Jargon buster

Before you choose your investments, you'll need to decide where to put them. In other words, you’ll need to pick an account.

An account is where you hold and manage your investments. At AJ Bell, we offer a Stocks and shares ISA, Lifetime ISA, Self-invested personal pension (SIPP) and Dealing account, as well as Junior ISA and Junior SIPP accounts that let you invest for children.

Each account has its own key features, rules and tax treatment. So you’ll need to consider which might be best for you and your investing goals.

You might see certain accounts (such as an ISA or SIPP) also referred to as ‘wrappers’ or ‘tax wrappers’.

See our range of accounts

A fund offers two types of units of shares you can buy – accumulation or income.  The difference is in how they handle the income (i.e. the dividends or interest) the fund generates.

Accumulation units or shares reinvest the fund’s income the fund generates, while income units pay it out. This usually means that the price of accumulation units or shares will rise over time as more income is received and reinvested.

If you hold a fund in a SIPP or an ISA, any income and gains are free of tax. But if you hold a fund in a Dealing account, income and gains are taxable. It’s important to remember that this includes income from accumulation funds – even though you’re not paid it directly.

See also: income units Read about fund classes

A type of fund that has a fund manager who makes investment choices with the aim of achieving a particular investment objective, or to outperform a benchmark.

See also: passive funds

AJ Bell’s own range of no-hassle investment funds, managed by our team of experts. Each fund has a different investment objective – including growth, income generation, and responsible growth.

The AJ Bell funds are designed to be held over the longer term. Each invests in different types of assets, in different proportions, depending on their level of risk and investment objective.

See AJ Bell funds

The junior marketplace of the London Stock Exchange, acting as a way for small and medium-sized growth companies to access investors. There are weaker regulatory requirements for companies that want to list on the AIM compared to the Main Market, which can mean less protection for investors.

AJ Bell offers dealing within the AIM market via our investment platform.

The amount you’re allowed to pay in across all of your pensions, per tax year before a tax charge might apply. This includes not only money you contribute yourself, but also the tax relief you get from the government as well as anything paid in by your employer.

The standard annual allowance is currently £60,000 per tax year but you can also carry forward allowances you didn’t use in the previous three tax years. If the total amount paid into all of your pensions in a tax year (including tax relief top ups) is more than your total allowance then you will face a tax charge.

If you have a high income (usually over £260,000 p.a.), your annual allowance will be tapered. It will also be lower if you’ve already accessed and taken an income from defined contribution pensions, which triggers the MPAA.

A lifetime annuity is a type of insurance policy that pays you a regular income for the rest of your life, in exchange for a lump sum. You can use all or part of your pension to buy an annuity.

When buying an annuity, you can choose whether the level of payment will stay the same, rise with inflation, or drop off later. If you like, you can also buy an annuity that pays your spouse an income after you die. These options must be chosen at the start.

The amount you receive from an annuity depends on your age, the size of your pension fund, and in some cases, your state of health. Once you buy an annuity, you’ll no longer have any say over how your pension is invested – but you will have the security of knowing your income will continue for the rest of your life.

An alternative junior marketplace to the Alternative Investment Market (AIM), offering a place for small and typically less mature companies to trade their shares. This is separate to and not owned by the London Stock Exchange.

Companies listed on the Aquis Stock Exchange tend to be at a very early stage of development with low levels of liquidity and little or no trading history, making them harder to buy or sell – and therefore a riskier investment.

AJ Bell offers dealing within the Aquis Stock Exchange via our investment platform.

A term that describes how an investment or portfolio is divided between types of assets (usually on a percentage basis). The main asset types are cash, shares (equities) and bonds, but can also include property or alternatives.

When investing, the bigger the potential risk, the bigger the potential return. Where you sit on this scale is your ‘attitude to risk’.

Understanding how much risk you’re happy to take to achieve your goals can help you decide what to invest in.

A type of collective investment fund authorised by the Financial Conduct Authority (FCA). An AUT is structured as a trust, with the underlying assets of the fund managed by an investment manager.

Investors buy and sell units in the fund, and the price of those units moves in line with the value of the assets the fund is invested in.

See also: collective investments

‘Bankers' Automated Clearing System’: an electronic payments scheme that allows transfers from one bank account to another. BACS payments usually take three working days to clear.

A special type of transaction that lets you efficiently move an investment from a Dealing account to an ISA (where you can hold it tax-free).

Rather than manually selling the investment in your Dealing account and buying it back in your ISA, a Bed & ISA carries out the two transactions together. This minimises your dealing charges, as well as your exposure to market movements.

Bed & ISA deals are available across a wide range of investments, including shares, investment trusts, trackers and bonds (but not unit trusts and OEIC funds).

Read about Bed & ISA transactions

A type of investment in which you lend money to a company or government. In return you get interest payments and repayment of the money you lent at the end of a specific term. The interest rate and term are set at the start of the investment.

Investing in bonds is generally considered safer than shares. But there are still risks, primarily default risk (i.e. the company or government becoming insolvent), inflation risk, and the risk that interest rates rise over time.

A bond issued by the UK government is also known as a gilt. You can buy bonds directly, as well as invest in funds that hold bonds.

See our bond offering Read more about bonds

The amount you paid for an investment. This includes all charges that apply to the investment, such as stamp duty and dealing charges. By comparing ‘Book cost’ with ‘Value’, you can see whether the investment has gone up or down since you bought it, and by how much.

