Which ISA should you choose?
Choosing an Individual Savings Account (ISA) used to be simple. There was either a cash...Read more
To accumulate something.
Annual Equivalent Rate. The rate for savings accounts - an overall rate to make comparisons. Rates based on what the interest would be if the interest was paid and added to each year.
A specific type of investment. There’s so many investments on offer that they are grouped together to make searching for them easier. Assets include bonds, equities (shares) etc.
This is usually something you’d be aware of when considering an Innovative Finance ISA. When you invest in an Innovative Finance ISA, you're essentially lending money to a business as a loan via a bond. When an Innovative Finance ISA is asset-backed, it means their assets are contractually used as collateral to protect the money you give. In short, if something goes wrong and the borrower cannot meet the terms of their loan, their assets are instead used to pay back investors.
Includes your money, property, and shares.
Electronic payments. BACS: An electronic system that allows you to make payments from one bank account to another. It can take up to 3 days to clear payments. CHAPS: Guaranteed same day payment in line with the terms and conditions of individual banks and building societies.
The price you sell shares for.
Bonds are a type of investment. Essentially, a bond is when an investor loans money to a business (or government). The borrower has to pay back the money at a variable or fixed interest rate.
A rate given at the start of opening a financial product to entice new customers.
A person or an organisation borrowing money.
Capital that is set aside to cover risks.
The increase in the value of your capital.
An individual savings account that pays interest tax-free. Unlike traditional accounts where you pay income tax on the interest you earn.
The concept of earning interest on your interest, rather than on just the money you have invested. E.g., invest £1,000 with an annual interest rate of 5%, and at the end of the year you will have made £50 in interest. The following year you would earn 5% interest on £1,050 not £1,000.
How much you are paying into a financial product.
When a borrower defaults on a loan, they are considered a credit risk.
Companies/people/organisations that lend money.
A custodian is an organisation who can take responsibility for protecting your assets.
Financial Conduct Authority. The FCA is the conduct regulator for financial services in the UK.
A payment made in exchange for services.
An individual whose job it is to provide financial advice.
Fixed-rate individual savings accounts (ISAs) pay set amounts of interest. For example 7.5%.
Flexible individual savings accounts allow you to withdraw funds without it affecting your remaining funds.
Financial Services Compensation Scheme. The FSCS protects consumers when financial services fail.