Glossary

A

Advisers

Refers to the collective of our Investment Managers, Wealth and Financial Planners.

Annual Allowance

You can save as much as you like towards a pension each year, however there is a limit on the total amount that can receive tax relief.
This amount is known as the annual allowance. If you save more than this amount, you may have to pay a tax charge on the excess unless you bring forward unused allowances from the previous three tax years.

B

Bonds

A fixed-income investment where a debt is issued by a government or company and the money is issued when the bond reaches maturity.

C

Capital Gains Tax

This is the tax charged when a UK individual makes a chargeable disposal, via a sale or gift, of a chargeable asset (certain assets such as your main home are exempt).

The tax is charged on any gain that arises between purchase and sale at a rate that varies according to that individual’s income tax bracket.

Cash-Flow Modelling

Our cash-flow modelling tool helps to answer important financial questions, such as when you can afford to retire or how much wealth you can pass on.

Child Trust Fund

A Child Trust Fund is a long-term tax-free savings account for a child if they were born between 1 September 2002 and 2 January 2011 and were living in the UK. They were replaced by Junior ISA on the 3rd January 2011.

Compound Interest

Compound interest is the ability to earn interest on interest.
Our compounding tool shows you how much your money could be worth*

D

Discretionary

Investments managed by an Adviser on behalf of the client.

Diversification

Diversification is the process of spreading investments across different asset classes, industries, and geographic regions to reduce the overall risk of an investment portfolio.

E

Estate Planning

The process of planning the transfer of your assets to your next of kin.

F

Financial Planner

Financial Planners work with you to understand your finances and goals and develop tailored long-term strategic financial plans alongside investment mandates.

Funds

A pool of money set aside for a specific purpose. Funds offer investors the chance to benefit from shares and bonds without having to own and manage them

G

Gilt

These are IOUs issued by the British government in order to meet the shortfall between its revenue (mainly tax) and its expenditure on public services and defence.

They are generally sold at competitive auctions to institutional investors looking for a relatively safe home for funds however they can subsequently be bought by anyone including retail investors. Gilts mostly carry a fixed income return in the form of a coupon and can be freely traded between issue and final redemption by the government. The nearest US equivalent is the Treasury.

H

House of Killik

An innovative space, designed to meet the needs of you and your family through saving, planning and investing.

I

Income Tax

This is the tax that individuals suffer on income whether earnings or investment related (so it applies to interest on cash and dividends received from companies).

The rate varies depending on the level of income earned. There are various ways to reduce the bill including annual allowances and the use of individual savings accounts.

Inflation

The rate at which the price of goods and services rise. Measured by the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households. Impacts decisions made by BoE etc.

Inheritance Tax

The tax paid on a UK domiciled (the UK is their legal home) person’s death estate.

On death an executor takes responsibility for valuing a deceased person’s assets for inheritance tax purposes. Tax is then levied at a flat rate of 40% on any amount above the exemption limit. There are various ways this tax can be mitigated including gifting assets while the donor is still alive.

Investment Managers

Investment Managers are responsible for the management and construction of client's investment portfolios containing bonds, funds and other assets.

ISA

An individual savings account, or an ISA, is a way to protect cash and investments from income tax and capital gains tax.

J

JISA

A Junior ISA is a savings account that can be set up for any child that is aged under 18 lives in the UK. A JISA can hold cash and/or stocks and shares. The amount that can be paid in each year is capped*, however anyone can pay into an account including the child themselves, parents and grandparents.

K

L

Lasting Power of Attorney (LPA)

This is used so that someone can give key decision-making powers to someone else to enable them to act on their behalf.

There are two basic types – one relates to Health and Welfare and the other to Property and Financial matter, such as control over investments and bank accounts. To set these up correctly takes a bit of time and requires some key decisions to be made. Without one, relatives can be left without the ability to raise funds and/or determine the right medical treatment and care for an ageing relative without seeking a mandate from the Court of Protection first.

Lifetime Allowance

This sum, which is set by the government, represents the maximum amount you can withdraw from a pension fund without being hit for additional penalty tax charges.