When you sell an investment, the book cost is used to calculate any gains or losses you make.

A type of drawdown that was available before 6 April 2015, when flexi-access drawdown was introduced.

In capped drawdown, the amount you can take from your pension is limited depending on your age, your pension pot value, and the rate of interest on a specific type of UK government bond. The idea was to restrict withdrawals so people’s pension pots last throughout their retirement. The maximum annual income limit is usually reviewed every three years until age 75, and annually thereafter.

Although capped drawdown is no longer offered, you may still be in capped drawdown if you accessed your pension before 6 April 2015. If so, you can stay in capped drawdown, or choose to convert to flexi-access drawdown.

Read more about drawdown

Used up your pension annual allowance for the current tax year? Carry forward lets you dip into unused allowances from up to three previous tax years.

Keep in mind that you need to have been a member of a pension scheme in the tax year you want to carry forward. Also, your ability to use carry forward will be restricted if you’ve already triggered the MPAA.

And if you were subject to the tapered annual allowance during a previous tax year, you may not be able to carry forward as much from it.

A type of ISA (Individual Savings Account) that’s typically offered by banks and building societies. Any interest you receive, or withdrawals you make, from a cash ISA are tax-free.

Money you pay in to a cash ISA counts towards your overall ISA allowance, of up to £20,000 each tax year.

To open a cash ISA, you must be 16 or over, and a UK resident or a UK Crown employee working/serving overseas or the spouse or civil partner of an UK Crown employee working/serving overseas.

Cash ISA vs Stocks and shares ISA

A one-stop-shop for managing your savings, offered by AJ Bell.

On the free Cash savings hub, you can browse competitive savings accounts, deposit your cash, and take instant action when your term is up.

You need to have an AJ Bell account in your own name to get started.

See our Cash savings hub

‘CREST Depository Interest’. This is a UK investment that represents an investment listed on an exchange outside the UK. CDIs allow you to trade in international shares.

CREST is an electronic system for holding investments and settles transactions for UK and Irish stocks.

‘Clearing House Automated Payment System’. An electronic system that lets you pay money from one bank account to another on the same day. Banks often charge a fee for a CHAPS payment.

A collective investment fund that has a fixed number of shares in issue. An example of a closed-ended fund is an investment trust.

Unlike an open-ended investment company (OEIC), the value of a closed-ended fund moves with demand for its shares. This means its shares could be trading above (at a premium) or below (at a discount to) the net asset value of the fund.

See our investment trusts offering

A collective investment, such as a fund, lets multiple investors pool their money together by buying shares or units in the fund. This allows them to access a wide range of investments.

Collective investments typically have an investment manager, and concentrate on one sector, investment objective or on tracking a particular market or index.

Examples of collective investment include investment trusts, units trusts or OEICs. The official structure of the collective investment depends on which type it is.

Complex financial instruments are more advanced types of investment. They contain features that mean they carry extra risks and behave differently to standard funds or ordinary shares. Because of this, they’re unlikely to be suitable for most investors.

Examples of complex financial instruments include warrants, derivatives, structured products and exchange traded commodities (ETCs).

Read more about the extra risks of complex instruments.

A corporate action (also known as a corporate event) is a material change that affects a company’s issued shares or debt – and as a consequence, its shareholders. Corporate actions are typically agreed upon by a company's board of directors, then authorised by the shareholders. Examples of corporate actions include rights issues, open offers, offers for subscription and schemes of arrangement.

Some corporate actions are ‘voluntary’, meaning they require the shareholder to decide on a course of action. An example of a voluntary corporate action is a takeover.

Others are ‘mandatory’, meaning they’ll go ahead without any action needed from the shareholder. An example of a mandatory corporate action is a merger.

Learn more about the different types of corporate actions that may affect your account.

The part of your pension that you’ve already accessed. You need to access some of your pension (i.e. crystallise it) before you can withdraw money from it.

The pension money you’ve accessed but not withdrawn as pension income (or used to buy an annuity) remains in your pension as your ‘crystallised’ funds.

Read about SIPP drawdown

An account with no maximum investment limits or allowances. But on the flip side, it doesn’t benefit from the same tax incentives and tax relief as an ISA or SIPP.

Explore our Dealing account

On the ‘Portfolio’, ‘Dealing’ and ‘Transaction history’ pages, your dealing limit is the amount shown as your 'Available cash'.

If you have any orders pending (such as a limit order), it’ll affect your ‘Available cash’ balance until the order has been executed or cancelled. We don’t offer a credit or margin facility.

A type of pension that gives you valuable guarantees: sometimes referred to as ‘safeguarded rights’. Defined benefit pensions include career average pensions, and the most well-known example, a final salary pension.

In a defined benefit pension, the amount you receive at retirement is usually based on two things: how long you were a member of the pension scheme, and your salary. This can be your salary at retirement, at the date you left the employer, or your average salary over your career.

The pension you get in retirement is guaranteed for life, and increases with inflation each year – although the scheme rules may place a cap on this. When you die, defined benefit pensions might continue to be paid to your dependants – such as your spouse or civil partner - albeit at a reduced rate and depending on the rules of the scheme.

See also: defined contribution pension

A type of pension that you build up over time. The level of income you receive at retirement depends on how much you’ve paid in (yourself, or via your employer) and how your investments have performed.

The income choices you make at retirement also have an impact on the level of income you can take out.

