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Accumulation Unit

A type of unit in a unit trust or pension in which the income is reinvested automatically, rather than distributed.

Active Management

An active fund manager is one who tries to outperform benchmark indices by selecting stocks. The other option is passive management offered by tracker funds. Active management tends to be more expensive than passive.

Additional Voluntary Contributions (AVCs)

AVCs are top-up payments made into pension schemes to boost eventual retirement income. Usually, AVCs are run by your employer’s pension scheme, but you can also have Free Standing Additional Voluntary Contributions (FSAVCs) which are run by investment firms. You get tax relief on your AVC and FSAVCs, just as with other pension contributions.

AER

Annual equivalent rate. This is a percentage rate used to show what the annual rate would be on, for example, a bank or savings account which actually pays interest monthly.

Alternative Investment Market (AIM)

An AIM is a stock market for smaller start-up companies. AIM-listed companies tend to be a riskier investment than those on the main market, so the shares are really for experts only.

Annual management charge

This is a charge paid to a company for managing your investments. (This could be a fund manager, stockbroker or financial adviser.) The annual management charge can vary - typically from 0.5% to around 1.5% - and is dependent upon the type of investment and the degree of advice received.

Annual Percentage Rate (APR)

The APR is the interest rate plus any charges, to indicate the total cost of borrowing. When you borrow money, every lender is required by law to quote this rate. The APR can be used to easily compare different products, and is mostly used for credit cards, personal loans and mortgages.

Annual report

All companies that trade on the London Stock Exchange have to produce an annual report and accounts. The report shows all the financial facts and figures for the year, including profits and losses, and the directors' salaries.

Annuity

An annuity is essentially a regular income for life and is usually purchased with your pension fund when you retire. The income you receive from the annuity depends on how old you are, when you buy it and how much you invest. The older you are, the more you’ll get - because your life expectancy is lower. There are lots of annuity options: For example the income can be index-linked or remain the same throughout your life.

Asset

Your assets are everything you own and are owed, including your house, money in your bank account, investments and anything else of value.

Asset Class

Different categories of investments are described as asset classes: For example, cash, shares and bonds.

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