Financial Glossary: F

Face value

The term used to describe value of a bond when it matures, also known as the 'nominal' or 'par' value.

Fee-based adviser

An independent financial adviser who earns a living by charging a fee for advice rather than earning commission from financial companies for selling their products.

Final dividend

The final dividend is paid after the annual accounts for the year have been published and after the proposed dividend has been agreed by the shareholders at the annual general meeting.

Final salary scheme

The calculation of your pension on retirement is based on a fraction of your pensionable earnings for each year you've been a member of the pension scheme. The most common fraction used is 1/6th and if you had been a member of the scheme from the age of 25 to 65 ,this would give you the maximum pension of 40/60 or 2/3 of your final salary.The fewer years that you are in the scheme means a smaller pension. It is usual for the pension to get regular increases and a provision is usually made for a pension for your spouse if you die first, or if you die before the retirement payment of the one-off payment.

Financial Services Act 1986

The Financial Services Act 1986 has established regulations for firms in the investment service industry, including buying and selling of stocks. It has now been overtaken by the Financial Services and Markets Act 2000 which, amongst other things, has centralised regulatory power in the hands of the Financial Services Authority.

Financial Services Authority (FSA)

The single statutory financial regulator in the UK. In order to do business in the UK most financial service firms must get permission from the FSA.

The FSA regulates banks, building societies, credit unions, insurance and investment firms and independent financial advisers. The FSA is also responsible for Lloyd’s Insurance Market and in 2004 its powers will be extended to cover general insurance advice and mortgage lending. However, the FSA does not cover loans, credit, occupational pension schemes and their administration

Financial Times Stock Exchange 100 Index (FTSE 100)

The FTSE 100 index is a share price index for 100 different shares quoted on the London Stock Exchange, The share are intended to be of a sufficiently broad cross section, so that movements in the index of share prices would be typical of movements in the value of the portfolio of shares of an average investor.

Financial Times Stock Exchange 250 Index (FTSE 250)

The UK stock Market index that measures the performance of the 250 companies below the FTSE 100 companies.

Financial Times Stock Exchange Actuaries All-Share Index (FTSE-A-All-Share)

The 'All Share', measures the performance of over 900 publicly quoted companies and is the broadest based of the UK stock market indices.

Financial Times Stock Exchange SmallCap Index

This is the index for the 'All-Share' market minus the top 350 companies.

Fixed interest security

A fixed interest security is an investment which has a return consisting of income in the form of interest payments and either a redemption value of the security when it eventually matures or the market value of the security if the investor sells it before maturity.

Fixed-rate mortgage

A mortgage where the rate of interest is fixed for a set period of time. The advantage of this type of mortgage is that the investor can budget accurately. Even if interest rates rise or fall and lenders alter their mortgage rates in line, your monthly payments will stay the same. You usually have to pay a premium on the lender's standard variable rate for such certainty, but many borrowers think it's worth it for the peace of mind it brings. They can also prove to be good value if interest rates rise more sharply than expected. Bear in mind that if you switch lenders before the fixed-rate period is up, you'll have to pay a redemption penalty.

Flexible Mortgage

A new type of mortgage that is becoming more popular, especially among the self-employed and other people who may experience uneven cash flow. It allows you to vary your monthly payments without any penalty, and even to take a payment holiday for a while. You can also borrow, or 'draw down', from the loan when you need to. The ability to overpay can save you a lot of interest over the term of the loan. Flexible mortgages often incorporate a current account, too, encouraging the idea that borrowings and savings can be run more efficiently in one pot.

Flotation or floatation

Flotation is the process of making a company's shares available to the general public by obtaining a quotation on the Stock Exchange. Also referred to as "going public" or "obtaining a Stock Exchange listing".

Free-standing Additional Voluntary Contributions (FSAVCs)

See Additional Voluntary Contributions.

Front-end loading

The initial sales charges that you have to pay when you invest in a mutual fund, such as, a unit trust. This charge is mainly for the cost of the adviser.

Future

A form of forward contract to buy or sell a set quantity of shares or commodities in the future at a pre-agreed price.

 

 

 

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