See also: defined benefit pension

A type of income you receive for holding an investment. Dividends are payments a company can make to its shareholders if it’s made a profit.

Learn about dividends

Drawdown is a flexible way to access your pension. After taking your tax-free lump sum, the rest of your pension is available for you to take an income from as you choose.

If you don’t decide to buy an annuity, your remaining pot will be moved into drawdown as your crystallised funds. In drawdown, you can choose how much income you want to take and when. Since 2016, the drawdown pension option for people accessing their pension for the first time is known as flexi-access drawdown.

When you set up a drawdown pension with us, we’ll offer you Investment Pathways. These can help you invest your pot in a fund designed to broadly match your retirement plans. (Choosing an Investment Pathway is completely optional.)

Learn about drawdown

‘Exchange Price Information Code’. EPIC codes are now known as TIDM codes in the UK.

If you buy income units in a fund between its dividend dates, the fund will hold a balance representing income generated by the fund's investments but not yet paid out. The price of the units in the fund will be higher to reflect this extra balance.

Your first income payment from the fund will be made up of the income generated since the date you bought units in the fund, and an ‘equalisation’ payment. This equalisation payment isn’t income, but reflects the fact you paid a higher unit price for the fund owing to the income balance already built up – even though it wasn’t payable to you.

An equalisation payment isn’t classed as income for tax purposes – instead it’s a return on your original investment.

‘Exchange traded fund’. This is a collective investment fund that’s traded on a stock exchange, in a similar way to an individual company’s shares.

Most ETFs track an index such as the FTSE 100, but others can track a specific stock sector, currency or commodity.

See our ETF offering Read more about exchange traded funds

A check on whether an investor receives a reasonable benefit from an investment product or service for the price they pay. The rules on fair value assessments come from the Financial Conduct Authority (FCA) as part of their work on consumer protection.

Fund managers authorised in the UK must regularly carry out a value assessment of the funds and investment trusts they manage. Fund costs are an important factor in value, but so are the benefits of using a product, such as performance and quality of service provided. An assessment will also look at any limitations of a product.

If an overseas fund manager does not provide a fair value assessment, we'll arrange for our own assessment or an equivalent to be made.

We’ll let you know if a fund you hold fails a fair value assessment. Although you can choose to keep it, we won’t be able to accept instructions to buy the fund online or continue any regular investment instructions into it. You’ll still be able to buy the investment over the phone.

Also known as a ‘defined benefit pension’, this is a special type of workplace pension which provides a guaranteed income for life – based on your salary at retirement.

Final salary pensions are less common today. Even in the public sector, most schemes now base the pension you’re entitled to in retirement on the average of your career earnings, rather than your final salary.

How do pensions work?

The UK's deposit guarantee scheme. It also pays compensation to consumers in the unlikely event a financial services firm (covered by the scheme) they save or invest with stops trading, subject to certain conditions. For banks and building societies with eligible deposits, the FSCS compensation limit is £85,000 per banking licence.

As a customer, the cash you hold with us is eligible for protection under the FSCS. To reduce your exposure to the risk of any individual bank failing, we hold your cash across a range of carefully selected banks.

Learn more about how the FSCS protects cash you hold with us, or visit the FSCS website.

You qualify as a first-time buyer if you‘ve never owned a home in the UK or the rest of the world – that includes any home you’ve inherited, or owned with someone else.

A fixed rate deposit or bond is a type of savings account. It pays you a fixed amount of interest or profit in return after you’ve locked your cash away for a set period of time. You won't be able to access your money until the end of the term.

Describes a savings account or form of investment with a minimum or known time period that’s agreed at the outset.

With a fixed-term investment, the investor parts with their money for a specified period of time, after which they’re repaid the amount they’ve invested and any income due.

See our fixed-term savings accounts

A type of drawdown. Drawdown is a flexible way to access your pension – after taking your tax-free lump sum, the rest of your pension remains invested, for you to take income from as and when you choose.

There are no limits on the income you can take with flexi-access drawdown. Keep in mind that the income will be subject to income tax at your marginal rate. Also, taking income under flexi-access drawdown will reduce how much you’re able to pay into certain pensions in the future.

When you set up a drawdown pension with us, we’ll offer you Investment Pathways, which can help you invest your pot in a fund designed to broadly match your retirement plans. Choosing an Investment Pathway is completely optional.

Learn more about drawdown

An index of the largest 100 companies that have shares listed on the London Stock Exchange.

Explore the FTSE 100 How to invest in the FTSE 100

A collection of investments, including shares and bonds, often managed by a professional fund manager. Funds are usually (but not always) less risky than shares, as the risk is spread across different companies and assets.

By investing in a fund, you're pooling your money with others, letting you access a wide range of investments. Funds usually concentrate on one sector or investment objective, or track a particular market or index.

See our funds offering Read more about funds

A summary document prepared by a fund manager that can help you decide whether a fund is right for you.

It typically includes the fund’s investment objective, top 10 holdings, and data about its past performance. You can download the fund factsheet from the fund’s research page on our website.

When researching a fund, it’s also a good idea to read its Key Information Document (KID), which covers the fund’s essential features.

The person (or organisation) who manages the assets of a fund in line with its investment objective.

A fund that invests in other funds – rather than directly in individual shares, bonds or other investments. Also referred to as a ‘multi-manager fund’.

Bonds (or fixed interest securities) issued by the UK government.

