A type of life insurance which pays out a tax-free lump sum on death, if you die within the term of the policy. The value of the lump sum decreases throughout the term.
Deed of variation
This allows beneficiaries to rearrange or vary their entitlement. A deed of variation can be used by any person who receives a gift under a will to redirect their inheritance to another person.
Default fund
The investments that your Defined Contribution pension savings are held in if you haven’t made an investment decision yourself. You have the option to change the fund your pension savings are invested in at any time.
Deferred period
The amount of time between when an insurance product is bought and when the protection begins. In some insurance products this could be the amount of time between when a claim is made and when a benefit can be received.
Defined Contribution Pension Scheme
A type of pension where contributions are made by you (the member) and possibly by your employer. These contributions are invested and you can choose how you would like to receive your savings at retirement (subject to scheme rules). As the money held in this type of pension is invested there is no guarantee of how much the pension will be worth at retirement. This has become the most common type of pension offered by UK private sector employers.
Defined Benefit Pension Scheme
A type of pension scheme that provides members with a guaranteed income for life at an agreed retirement age. Most UK private sector employers no longer offer these types of pension scheme.
Deferred Member
A member of a pension scheme who has stopped building up benefits in the scheme but whose pension savings are held securely for them to access in the future. Employees of a company who end their employment usually become deferred members of the employer’s pension scheme.
Delayed period
The delayed period is the amount of time between when you make a claim and when you receive your benefit. In some insurance policies this is also referred to as the deferred period.
Early retirement on medical grounds
A member of a pension scheme can usually only begin to receive a pension from age 55. Where a member has serious ill health they may be given the option to retire early on medical grounds. In this case, a pension can be received before the age of 55.
Easy access account
A type of savings account that provides immediate access to your savings without any penalty or loss of interest.
Emergency fund
An easily accessible sum of money, normally recommended to be equivalent to at least 3 months’ worth of outgoings or salary.
Estate
When you die your belongings are grouped together to make your estate. This includes money, property and valuables. Any debt reduces the value of the estate.
Excess
In the context of an insurance claim, the excess refers to the amount the claimant contributes toward a claim. Some insurances have both compulsory and voluntary excesses.
Exclusions
Specific terms, conditions or items not included in what the policy covers.
Family income benefit
A type of life insurance which pays a tax-free income on death if you die within the term of the policy.
FCA
The Financial Conduct Authority (FCA) is the regulator of financial firms in the UK.
Final Salary Scheme
See Defined Benefit Pension Scheme
Fixed Interest
An interest rate that is agreed when a loan is first taken out and will remain unchanged throughout the term of the agreement. Where the interest rates is not fixed, monthly repayments on a loan may be higher or lower in the future.
Fixed rate account
A type of savings account that provides a guaranteed rate of interest for a specified term. Penalties often apply for withdrawing funds before the end of the agreed term.
Foundation Level Contributions
The standard pension contribution structure for Your M&S Pension Saving Plan members. When you pay a 3% pension contribution M&S will pay a 6% employer pension contribution.
FSCS
Stands for Financial Services Compensation Scheme. This is the scheme that protects your savings up to certain limits, in the event that your bank or building society fails.
Funeral Planning Authority (FPA)
Some providers of pre-paid funeral plans are regulated by the FPA. This is an optional subscription for the provider to be party to. It also provides an independent complaints mechanism in the event of disputes, for the protection of consumers.
Gross Income
Your income before any deductions such as income tax, national insurance and any pension contributions or student loan repayments you may be making.
Gross interest
The interest that is received on a savings account before deducting any tax that may be due.
Hire Purchase (HP)
A method of car finance where you pay a deposit up front and pay the balance of the car cost plus interest in fixed monthly instalments. You will not own the car until you’ve made the last payment.
Home insurance
An insurance policy designed to cover your home or the belongings inside it. For further details see the definitions of Buildings insurance and Contents insurance.
