| This glossary provides clear and short definitions of a large number of investment, financial and retirement planning terms. |
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Accident & Sickness The class of insurance which involves health and the ability to perform work for gain as the main risk. Accident & Sickness insurance may be transacted by either general or life insurance companies provided they hold the appropriate licenses. |
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Accrued Interest Interest that has been earned but has not yet been credited or received. |
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Accumulation Plan A savings program under which amounts are deposited regularly, e.g. monthly, or units or shares are purchased regularly. |
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Actuarial Value A theoretical value calculated for an investment by choosing certain assumptions and using them to work out how much each component, income and capital repayment, of the investment is currently worth, and adding the results. |
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Actuary A member of a profession which calculates the price of annuities and life insurance and which certifies the financial condition of defined benefit pension plans. Actuaries are the technicians of the insurance, benefits and pension industries. |
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Adjusted Cost Base The price at which an asset is carried for tax purposes and which is used to compute taxable gain or loss on subsequent sale. It is the original purchase price plus the cost of any additional purchases or improvements. When a partial sale is made the adjusted cost base is reduced pro-rata to the amount of the asset being sold. |
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Agent In the insurance industry, an individual who is licensed to sell insurance and represents and is employed by a single insurer. An agent would usually be remunerated mainly by commission based on sales closed. |
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Alternative Minimum Tax (AMT) A tax which applies in situations where the normal tax computation rules would yield little or no revenue and which increases the amount payable to a minimum level. |
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Amortization A technique for spreading an amount forward into the future. For example, a loan or mortgage is amortized by making the repayments due monthly over a 5 or 20 year period. |
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Annual Reports A publication sent to all shareholders of a public company soon after the end of its fiscal year and before the Annual General Meeting, detailing a description of the company's operations during the year just completed, its balance sheet at the end of the year and its income statement for the year. |
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Annual RRSP Dollar Maximum The annual amount by which a taxpayer's RRSP deduction limit increases. It is $19,000 in 2007, $20,000 in 2008, $21,000 in 2009, $22,000 in 2010 and is scheduled to increase in line with the Average Wage, as compiled by Statistics Canada, beginning in 2010. The amount an individual taxpayer may contribute to his/her RRSP in any year is the RRSP deduction limit which recognizes the Annual RRSP Dollar Maximum and other circumstances personal to the taxpayer. |
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Annuitant An individual who is receiving or will receive payments from an annuity. |
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Annuity A contract usually between an individual and a life insurance company whereby the individual pays a single amount to the insurer at the start of the contract, and the insurer pays regular amounts to the individual beginning on a fixed date and continuing for a fixed term, or for the life of the individual. Many variations on the theme are possible (see below for some of them). |
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Annuity, Certain An annuity payable for a fixed period of time, e.g. 10 years beginning on a certain date. Such contracts may be issued by institutions other than life insurance companies as specified by legislation, e.g. Trust Companies. |
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Annuity, Guaranteed An annuity payable during the lifetime of an individual but guaranteed to continue to a designated beneficiary for at least a minimum term, e.g. 5 years, even if the annuitant dies within that term. |
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Annuity, Indexed An annuity whose payments increase in line with an index. For example, once every twelve months the monthly payments under an annuity might increase in line with a published cost of living index. |
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Annuity, Joint An annuity where two individuals are each named as annuitants and payments continue so long as they are both alive but cease on the first death. |
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Annuity, Joint & Last Survivor An annuity where two individuals, e.g. a husband and wife, are each named as annuitants and payments continue as long as any one of them remains alive. Sometimes the level of payment may reduce on the first death, e.g. to 60% of the original level. Such a contract is called a "JL&S 60%". In settling complex estates more than two lives may be involved. |
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Annuity, Life An annuity where payments depend on the continued existence of the annuitant. Such contracts may only be issued by life insurance companies. |
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Annuity, Term Certain See Annuity Certain. |
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Annuity, Reversionary An annuity whose payments do not begin until the death of one individual or the expiry of a fixed term, but then continue during the life of another individual provided they have outlived the first individual or the fixed term. If the second individual does not live long enough no payment may ever be made, or there may be a guaranteed payment to a designated beneficiary. |
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Asset Anything that has monetary or tangible value, such as antiques, art, autos, bonds, businesses, china, equities, farms, gold, insurance policies, investments, jewellery, porcelain, property, rare books, etc. |
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Asset Allocation A technique for spreading funds over different categories of securities, so that different types of risks, and different types of investors may be accommodated. Often percentage ranges are allocated to categories, e.g. 20% to 40% in bonds so that a portfolio will always have between a minimum and a maximum content in that category. An investor will sometimes work through a questionnaire to establish an asset allocation which will reflect his/her objectives, age and time horizon, tolerance to risk and market outlook. |
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Asset Allocation Fund A type of mutual fund which invests in a varying proportion of stocks and bonds. The proportion is driven by a computer model which aims to monitor certain variables and optimize the stock and bond content from time-to-time. |
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Assurance A class of insurance ("life assurance") which offers the payment of a sum of money upon the death of a person. The term "life insurance" is often used instead. |
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Audit An examination and report usually conducted by a third party. An audit may be applied to a single transaction, or to an activity, e.g. claims, or to a department or division or to a whole company's operations. It may be carried out by company personnel, e.g. the "Internal Auditor," or by external personnel (usually a public accounting firm), or by tax or other governmental authorities. |
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Average Tax Rate The single theoretical rate of tax which would produce the same result as the application of actual tax rates to successive slices of income produces in calculating the tax due on an amount of income received in a year. |
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