See gilt prices Learn about government bonds

A type of fund that aims to increase its share or unit price over time. The other main type of fund, an income fund, aims to generate and pay out a regular income.

Growth funds often invest in companies that reinvest profits to grow value, rather than those that regularly pay out dividends to shareholders.

See our range of funds

When you transfer an investment in its current form, rather than selling it and transferring the cash.

This lets you stay invested, and means you don't have to buy back your investments after the transfer is complete.

Funds that aim to generate an income for investors. To achieve this, income fund managers invest largely in assets which provide income or dividends.

The income paid out may vary from month to month, depending on the dividends the fund generates – which are paid by the companies owned by the fund’s underlying investments.

See also: growth funds

An investment fund offers two types of units or shares you can buy – accumulation or income. The difference is in how they handle the income (i.e. the dividends or interest) the fund generates.

Where accumulation funds reinvest this income, income funds pay it out to investors. The income is paid to your cash account regularly (usually monthly or quarterly) for you to choose to withdraw or reinvest.

See also: accumulation units

A list of investments and their prices. For example, the FTSE 100 index is a list of the 100 largest companies whose shares can be bought or sold on the London Stock Exchange.

The weighted value of these shares usually moves up or down throughout a trading day. There are indices for all sorts of sectors, regions and stock exchanges.

Explore the FTSE 100 index

A fund that tracks the performance of an index by investing in companies listed on it. Index funds aim to duplicate, rather than beat, the index they’re tracking.

Investing in an index fund gives you exposure to every company listed on it, without having to buy each investment separately.

The measure of how prices of goods and services (and therefore the cost of living) are increasing over a period of time. The speed of rising prices is known as the rate of inflation.

The official measure of inflation in the UK is the Consumer Prices Index (CPI).

A cash savings account that lets you withdraw money whenever you need it. You can save as little or as much as you want each month, and it may or may not pay interest.

More on our Cash savings hub

An asset you buy with the hope of generating an income, profit or a combination of the two. Common types of investments include shares, funds and bonds.

Explore our investments hub

An investment option we offer to customers who put their pension into drawdown. Investment Pathways were introduced by the Financial Conduct Authority (FCA) to make managing drawdown pots easier, and reduce the number of people who keep it in cash over the long term – leaving it vulnerable to inflation. By choosing an Investment Pathway, you can invest your pot in a fund that’s been designed to broadly match your retirement plans.

Investment Pathways are completely optional. Keep in mind that they aren’t tailored to your personal circumstances, and aren’t a substitute for financial advice. It’s also important to review your chosen Investment Pathway regularly, especially if your retirement goals change.

More on Investment Pathways

In the UK, an investment trust is a type of fund structured as a company, with its shares listed on the London Stock Exchange. They are ‘closed ended’, which means there’s a fixed number of shares in issue, and the share price is determined by demand for the shares – rather than just the performance of the underlying investments.

The price of investment trust shares can show a premium (where demand makes the price of a share greater than the net asset value of investment trust), or a discount (where you can buy a share for less than the underlying net asset value).

See our investment trust offering

IPO stands for ‘Initial Public Offering’ - the first time a company offers its shares to investors. IPOs or new issues are usually the first opportunity for private investors to buy into a company.

The money raised from an IPO or new issue can be used to grow the company, reduce debts, or release cash to the current owners (often management or private equity holders). For an investment trust launch, the money raised is invested on the holders’ behalf.

See our latest IPOs

‘Individual Savings Account’. ISAs are ‘wrappers’ in which you can shelter savings and investments from tax (they aren’t an investment in their own right).

ISAs come with handy tax advantages for investors. You pay no capital gains tax on any investment gains, and no UK income tax on income generated by your investments. You also don’t need to declare ISAs on your tax return.

To open an ISA, you need to be a UK resident, or working/serving as a UK Crown employee overseas. You must also be aged 18 or over.

Explore our Stocks and shares ISA

The maximum amount you can pay into ISAs in a tax year. For 2024/25, it’s £20,000. You can split this allowance between different ISAs, providing you stay within the overall limit.

Keep in mind that a Lifetime ISA has its own limit of £4,000 per tax year. Payments into AJ Bell’s Lifetime ISA count towards both the Lifetime ISA payment limit and the overall £20,000 ISA limit.

Learn about ISA allowances

‘International Securities Identification Number’. An ISIN is an international standard for identifying individual investments.

Every ISIN is 12 digits long, alphanumeric, and begins with two letters representing the country of registration. (For example, Vodafone’s ISIN is GB00BH4HKS39).

See also: SEDOL

A Junior ISA (or JISA) is a tax-efficient way to save for a child. You can open a Junior ISA for a child if you’re their parent or legal guardian.

There are two types of Junior ISA to choose from. A cash Junior ISA pays you interest, and a stocks and shares Junior ISA lets you invest in shares, funds, tracker funds, investment trusts and more. A Junior ISA can’t usually be accessed until the child reaches age 18.

Explore our Junior ISA

‘Key Information Document’. Before you invest in a fund, you should read its important documents. That includes the KID, which gives you information about a fund's charges, risk rating and investment profile.

What's the difference between KIID and KID?

‘Legal Entity Identifier’. A unique code required whenever a legal entity invests in a financial instrument (e.g. shares, bonds, exchange traded funds, investment trusts and derivatives) on a regulated exchange. The LEI is reported whenever they make a transaction.