Income Drawdown
A method of drawing money from Defined Contribution pension savings at retirement. This normally involves drawing a regular amount on a monthly basis to create an income. It is your responsibility to ensure you do not spend your pension savings too quickly.
Income Tax
The tax that is applied to any income you receive above your Personal Allowance. This is likely to apply to your earnings from M&S but can also apply to pension or investment income you receive.
Index linked
A product that is index linked has its value adjusted according to the value of an inflation index such as the CPI.
Inflation
The rising cost of goods and services over time. Where the cost of the things you buy increases, the amount you can buy with your savings reduces.
Inherit
To inherit money, valuables or property is to receive them once a person has died.
Inheritance Tax
A type of tax that is charged at the point an individual dies. This tax is applied to the value of a person’s estate above a threshold called the nil rate band but there are a number of exemptions that could result in no tax being due. The value of any pension savings when someone dies are normally exempt from Inheritance Tax.
In store finance
In-store finance is a popular way to purchase items and spread the cost over a period of time, it is often referred to as ‘buy now pay later’ credit. You may be offered an interest free period meaning you won’t pay any interest if you pay back the loan before this ends. If you haven’t paid off the debt at the end of the interest free period you will start to pay interest, normally at a high rate. This will make paying off the debt even harder.
Insurance
An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.
Insurance Claim
To use an insurance policy to make a claim. This pays a pre-agreed benefit to you from the insurer, normally after paying an excess, if a specified event occurs.
Interest rate
The return that will be paid on savings you hold in a bank or building society. Interest rates are always shown as a percentage.
Intestacy laws
When you die without leaving a valid will, you are said to have died intestate. There is a legal process which decides how your belongings will be divided up, known as intestacy laws.
Investment
The action or process of investing money for profit.
Investment Growth
The term used to refer to how much an investment rises in value. As investments can also fall in value, the holder of an investment can experience an investment loss.
Investment risk
Sometimes referred to as market volatility, this is a term used to describe how much an investment is likely to rise and fall in value. High risk investments are expected to make large rises and falls in value over a short space of time. They represent the greatest potential returns but also the greatest risk of loss.
ISA
ISA stands for Individual Savings Account. This is a type of account that shelters your savings from any tax that may ordinarily be due on your returns. There are a number of different types of ISAs with each having a limit on the amount that can be paid in each tax year.
Lifestyle investment approach (Lifestyle Strategy)
This approach automatically manages the way pension savings are invested up until retirement, gradually moving your savings into lower risk investments. The default investment for contributions made into Your M&S Pension Saving Plan has a lifestyle investment approach. Members have the option to choose an alternative lifestyle investment approach or can choose (i.e. Self-Select) from a range of investment funds.
Lifetime Allowance
The maximum that someone can hold across all of their UK pension savings before incurring a tax charge. This is currently set at £1,073,100.
Lifetime ISA
A specific type of Individual Savings Account (ISA) that benefits from a 25% bonus from the government. This type of ISA is intended for people who wish to save towards their first home or retirement, with penalties applying to those who use the savings for any other purpose. There are strict rules relating to the maximum age to qualify for this account and the amount that can be contributed each tax year.
Loan Trap
If you have problems paying off a loan, the lender may offer you an extension or a further loan. You can end up being trapped in debt because you’ll have to pay further interest and fees. Debt can quickly spiral out of control.
Money Purchase Annual Allowance (MPAA)
The amount that can be made in Defined Contribution pension savings by an individual after they have begun drawing taxable money from a Defined Contribution pension through a flexible arrangement. (This excludes purchasing a lifetime annuity or income withdrawn from a Defined Benefit pension scheme). The MPAA is currently set at £4,000 pa.
Mortgage
A type of loan used to purchase a house or land.
National Insurance Contributions
National Insurance is a form of tax that is paid on income you earn from employment. You and your employer pay National Insurance Contributions to qualify for certain benefits and the State Pension. You may be able to get National Insurance credits if you’re not paying National Insurance contributions, for example when you’re claiming benefits because you’re ill or unemployed.
