Pensions Glossary - B

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Back to Back. Funding of one arrangement by another e.g. annuity payments going towards regular premium payments. A leasing arrangement whereby a sub-lessor leases equipment in, so that it can be leased out again to the final lessee.

Backwardation. The fee paid by a seller of shares for deferring the delivery of stocks and shares to the buyers.

Bad Debt. Money owed that will not be repaid. Normally written off as a charge to the profit and loss account.

Balance Sheet. A statement of assets and liabilities, plus owners equity and reserves at a specific date.

Balloon Rental. Large final payment at the end of the lease period.

Bancassurance. General term describing the broader financial services activities of banks and building societies, in particular their 'insurance company' activities.

Bank of England. The UK's central bank. Its main responsibility is to implement and police monetary policy. Bank Rate. The official rate of interest charged by the Bank of England acting in its role as lender of last resort to the financial institutions. In 1972 the rate was renamed Minimum Lending Rate (MLR) and was no longer to be determined by the government, but automatically by the current level of interest rates in the money market. But on 14 January 1985 the government returned to prescribing the level of MLR in order to control the volume of credit in the economy.

Banker's Draft. A bill of exchange drawn on the bank, like a cheque, and presented by the bearer to the seller to purchase goods. The individual's account is then debited with the amount.

Bankers Automated Clearing Services. A computerised system facilitating the transfer of funds after clearing.

Bankrupt. Person or business incapable of paying outstanding debts and whose affairs have been ordered by a court into the control of a receiver. Before someone can be declared bankrupt, they must commit an act of bankruptcy, such as entering into a situation which shows that it is unlikely that ensuing debts will be paid.

Bar Chart. A pictorial comparison of results or measurements illustrated by vertical bars from the height of which it is possible to compare figures.

Bar Council. Barrister's governing body, responsible for maintaining professional standards.

Bare Trust. See 'absolute trust'.

Barrister. A qualified lawyer who represents people in court and who may provide legal opinion out of court.

Base Rate. The foundation of every bank's structure of interest rates. Depositors are paid interest rates a few percentage points below the base rate, and borrowers are charged rates above the base rate. Banks alter their base rates when MLR changes.

Basic Rate Tax. Under the unified system of taxation introduced in April 1973 there are currently three levels of taxation; a lower rate, currently at 10%, the basic rate of 23%, and a higher rate of 40%.

Basic State Pension. The flat rate state pension available to everyone upon reaching State Retirement Age, provided sufficient N.I. contributions are made.

Bear. Stockmarket jargon for a pessimist. Someone who thinks that the market is going to fall and sells shares or options in the belief that they can be bought back later at a cheaper price.

Bear Market. An investment market term meaning that the value of investments is expected to fall.

Bear Raid. High volume selling in the hope of depressing prices with a view to repurchasing at a lower price.

Bearer Bill. A bill of exchange written so that the value will be paid out to the holder on presentation e.g. cheque made out to cash.

Bed and Breakfast. The sale of shares one day, and their repurchase the next day, done to achieve a disposal for Capital Gains Tax purposes. This did have the effect, until 17th March 1998 of rebasing share value and using the annual CGT exemption so as not to produce a highly taxable gain in the future. Since that date at least 30 days must now elapse between the sale and repurchase for the practice to be effective so the level of risk is normally considered to be too great.

Bellwether Industry. An industry or sector which gives a lead indicator of forthcoming changes in the economy.

Below the Line. See "Above the Line". Items below the line tend to be extraordinary items such as dividends.

Benchmarking. Comparing activities against agreed parameters to assess degrees of comparative performance Beneficiary. Someone who will receive the proceeds from a trust or settlement.

Benefits Agency. The Executive agency of the DSS responsible for distribution of information concerning various State benefits.

Benefits in Kind. Refers to non-cash forms of employee benefit, such as pension scheme membership, car packages, and similar.

Best Advice. A generic expression referring to the regulatory requirement for a financial adviser to offer suitable and timely advice relevant to a client's needs. Client's needs must take precedent over the adviser's remuneration. The original "best advice" rules has been replaced by an FSA "suitability" rule. See 'Know Your Client'.

Bid Price. Price at which market makers, life assurance companies and unit managers buy back units from investors. Also used when unit linked policy matures or is encashed. Always less than offer price.

Bid Valuation. Valuation of a unit trust on a bid value of shares held after allowing for dealing costs. Usually indicates that the trust has more sellers than buyers.

Bid/Offer Spread. Difference between the bid price and offer price of units. Usually between 5% and 6% of the offer price of units. Used to recoup management expenses and initial costs.

Big Bang. A series of changes to the operating systems of the Stock Exchange leading to the introduction of electronic trading commencing October 27 1986.

Big Ticket. Leases on high cost assets. 'Small ticket' items would usually be items such as office equipment.

Bill of Exchange. A paper document indicating that one party (the drawee) agrees to pay another party (the drawer) the sum of money noted on the bill, on demand or on a specified date e.g. a bank note, or a cheque.

Bill of Lading. Document stating that goods have been received for shipment, and which sets out the terms of delivery and receipt.

Black Economy. Goods and services paid for by 'cash in-hand', and not recorded for tax and NI purpose.

Blue Chip. A phrase taken to mean 'first class', referring to shares of a company with a good trading and dividend record, or to the company itself.

Board Order. Instruction to deal only when a particular price is obtainable.

Board Resolution. A decision made by the directors of a company.

Bona Fide. Good faith.

Bona Vacantia. Property not disposed of by will, and which will pass to the Crown or Duchy of Lancaster.