Examples of legal entities are Trusts (with the exception of Bare Trusts), Companies, Pension Funds (with the exception of SIPPs), and Charities.

If you’ve never accessed a pension, or you’ve only accessed pensions since 6 April 2024, then the old lifetime allowance won’t impact you.

From 6 April 2024, there are only limits on what you can take as tax-free lump sums, not on your total pension savings.

The lifetime allowance was a limit on the amount of pension savings you could have before an extra tax charge was applied. It’s now been abolished, but if you accessed a pension before 6 April 2024, you should keep a record of how much of the old allowance you used up.

The first time you want to access a pension after 6 April 2024, your current pension provider will ask you the percentage of the old lifetime allowance you’ve used so they can calculate how much of the new tax-free lump sum allowance you have left. You’ll find this information in the confirmation letter your pension provider(s) gave you when you accessed your pension(s), or in your annual pension statements since then.

A type of ISA you can open if you’re aged 18–39, and want to save for your first home and/or retirement.

Lifetime ISAs (LISAs) are free of income and capital gains tax, and you’ll get a 25% bonus on the money you pay in. However, you’ll face a government withdrawal charge on money you take out before age 60, unless you’re a first-time buyer and the property you want to buy meets certain criteria.

Explore our Lifetime ISA

Lets you specify the maximum or minimum price at which you’re willing to buy or sell a particular share. You can place a limit order for most UK shares.

How to become a stock investor

How quickly and easily an investment can be converted into ready cash. Different types of investments are more liquid than others. For example, selling a share in an investment fund is usually quicker and easier than selling a property, which takes longer and incurs significantly more cost.

A UK marketplace where shares, bonds and exchange-traded funds are traded between buyers and sellers. You might buy or sell an investment via AJ Bell (or another platform), but the transactions are conducted through the stock exchange.

The London Stock Exchange has two parts: the Main Market and the Alternative Investment Market (AIM). We offer dealing in both of these markets.

When you access your pension, you can usually take up to 25% of the value tax-free. The lump sum allowance limits the total amount you can take tax-free from all your pensions. It’s set at £268,275 for most people.

Learn about the lump sum allowance

This is a limit on the total tax-free lump sums that can be paid from your pensions both in your lifetime and to your beneficiaries after your death. The lump sum and death benefit allowance (LSDBA) is set at £1,073,100 for most people.

Learn more about the LSDBA

The ‘Make Good’ offer is specific to Sharia savings accounts and works on the principle that if a Sharia bank is unable to meet the advertised expected profit rate and your deposit returns a loss, the bank shall “make good” on any shortfall, meaning that you’ll receive your full deposit amount back.

You’ll automatically be opted into our ‘make good policy’ when you open a Sharia-compliant savings account on our Cash savings hub.

If you remain opted in to the make good policy this will not comply with Sharia Principles. You can opt out of the make good policy by emailing help@ajbell.co.uk and putting ‘Make good opt out’ as the subject line.

The rate of tax you pay on the next £1 of income you receive. Keep in mind that your marginal tax rate will be higher than the actual amount of tax you pay as a percentage of your overall income.

For example, in the UK most taxpayers have a tax-free personal allowance of £12,570. On this first band of earnings, you’ll pay no income tax. On the next band (£12,571 to £50,270) you’ll pay 20% – then 40%, then 45% on your next bands of earnings.

So, someone earning £60,000 will have a marginal tax rate of 40%, even though they won’t pay 40% on the whole of their earnings.

A market auction refers to the process where buyers and sellers place orders to buy or sell investments, with those orders matched at the best possible price. The most common types of market auction are:

• Opening auction: This happens at the market open
• Closing auction: This happens right before the market closes
• Intraday auctions: Some exchanges do these at specific times during the trading day

During these auctions:

• Buyers submit bids (what they’re willing to pay)
• Sellers submit asks (what they want to sell for)
• The exchange matches them to find a clearing price – where the most volume can be traded

Throughout periods of high volatility – for example, after a major news event or geopolitical shock – prices can swing rapidly and unpredictably.

When there is high volatility, market auctions help to find a ‘fair’ price for both buyers and sellers, concentrate trading activity to help improve the chances of completing an order, and can help stabilise prices by matching a large volume of orders at the same time.

Read more about share prices and quotes

‘Money purchase annual allowance’. This applies when you take an income from defined contribution pensions (also called ‘money purchase’ pensions).

Once you trigger the MPAA, your annual allowance for defined contribution pensions is reduced to £10,000 per year. That means if you pay any more than this amount into your defined contribution pensions per tax year, you’ll face a tax charge. You’ll also no longer be able to use carry forward for your defined contribution pensions.

The MPAA doesn't apply to any defined benefit pensions you hold.

More on the MPAA

A fund that invests in other funds – rather than directly in individual shares, bonds or other investments. Also referred to as a fund of funds.

An AJ Bell service that lets you view all your financial assets in one place, helping you manage your money more effectively. On Mywealth, you can add details of every asset and liability you hold, including those outside of AJ Bell – such as bank accounts, investment accounts, property, pensions and more.

More on Mywealth

‘National Client Identifier’. All of our customers need to give us an NCI, because we’re required to report this information to the regulator when you buy or sell certain types of investments.

For UK nationals, your NCI will be your National Insurance Number. If you’re not a UK national, find out what information you'll need to provide instead.

The total of a fund’s assets, minus any liabilities and expenses, divided by the total number of units or shares in the fund. The NAV isn’t necessarily the same as the market price of a unit or share in a fund.