Net Income
Refers to your income after all deductions that are taken from your salary. This would include any income tax and National Insurance that is deducted from your salary, together with any other deductions such as pension contributions and student loan repayments you may be making.
No claims bonus
Also known as a NCB. This is a discount applied to some insurance policies as a reward for not making a claim previously.
Over 50’s life insurance
A type of whole-of-life insurance designed to make a tax free lump sum payment when the policy holder dies.
Overdraft
An overdraft allows you to spend more from your current account than your balance. This is referred to as being ‘overdrawn’. There are two types: Authorised Overdrafts and Unauthorised Overdrafts – look up these definitions for further information.
Payday loan
Payday loans are short-term loans with extremely high interest rates, intended to fund small purchases (normally under £1,000) until your next payday. If you don’t repay the debt on time it can quickly spiral out of control. Due to the high interest rates often applied to pay day loans these should usually only be considered as a last resort.
Pension Wise
Free and impartial government guidance about your Defined Contribution pension options which is available from age 50.
Percentage
A percentage means ‘out of 100’. For example, 20 out of 100 is 20%. Equally 20p out of £1.00 is 20%.
Personal Contract Purchase (PCP)
A method of car finance where you pay a deposit and make monthly payments for a fixed period of time. At the end of the contract you have the option to make a balloon payment and keep the car, return the car to the dealership and walk away or start a new PCP agreement.
Personal Loan
A loan made to an individual, usually for a fixed amount of money over a fixed time period. Personal Loans are normally offered by banks and building societies, however other high street retailers have begun to offer personal loans.
Personal Savings Allowance
This is a tax-free allowance that can be used against any interest you receive from savings. This means that up to £1,000 of interest from savings will be tax free for basic rate tax payers.
Pet insurance
An insurance policy designed primarily to cover the costs of medical treatments for pets. Policies may cover other scenarios but these will vary between policies.
Policy
In the context of insurance – this document normally includes details of the product and lists what you are insured for and what you are not insured for as well as the start and end date.
Power of Attorney
A legal document detailing a person you would like to help you with important decisions about your finances or health when you’re not able to make those decisions yourself. The document name varies depending on which region of the UK you live in and which type of Attorney you are appointing.
Pre – existing medical condition
A condition or situation that existed and was known about prior to taking out an insurance policy.
Premium
This is the amount you pay for the policy. Some policies have one off premiums, some are paid yearly and some are paid monthly.
Premium Level Contributions
The higher pension contribution structure for Your M&S Pension Saving Plan members. When the member pays a 6% pension contribution (or more) M&S will pay a 12% employer pension contribution. To qualify for this structure the member needs to meet one of the following conditions:
- They have been a member of Your M&S Pension Saving Plan for 2 years or more
- They are a Reward level D or above
- They left The M&S Pension Scheme when it closed on 31 March 2017 and immediately joined Your M&S Pension Saving Plan (and have remained a member since)
Pre-paid funeral plan
An agreement where the policy holder pays a set amount either upfront or over a number of months in order to get a guaranteed payment toward funeral costs, based on today’s prices when they die.
Quote
A quote or quotation for an insurance policy based on your circumstances which provides an indicative price for the policy, often guaranteed for 28 days.
Redundant
No longer employed as the position is no longer needed.
Regulated
The person or organisation is subject to a set of rules which are designed to ensure they are operating in an honest manner and in accordance with all applicable law.
Revoked
Taken away or no longer valid in relation to a will or insurance.
RPI
The Retail Price Index (RPI) is an index that examines the weighted average of prices of a basket of consumer goods and services, such as rises in mortgage payments, rents, and council tax.
Salary Exchange
Sometimes referred to as salary sacrifice, this is a special way of making contributions into your workplace pension scheme. This is where you “exchange” part of your salary in return for your employer making your pension contributions on your behalf. By using Salary Exchange, the contributions paid into your pension scheme are free from Income Tax and National Insurance. However, there are certain rules that limit the amount you can contribute without paying any tax.