M

MyKillik

Our client portal gives you around the clock access to your accounts, our latest investment ideas and content library, both online and via your mobile or tablet.

N

O

P

Pension

There are several types; a final salary scheme pays you a proportion of your final salary in retirement whereas a money purchase scheme means you save a lump sum during your working life which can be converted into an income (via an annuity or income drawdown) on retirement. It may also be left invested. There is also a state pension of a fixed amount per week, although this is relatively low.

Q

R

Rainy Day Funds

The aim is to have a fund available should we need to fund an unexpected short-term problem, such as losing our job, getting sick or having to repair a leaky roof. The amount will vary from person to person but around 3-6 months of salary will usually suffice.

S

Salary Sacrifice

A government-backed scheme designed to help employers save workers on tax.

Share

This is the mechanism by which firms raise capital from investors willing to take an equity stake in a business and share directly in its fortunes.

As a firm grows a shareholder may expect to receive an income return in the form of a dividend and also see the value of their share rise. As part owners of the business, they are also entitled to vote at shareholder meetings on key issues such as whether the directors are reappointed or not. They also carry some risk in the event a firm goes bust since shareholders rank behind bond holders and other creditors in terms of recovering their money. Shares may be privately owned, in which case they can only be bought as and when existing shareholders decide to sell or they may be more freely available on a public market such as the London Stock Exchange if the issuer is listed.

Silo

Investments managed by the award-winning team at Killik & Co in our handy savings and investing app with no minimums.

SIPP

A Self-Invested Personal Pension is a pot for retirement and allows you to have more control on where your investments are made from that of a standard pension.

SSAS

This is short for Small Self-Administered Scheme.

These are usually set up by the directors of a company who want greater control over the investment decisions relating to their pensions. They may even want their pension plans to invest in their business. That is one of the main reasons for setting up a SSAS, which can make such an investment, rather than a SIPP, which can’t.

Stocks and Shares

A share is when you own part of a company, and a stock is portions of ownership of multiple companies

T

Tax Relief

Whenever you are able to offset an item of expenditure, or a cost, against income or profits in order to reduce the total amount of tax you will pay it is described as tax relief.

So for example you may be receiving rental income on a property but be able to deduct some of the costs of running the building against it – this is an example of tax relief as your net income, and therefore your tax bill, will be reduced as a result.

Three Pot Approach

A three-pot approach is usually made up of a rainy-day fund, which is typically 3-6 months’ worth of everyday spending. A medium-term goal pot for larger capital expenses (e.g. a car or education costs) needed in the next five years savings beyond this, represent your ‘lifetime savings’ which you could look to invest for your longer-term financial goals.

Trust

This is a vehicle that helps manage assets.

There are three parties – a ‘settlor’ puts assets into trust, a trustee then manages them in accordance with their wishes and a beneficiary receives income, capital or both at an agreed point in the future. There are several types of trust. The simplest is known as a bare trust where a beneficiary is known to and can be named by a settlor. Alternatively, where there are multiple beneficiaries and/or the benefits from an asset are to be split, a discretionary trust may be more appropriate.

U

V

Volatility

Volatility is the extent to which an asset prices rises and falls and also the speed with which it does so.

As such it is a way of describing the price risk associated with that asset. As a rule of thumb the higher the volatility of an asset the greater the returns an investor should expect to earn from that asset. There are several ways of measuring volatility. One way to mitigate volatility as an investor is to spread your cash over several asset classes and to then diversify within each asset class. For example someone who owns shares should ideally look to own 15-20 as a minimum to reduce the impact of single stock volatility on their portfolio.

W

Wealth Planners

Wealth Planners work with clients to discuss their financial position, lifetime goals, and develop tailored long-term strategic financial plans alongside investment mandates to help achieve these.

Wealth Planning/Financial Planning

A Planner works with you to firstly understand your financial situation and ambitions and then maps out a plan to help you reach your goals within a timeframe from cashflow planning, pensions to legacy planning.

Wills

Wills are legal documents that deal with some crucial issues that only arise when you die.

These include who will act as your executor and distribute your assets on death and who will act as guardian to your children. Someone who dies without a will is said to have died intestate.

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