A type of pension that you set up yourself. You control how much you pay in (and when) as well as the investments you want to make. The SIPP and Ready-made pension we offer at AJ Bell are examples of non-workplace pensions.

A type of savings account that works like a halfway house between a fixed term account and an instant access account.

In the AJ Bell Cash savings hub, you can deposit a set amount of money into a notice account, and to withdraw it you need to give notice (i.e. request to withdraw your money). The amount of notice you’ll need to give will vary by accounts, and the rate of interest on a notice account is variable too.

If the bank is changing their rate, they’ll let you know. You’ll then have the option to terminate your account by giving the required period of notice. The notice period for a reduction in the rate will be as long as the notice period for terminating the savings account.

More on our Cash savings hub

To hold Canadian shares within your ISA, Lifetime ISA, Junior ISA or Dealing account, you need to complete a NR-301 form. You don’t need to complete this form to hold Canadian shares in a SIPP. You can’t complete a NR-301 form online, so you'll need to post it to us.

Download our NR-301 form

'Open-ended investment company' – a type of fund structured as a company. Unlike an investment trust, an OEIC doesn't have a fixed amount of shares, so can fluctuate in size. That’s why OEICs are called ‘open-ended’ – because they can create new shares to meet investor demand.

OEICs cancel the shares of investors who exit the fund. The price of the shares is determined by the value of the investments the fund holds, rather than supply and demand.

A type of corporate action. Like a rights issue or open offer, an offer for subscription lets shareholders buy additional shares, usually at a fixed price.

What makes an offer for subscription different is that you aren’t offered shares in proportion to the number you already own. Instead, you can subscribe for as many as you’d like, subject to the terms of the offer.

With an offer for subscription, there’s usually a minimum level of total subscriptions for the shares. If this level isn’t met by shareholders collectively, the offer can be withdrawn. Similarly, if the company receives more applications for shares than are on offer, it can reduce the number of shares it allocates to each applicant, accordingly.

All funds have an annual ongoing charge (sometimes abbreviated to OCF, for ‘ongoing charges figure’).

This charge covers the day-to-day costs of running and managing the fund, as well as any one-off charges. It’s deducted directly by the fund manager – it comes off the value of your investment in the fund.

See our full range of funds

A type of corporate action. Like a rights issue, an open offer (also known as an entitlement issue) is a way for a company to raise money by offering its existing shareholders the right to buy new shares at a discount to the market price.

On top of your ‘basic entitlement’, open offers have an ‘Excess Application Facility’, giving you the chance to buy additional discounted shares. This is a separate pool of subscription shares, and as it isn’t guaranteed, it can be scaled back if oversubscribed.

Where an open offer differs from a rights issue is that you don’t have the option to sell your rights in the market. And if you do nothing, unlike a rights issue you won’t receive a lapsed payment.

Collective investments that don’t have a fixed size or number of shares or units. Instead, these type of funds grow or shrink in line with investor demand.

This means that when investors purchase an open-ended fund, new units or shares are created; and when investors sell their holdings, these units or shares are cancelled.

The price of the unit or shares is determined by the value of the investments the fund holds, rather than supply and demand.

‘Over the counter’. Describes a trade arranged directly between two parties, rather than on a formal exchange. It’s also called ‘off-exchange trading’.

A type of fund that attempts to track the performance of a particular market or index, rather than trying to beat the market like an active fund.

See also: index fund

‘Pension commencement lump sum’. This is the official name for the tax-free cash you can take when you start to access your pension (from age 55, rising to 57 in 2028).

The PCLS is usually limited to 25% of the value of your pension. Once you take your PCLS, you need to choose an income option for the rest of your pot. With a SIPP you can buy an annuity, go into drawdown, or combine the two.

Learn more about your options at retirement or get guidance by contacting the government’s Pension Wise service if you’re over 50.

An account designed to help people save for their retirement. With a pension, individuals and employers enjoy generous tax relief on money they pay in. And any investments it holds can grow free of tax.

You can normally access your pension from age 55, rising to 57 in 2028. When you access your pension, you can take up to 25%  tax-free – with the rest available to provide you with a taxable income.

There are different types of pension – including pensions set up by your employer, and pensions you set up yourself. You'll see these referred to as 'private' or 'personal' pensions.

See our pension accounts

The Pension builder fund is AJ Bell’s low-cost standard option, designed to help you invest the money you’ve paid into your pension.

If you’re not quite ready to start building your own investment portfolio, it can be tempting to leave your money in cash or not get started at all. That’s why pension providers now offer a ‘standard’ pension investment option to customers. AJ Bell’s is called the Pension builder fund. Just remember – by offering a standard option, we’re not making a personal recommendation.

The fund is managed by our in-house experts. It aims to achieve consistent growth over the long term by mixing more defensive assets such as bonds with more aggressive assets such as company shares.

See full details for our Pension builder fund

A government service that gives you free, impartial guidance on your options at retirement if you’re age 50 and over. A Pension Wise specialist will talk you through the options available to help you make a decision with your pension money.

You can book a Pension Wise appointment at www.moneyhelper.org.uk/pensionwise, or by calling 0800 138 3944.

The range of investments you hold across different accounts.

A [ajb:PTM levy] charge automatically applied when investors buy or sell shares with a total value of over £10,000. The charge isn’t levied by AJ Bell, but by the Panel of Takeovers and Mergers (PTM), a regulatory body set up to ensure all shareholders are treated equally during takeover bids.