Secured Loan
These loans are borrowed against assets such as your home or car. If the terms of the contract are broken, the lender could seize the asset.
Selected Retirement Age (SRA)
The age that you would like to start drawing your pension savings. You should think about when you would like to start receiving your pension and tell your pension scheme to update your SRA, as it may affect the investments your money is held in. You can normally choose to begin drawing your pension at any time from age 55. For Your M&S Pension Saving Plan this is set a default of 65, but you can update this at any time.
Self-insurance
When you save enough money to cover your outgoings for a set period of time.
Self-Select Strategy
This is the term used to describe choosing your own pension investment funds. This option is available to members of Your M&S Pension Saving Plan, where members can choose a variety of investment funds from a specified range made available by the Trustees.
Shares
Also referred to as equities, this is a way of investing into a company by becoming a shareholder (buying a share of the company). The returns are then linked to the future profitability of the company. There is the risk that you could receive back less than you paid in.
Sharebuy
A way of buying M&S shares from gross salary (before tax). As a member of this scheme, you can receive the shares you purchase tax-free, provided they have been held in the scheme for at least 5 years. Sharebuy is only available to M&S employees.
Sharesave
A way of buying M&S shares at a discounted price. This scheme is only available to M&S employees with contributions into the scheme taken directly from your regular salary.
Spouse
A spouse is the name given to a husband or wife when they are married. Spouse does not include Civil partner.
State Pension
The pension you may receive from the government at your State Pension Age. The amount you may receive is determined by the number of years of National Insurance Contributions you have. Those who have less than 10 years of National Insurance Contributions will not receive a State Pension.
State Pension Age
This is the age that you can start receiving a State Pension and is determined by whether you are male or female and your date of birth. You can choose to delay receipt of your State Pension but cannot receive it before your State Pension Age.
Sum assured
This is what the insurance company has agreed to pay you if you needed to make a claim. It is sometimes called the benefit or pay out.
Tax code
A code used by your employer or pension provider to work out how much Income Tax to take from your pay or pension. Your tax code is provided by your tax office and will be based on your personal tax situation. You will be able to see your tax code on your pay slip and will usually receive a letter from HMRC when your tax code changes.
Tax Free Lump Sum
All pension schemes allow you to receive part of your pension tax free at retirement. In most cases, this is a lump sum up to 25% of the total value of the pension.
Tax Relief (on contributions)
This refers to the special tax treatment that applies to contributions made to a personal pension arrangement.
Tech insurance
An insurance product designed to cover a piece of tech like a mobile phone, tablet or laptop in a number of events such as loss, theft or accidental damage.
Term
This is the length of time the insurance policy runs for.
Travel insurance
Covers problems you may face whilst travelling such as flight cancelations, loss or theft of your belongings or getting injured. Also known as holiday insurance.
Unauthorised Overdraft
This is unplanned borrowing that your bank or building society has not agreed to. An unauthorised overdraft also applies when you exceed the borrowing limit on an authorised overdraft.
Unsecured debt or Loans
A type of loan or debt not secured against any assets. Personal loans, credit cards and in store credit are typically unsecured.
Variable Interest
An interest rate that may go up or down during the term of the loan.
Variable rate account
A type of savings account that offers an interest rate that could increase or decrease in the future. These types of accounts do not normally apply penalties for early access to your savings, however you should always check the terms before opening an account (e.g. 90 day accounts).
Warranty
A written guarantee, issued to the purchaser of a product by its manufacturer, promising to repair or replace it if necessary within a specified period of time.
Whole-of-life insurance
A type of life insurance which pays a tax-free lump sum on death. This policy does not have an end date and your policy will cover you for as long as the premiums are paid.
Will
A legal document that sets forth your wishes regarding the distribution of your property and the care of any children or minors. It can also be used to detail any funeral plans.
