CII IF6 key terms

A protection policy that pays a lump sum only if the life assured dies within a fixed term. It has no investment element and no surrender value, so it is the cheapest form of life cover.

Cover that pays out whenever death occurs, with no expiry date, provided premiums are maintained. It is usually more expensive than term assurance and may be reviewable or non-reviewable.

A savings contract with a fixed term that pays a guaranteed sum at maturity or on earlier death. Historically used to repay mortgages, it combines life cover with investment growth.

A pooled life fund where policyholders share profits through bonuses. Annual bonuses, once added, cannot normally be removed, while terminal bonuses depend on investment returns and may be zero.

An additional, non-guaranteed payment added to a with-profits policy when it matures, is surrendered, or the life assured dies. Its size depends on the fund's investment performance and smoothing policy.

A deduction applied when a with-profits policy is cashed in early, protecting remaining policyholders from the cost of selling assets at a loss. It usually does not apply at maturity or on death.

A contract where premiums buy units in underlying funds, so the value rises and falls with investment performance. The policyholder bears the investment risk, unlike with with-profits or guaranteed products.

The gap between the price at which units are bought and the lower price at which they are sold back. It covers dealing costs and can widen in volatile markets; many modern contracts use single pricing instead.

A contract that converts a pension fund into a regular income, usually for life. The rate depends on age, health, interest rates and the type of annuity chosen, such as level, escalating or joint-life.

An annuity paying a higher income because the applicant's health, lifestyle or occupation is expected to shorten life expectancy. It requires medical or lifestyle disclosure at application.

The right to shop around for an annuity rather than accepting the income offered by the existing pension provider. Exercising it can materially increase retirement income.

An arrangement that keeps a pension fund invested while paying an income from it, rather than buying an annuity. The fund remains exposed to investment risk and can be depleted.

A drawdown arrangement with no capped income limit, available since the pension freedoms. Any income taken above the tax-free lump sum is taxed at the individual's marginal rate.

A defined contribution arrangement set up by an individual with a provider, receiving tax-relieved contributions from the member and possibly an employer. Benefits depend on fund value at retirement.

A low-charge personal pension meeting statutory standards on costs, minimum contributions and flexibility. It was designed for people without access to an occupational scheme.

A workplace arrangement established by an employer under trust, which may be defined benefit or defined contribution. Trustees hold the assets separately from the employer's business.

A workplace scheme promising benefits calculated by a formula, typically based on salary and service, rather than on fund value. The employer bears the investment and longevity risk.

A workplace scheme where contributions are invested and the resulting fund provides retirement benefits. The member carries investment risk and the amount at retirement is not guaranteed.

The legal duty on employers to enrol eligible workers into a qualifying pension scheme, with minimum contributions from employer and employee. Workers may opt out within a prescribed period.

The maximum tax-relieved pension contribution an individual can make in a tax year across all arrangements. Contributions above it may be subject to an annual allowance charge.

A cap on the total pension benefits that can be built up with tax relief before an additional tax charge applies. It is tested when benefits are first taken and at age 75.

The ability to use unused annual allowance from the previous three tax years, subject to having enough relevant UK earnings in the current year and to membership of a scheme in the earlier years.

A reduced annual allowance that applies once someone has flexibly accessed a defined contribution pension, such as through flexi-access drawdown. It limits further tax-relieved saving into money purchase schemes.

The tax-free cash normally available when pension benefits are first taken, usually capped at a quarter of the fund up to the lifetime allowance limit. It must be paid in connection with taking pension benefits.

A point at which pension benefits are tested against the lifetime allowance, for example taking a lump sum, buying an annuity or reaching age 75. Each event uses up part of the allowance.

A payment from a registered pension scheme that does not meet tax rules, such as an early lump sum outside permitted circumstances. It triggers tax charges on the member and sometimes the scheme administrator.

A scheme approved by HMRC for tax reliefs, including relief on contributions, tax-free investment growth and tax-free lump sums within limits. Registration brings reporting duties for the scheme administrator.