The charge is collected when you place a deal, so will appear on your contract note.

Learn about the PTM levy

'Relevant Benefit Crystallisation Event'. This complicated-sounding term means any lump sum with a tax-free element that counts against your lump sum allowance and/or your lump sum and death benefit allowance.

The most common RBCEs are the tax-free cash lump sum and the uncrystallised funds pension lump sum. Some lump sums on death are also RBCEs.

At each RBCE, you'll receive information from your pension provider about how much of the allowances was used.

A simple, low-cost pension where you choose from four AJ Bell fund options.

Money paid in is automatically invested into your chosen AJ Bell fund. This includes lump sums and regular payments you make, plus any pensions transferred using our free Pension finder.

Explore our Ready-made pension

Investing a set amount regularly, rather a one-off lump sum.

You can use our regular investment service to automatically buy your chosen investments each month from cash in your account(s).

Watch how to set up regular investing

‘Real Estate Investment Trust’. REITs are property investment firms that offer investors a simple way to get exposure to a portfolio of properties that generate (rental) income.

Rather than buying properties directly, investors buy shares in the REIT – which is listed on a stock exchange. The profits the REIT makes from its property rental investments can be shared with investors in the form of dividends.

A type of corporate action that aims to raise money for a company. In a rights issue, a company offers its existing shareholders the right to buy new shares at a discount to the market price.

The more shares you already hold, the more new shares you’ll have the right to buy. Rights issues are considered to be a type of option, since it gives a company's stockholders the right, but not the obligation, to buy additional shares in the company.

Rights are often transferable, allowing the holder to sell them in the open market.

The balance of the uncertainty of an investment. A high-risk investment generally aims to achieve a high rate of return, but there’s also a higher chance that if things go wrong you could lose all the money you invested. Keep in mind that there’s not always a direct relationship between risk and reward.

Different types of investment sit in different places on the risk scale. For example, shares are generally considered higher risk, while bonds are considered lower risk.

See our investment range

A type of corporate action typically used to execute a change in the structure of a company (such as during a takeover).

A scheme of arrangement is a court-approved agreement between a company and its shareholders or creditors to allow a bidder to acquire all of the shares in the company. For a scheme of arrangement to pass, shareholders holding at least 75% of the issued shares must vote in favour.

If that happens, the bidder or ‘buying company’ obtains 100% of the shares in issue – regardless of whether a shareholder voted in favour or not – and the shareholders receive payment (shares, cash, or a combination of both).

‘Stock Exchange Daily Official List’. A seven-character identification code given to investments that trade on the London Stock Exchange and other smaller exchanges in the UK and Ireland.

A type of pension that gives you more control over your pot. You can choose how much you pay in, as well as what you invest in.

As it’s a pension, you have generous tax reliefs and incentives on money you save into a SIPP (although limits do apply), and your investments can grow free of tax.

When the time comes to access your SIPP, you can take up to 25% tax free, and you’ve flexibility over how and when you draw income from the remaining pot.

Explore our SIPP

One of the two key dates when you buy an investment, alongside the trading date (the day you place a buy order). The settlement date is when the buy order completes.

The length of time between the trade date and settlement date differs from one investment to another. For example, shares have a quicker settlement than funds.

A share is a small part of a company. So when you buy shares, you effectively become a part owner of the company.

Depending on how well the company does, the value of your shares could go up or down, giving you either a profit or a loss when you sell them.

If the company makes a profit, its directors may choose to distribute income to the company's shareholders in the form of dividends.

See our shares offering

A type of savings account offered by our Cash savings hub.

Sharia-compliant savings accounts are similar to mainstream bank accounts, but the way in which they generate and pay a return is different. Instead of paying interest, they have ‘an expected profit rate’, and there isn’t an overdraft facility.

This is because the principle of paying or charging interest is against Islamic law. To generate profits to make a return, your savings are used to fund Sharia-compliant activities.

Stamp duty is a type of UK tax payable when you buy certain investments. The Stamp Duty Reserve Tax (SDRT) applies when you buy most UK shares online, and comes to 0.5% of the total of the transaction.

As your broker, we’ll automatically add stamp duty (where it’s applicable) to the cost of your share deal and pay it to HMRC for you. You’ll see this charge included on your contract note when you buy the investment, alongside our dealing charge.

Stamp duty applies for all UK-listed shares, except for the majority of those listed on the London Stock Exchange’s Alternative Investment Market (AIM). It also won’t apply when you buy funds or exchange-traded funds.

You don’t need to pay SDRT when you sell shares.

The name given to the exchanges where you can buy and sell shares in companies, and other investments. A stock exchange is also where companies can issue shares for sale.

How to become a stock investor

When a company divides its existing shares into multiple new shares without affecting the total value of all the shares.

Stock splits can make shares in a company easier to buy and therefore help improve the shares’ liquidity.

‘Stocks’ and ‘shares’ mean broadly the same thing and are often used interchangeably.

But officially, ‘stock’ is a more general term describing the ownership of companies, while ‘shares’ is used to describe owning part of a specific company.

How to become a stock investor

A stop-loss order is an instruction to sell a UK-listed share if its price falls to, or below, a trigger price you’ve specified.

When setting up a stop-loss order, you also need to set a bottom price, i.e. the lowest price you’d be willing to sell at should your stop loss be triggered.