Bonds. A generic term for life assurance policies that contain a nominal amount of life cover and a large investment content. Marketed as investments and subject to special tax treatment. Phrase also used to describe Government securities.

Bonus. Added to with profit policies. The amount is determined by life company's actuary and represents a distribution to with profit policyholders of investment return achieved by fund. Payment of bonus is not guaranteed. Reversionary bonuses, normally declared annually, cannot be removed once added. Terminal bonuses added on death or maturity.

Bonus Issue. Often called a "free" or scrip issue, a bonus issue is a book-keeping transaction that transfers money from a company's reserve to its capital. Existing share prices fall to reflect the greater number issued.

Bonus Sacrifice. A way of giving up any bonus element of earned income, and diverting the sum to additional pension contributions. Treated as an additional employer contribution payment. Any notice of intention to sacrifice must be made clear before any bonus payment is announced. Tax treatment depends on specific circumstances and the local inspector.

Book Value. The value of an asset as shown in a company's account books, which may or may not be the same as its market value.

Box. Term used to describe the way in which unit trust manager may hold units available for sale. Box may contain new units, units repurchased from investors or both.

Breach of Contract. Failure of a party to a contract to perform the necessary obligations.

Breach of Trust. Any act or omission by a trustee, not necessarily deliberate, contrary to the terms of the trust.

Break Even Analysis. Technique concerned with estimating the point at which income and expenditure are at the same level. This is termed the break even point, at which point the business makes neither profit nor loss.

Bretton Woods Agreement. 1944 agreement which established the International Monetary Fund and the World Bank.

Bridging Loan. A short-term loan taken out to help fund the purchase of one asset before the sale of another asset has been finalised. Commonly seen in the property market.

Bridging Pension. An additional temporary pension paid from a scheme between retirement and State pension age. Usually replaced by State pension payable from State pension age.

British Government Stocks. See Gilts.

Broker. A broker is an agent who brings two parties together to do business, and is remunerated by a fee or commission, the latter calculated as a percentage of the contract sum.

Broker Fund. Generic term for an investment fund managed by a specialist financial adviser. Usually invested in the units of other investment funds/unit trusts.

Brokerage. Dealing fee or commission charged by a broker. May also be used as a term for a broking firm.

Budget. A budget is a financial plan that details future expected income and expenditure. Also refers to a specific sum of money set aside for a particular project. Hence the Government's announcement each year, regarding it's tax and financing plans for the future, is called The Budget.

Building Societies Association. Trade association for UK building societies which represents societies in discussions with government and other organisations.

Building Societies Commission. The organisation which now regulates the affairs of building societies, having taken over from the Registrar of Friendly Societies.

Building Societies Ombudsman. Established in 1987 to investigate complaints made by customers against societies.

Funded by all building societies. To be combined with other ombudsman and complaints handling schemes to form Financial Services Ombudsman.

Building Society. A financial institution which, traditionally, accepts cash deposits and pays out interest on deposits at a variable rate. Money is also lent, traditionally to finance house purchase. Many are now expanding into banking and financial services.

Bull. The opposite of a bear. the optimist who believes that the market is going to rise, and so buys shares now to benefit from future price rises.

Bull Market. A rising investment market; the 'opposite' of bear market.

Bulldog Bond. A sterling denominated bond issued in the UK by a non-UK institution.

Business Card. A convenient way of satisfying the compliance requirement of informing a potential client of who you are, who you work for, your business and regulatory status, and your regulatory authority.

Business Expansion Scheme. Introduced in 1983 as a tax effective inducement to encourage investment in companies not quoted on the stock exchange. The scheme ended 31.12.93 and was replaced by the Enterprise Investment Scheme.

Business Investor. One of several types of investor identified in financial services legislation. Different levels of duty of care apply to each type of investor to reflect their existing knowledge and experience of investment business. A business investor is not a professional investor but does regularly deal with certain investments in a business capacity. Deemed to understand the nature and risk of the type of investments they normally transact.

Business Property Relief. An inheritance tax relief, applying to lifetime transfers of business property or business interests. Amount of relief ranges from 50% to 100% depending on type of asset. Relief not available if business deals in stocks and shares, land and buildings or investments.

Business Protection. Generally used to refer to such areas as share protection, key employee protection and partnership protection i.e. arranging, by use of life assurance policies, for money to be in the right hands in the event of death and retirement to purchase shares or business interest to help preserve a business and/or its status quo.

Business Roll-Over Relief. Where there is a capital gain on the sale of a company fixed asset, some or all of the gain may be offset by the purchase price of a replacement. Cannot be used for all assets but applies to land and buildings and plant and machinery. Replacement asset must be purchased between one year before and three years after disposal of original asset.

Buy and Sell Agreement. Both partnerships and director/shareholder controlled companies need agreements to help ensure a satisfactory disposal of shares in certain circumstances. The 'buy and sell' route is one such, where it is written into a wider agreement that in the event of death or retirement, one party will sell the business share, and another buy. A fixed agreement rather than an option.

Buy at Best. Instruction to buy until the required quantity is reached.

Buy Back. Term used to describe the reinstatement of an individual's SERPS benefit relating to a period of contracted-out employment. Payment of State Scheme Premium ensures treated as if had not contracted-out.

Buy Out Policy. Refers to the type of stand-alone policy introduced by S.32 of the Finance Act 1981, which enabled those leaving an employment to transfer pension entitlement from a pension scheme to a personal contract in their own name. A single premium contract, accepting only transfer payments, with no provision for additional, regular contributions.

Buyers Guide. Information given to a client by a Financial Adviser showing the adviser's status and obligations to the client. This has now been replaced by a Regulator's Statement which must appear prominently in the Terms of Business letter.

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