An overseas pension scheme meeting HMRC conditions so that UK tax relief is preserved on transfers into it. Transfers may be taxed if the scheme or the member's circumstances fail the conditions.

The UK regulator responsible for conduct in retail financial services, including life insurance, pensions and advice. It sets rules on fair treatment, disclosure and suitability of advice.

The regulator within the Bank of England that supervises the financial soundness of insurers and other firms. It focuses on capital adequacy, governance and policyholder protection rather than market conduct.

A regulatory standard requiring firms to act to deliver good outcomes for retail customers across products, price and value, consumer understanding and consumer support. It raises expectations above mere compliance with rules.

An earlier conduct principle requiring firms to demonstrate fair treatment of customers in areas such as product design, advice, claims and complaints. It remains embedded in current conduct expectations.

An independent body that resolves complaints between consumers and financial firms free of charge to the consumer. Its decisions are binding on the firm if accepted by the complainant.

A statutory fund of last resort that pays compensation to eligible customers when an authorised firm fails. Limits and eligibility vary by product type, including life and pension contracts.

The process of concealing the criminal origin of funds by moving them through legitimate channels. Life and pension firms must apply customer due diligence, monitoring and suspicious activity reporting.

The checks a firm performs to identify and verify a customer, understand the purpose of the relationship and assess risk. Enhanced measures apply to higher-risk customers such as politically exposed persons.

A written explanation given to a client setting out the recommended product, why it meets their objectives and circumstances, and the risks and costs involved. It evidences the advice given.

A structured record of a client's personal and financial circumstances, needs, objectives and preferences. It forms the basis for analysing needs and making a suitable recommendation.

A client's willingness to accept investment risk, assessed through discussion and often a questionnaire. It is distinct from capacity for loss, which concerns the ability to withstand losses financially.

A client's financial ability to absorb falls in value without undermining their plans. A client may be willing to take risk they cannot afford, so both measures must be considered together.

New business that replaces an existing policy, such as a pension transfer or a rewritten life contract. It requires extra scrutiny because it may trigger exit charges, lost guarantees or new underwriting.

Moving pension benefits from one arrangement to another, for example from a defined benefit scheme to a personal pension. Defined benefit transfers above a set value require regulated advice.

A customer whose circumstances, such as health, bereavement, low literacy or financial pressure, make them more susceptible to harm. Firms must adapt communication and processes to achieve good outcomes.

The process by which an insurer assesses the risk presented by an applicant using medical, lifestyle and financial information. It determines whether cover is offered, on what terms and at what premium.

Failure by an applicant to reveal information material to the insurer's assessment of risk. Remedies depend on whether the omission was deliberate, reckless or innocent, and may include reduced claims or avoided contracts.

The insured's obligation to disclose all material circumstances they know or ought to know, and to make the presentation clear and accessible. It replaced the older duty to volunteer every material fact.

A short period after a policy starts during which the policyholder can cancel and receive a refund of premiums. Its length is set by regulation and it applies to most life and pension contracts.

A period after a missed premium during which cover continues, allowing the policyholder to pay and keep the contract in force. If payment is not made, the policy may lapse or become paid-up.

A whole life or endowment contract where premiums stop but cover continues at a reduced level, using the accumulated value. It avoids total loss of benefits on lapse.

The amount a policyholder receives if they cash in a savings-type policy before maturity. It may be less than premiums paid, especially in early years, and may be reduced by charges.

A request by a policyholder or beneficiary for payment under the contract, supported by evidence such as a death certificate or medical records. The insurer checks cover, disclosure and exclusions before paying.

A legal arrangement where assets are held by trustees for beneficiaries, often used to keep life policy proceeds outside the estate. It can speed payment and reduce inheritance tax exposure.

A non-binding instruction from a pension member about who should receive death benefits. Trustees normally consider it but retain discretion, which can preserve tax advantages.

A tax on the value of an estate above the nil-rate band, with reliefs for spouses and certain business or agricultural assets. Life policy proceeds can add to the estate unless written in trust.