A technical term for accessing your pension. You can ‘take benefits’ at any time following your 55th birthday, though this is rising to 57 in 2028.

You can access your pension in a variety of ways, including drawdown, a series of smaller lump sums or an annuity. Usually you can take the first 25% of your pension tax free.

How to access your pension

If you have a high income, the tapered annual allowance reduces the amount you can pay into your pension before a tax charge applies. Your annual allowance is reduced by £1 for every £2 of income you get over £260,000 p.a. – to a minimum allowance of £10,000 per year.

Read the full guide

The government offers tax relief to encourage people to save into their pensions.

Here’s how it works. The method of tax relief depends on the type of pension, but for SIPPs, you’ll receive the first 20% of tax relief (i.e., basic rate) as a top up to the contributions you pay in personally. If you pay income tax on your earnings at a higher rate, you can receive extra tax relief on the money you pay into your SIPP by completing a self-assessment tax return.

Keep in mind that you'll only receive tax relief up to the amount you earn that tax year. For example, if you want to pay in £60,000 (including tax relief) to your pension, you'll need to earn at least £60,000 this tax year.

This limit doesn’t apply if your employer is making the contribution on your behalf, but employers can still receive tax relief on money they pay into pensions for their employees.

Although they both apply to pensions, the concept of tax relief isn’t the same as the annual allowance.

Learn about tax relief

The tax year (sometimes called the fiscal year) runs from 6 April to the following 5 April.

Tax rules are usually built around the tax year dates. And most tax allowances and reliefs will renew at the start of each tax year.

A type of takeover bid for a company, usually made publicly.

In a tender offer, a buyer invites existing shareholders to sell their shares for a specific price, within a particular time frame. The price is usually higher than the current market price (i.e. at a premium), but often on the condition that a minimum or maximum number of shares are sold.

An investment in which you lock away your cash for a specified amount of time (the ‘term’) in return for a guaranteed rate of interest.

The specific term can be from one month up to a number of years. There may also be a minimum amount you need to set aside (known as the ‘deposit’).

A unique series of letters and numbers given to US-listed shares so investors can identify, search for, and trade them easily.

A unique abbreviation given to UK-listed shares so they’re easier to search for. Vodafone’s TIDM code, for example, is ‘VOD’.

In the UK, TIDMs were previously known as EPIC codes.

One of the two key dates when you buy an investment, alongside the settlement date (when the transaction completes). The trade date is the day that the buy order is placed.

The length of time between the trade date and settlement date differs from one investment to another. For example, shares have a quicker settlement than a fund.

In our Cash savings hub, your transaction account is where your money is held before it transfers to the savings account(s) you’ve chosen.

When you apply for a Cash savings hub with us, we’ll open a transaction account for you, in your name, with our partner ClearBank. It’ll be your personal account, with its own account number and sort code. Money in your transaction account won’t earn any interest.

When a savings account matures, your money will be paid back into your transaction account (unless you’ve chosen to renew the account with the same bank). You can then choose to deposit it in a new savings account, or withdraw it.

A legal agreement for a third party to hold and manage assets for the benefit of a person or group of people.

The people (or organisations) managing the assets are known as the trustees. The people who can benefit from the assets are known as the beneficiaries.

The term ‘settlor’ or ‘donor’ is used to describe the person who puts assets into the trust in the first place.

Describes any pension savings you haven’t accessed yet. You need to access (crystallise) these funds before you can take income from them.

See also: crystallised

Usually abbreviated to UFPLS, an uncrystallised funds pension lump sum is a way of accessing your pension. You can take an UFPLS from any part of your pension you haven't accessed (known as your uncrystallised funds) from age 55 (rising to 57 from 6 April 2028).

Although you receive one lump sum payment, 25% of each UFPLS is tax-free, and the remaining 75% is subject to income tax. Until we receive a tax code from HMRC, we may need to apply an emergency 'Month 1' tax code – meaning HMRC will assume it's the first in a series of monthly withdrawals. This could mean you’ll pay more tax up front than you were expecting, though HMRC should refund any tax you overpay.

Once you take an UFPLS from your SIPP, the amount you can contribute to your SIPP (and any other money purchase pensions) will be restricted to £10,000 a year. This is known as the money purchase annual allowance (MPAA).

Funds (for example unit trusts) are split into units of ownership. If you buy into an investment fund, you buy units in the fund.

Other types of fund, (for example an OEIC) with different structures, are split into shares.

The URN is the unique reference number of your child’s Child Trust Fund. It’s nine characters long, and you’ll usually find it on statements from your CTF provider.

You need to give us the URN to transfer your CTF to a Junior ISA. If you can’t find it, you may need to request it from your CTF provider.

More on Child Trust Funds

A form you need to complete to hold US shares in any account (except a SIPP). If you haven't completed this form when you buy US shares for the first time, you'll be asked to.

A W-8BEN form (‘Certificate of Foreign Status of Beneficial Owner for US Tax Withholding and Reporting’) also entitles you to a reduced tax rate in the US on your investments.

Download our W-8BEN form

A type of pension set up by your employer. All employers must offer a workplace pension, and automatically add employees to it if they’re eligible workers.

See also: non-workplace pension

A way of measuring the return on an investment over a set period of time. It’s usually the income you receive from an investment expressed as a percentage of the price you paid for the investment, or its current price.

For example, the yield on a bond could be measured using the interest payable divided by the current price of the bond.