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Dictionary of Financial Terms - F

Facultative Reinsurance
A type of reinsurance in which the reinsurer can accept or reject any risk presented by an insurance company seeking reinsurance.

Family Foundation
A private foundation created to make charitable contributions on behalf of a particular family. The board is often limited to family members.

Family Income Policy
A form of term insurance. If the death of the insured occurs during the term an income will be paid from the date of death to the end of the term.

Federated Fund Drive
A centralised campaign whereby one organisation raises money for its member agencies. The United Way campaign and the Community Works are examples.

Final Salary Scheme
A particular form of defined benefit pension scheme (see under that heading). Benefit is calculated based upon the final salary of the member and years of service.

—n. 1 management of (esp. public) money. 2 monetary support for an enterprise. 3 (in pl.) money resources of a State, company, or person. —v. (-cing) provide capital for. [French: related to fine]

Finance Company
n. (also finance house) company providing money, esp. for hire-purchase transactions.

Financial - Financially
adj. of finance.

Financial Planning Certificate
A professional qualification for financial advisers obtained by examination through the Chartered Insurance Institute. Holders are entitled to be Registered with the Society of Financial Advisers.

Financial Services Authority
The single regulatory authority for the UK financial services industry.

Financial Year
Year as reckoned for taxing or accounting, esp. from 6 April to 5 April every year (in the UK). 1. Any year connected with finance, such as a company’s accounting period or a year for which budgets are made up. 2. A specific period relating to corporation tax, i.e. the year beginning 1st April (the year beginning 1st April 1988 is the financial year 1988). Corporation-tax rates are fixed for specific financial years by the Chancellor in his budget; if a company’s accounting period falls into two financial years the profits have to be apportioned to the relevant financial years to find the rates of tax applicable. Compare with fiscal year.

n. capitalist; entrepreneur. [French: related to finance]

Fiscal Policy
influencing the direction of an economy through the use of taxation (See also Monetary Policy)

Fixed rate
A guaranteed rate that is normally set just below the standard variable rate and is guaranteed for a certain period of time. If the standard variable rate falls below the fixed rate you will still have to pay the fixed rate. Once the fixed rate period ends you will normally pay the lender's variable rate. Sometimes there are redemption penalties associated with this type of deal.

Flexible Benefits
A program where employees can select from a range of benefits offered by their employer in order to meet their own specific needs.

Flexible mortgage
A feature of some mortgages that gives you freedom to change the amount and frequency of your mortgage payments.

Flow-through Funds
Contributions to a foundation that are used primarily for direct grant making, rather than for endowing the foundation permanently. Most corporate foundations depend on these funds each year rather than on income produced from endowment funds.

the popular name for the FT-SE 100 Share Index, the UK stockmarket's main benchmark index, which measures the daily share price performance of Britain's top 100 public limited companies, ranked by their size (See also Market Capitalisation)

Foreign draft
This is similar to a bankers' draft, but is in a foreign currency. Foreign drafts take around 5 days to arrive depending on where it is sent.

A private non-profit organisation with funds and a program managed by its own trustees and directors, established to further social, educational, religious or other charitable activities by making grants. A private foundation receives its funds from, and is subject to control of, an individual family, corporation or other group of limited number. In contrast, a community foundation receives its funds from multiple public sources and is classified in the US by the IRS as a public charity.

Financial Planning Certificate.

Fixed Rate
The interest rate is fixed for a set period.

Free Cover Level
The maximum amount of benefit for which an insurance company is prepared to insure a member of a group insurance scheme without the member needing to provide evidence of good health.

If you buy a property which is freehold it means that both the land and the property is yours, unlike leasehold where the land would not belong to you.

Free Standing Additional Voluntary Contributions
A scheme whereby an individual can make payment into an independent arrangement to supplement an occupational pension scheme as longs as the anticipated benefits from the two schemes together are less than the maximum permitted under the rules laid down by the Inland Revenue.

Friendly Society
Similar to a mutual insurance company. A Friendly Society, registered under the terms of the Friendly Societies Act 1974, is owned and operated for the benefit of its members. There are limits on the amounts which can be invested by members but tax privileges are available to policies within those limits. Some Friendly Societies now operate with separate sections for 'tax-exempt' and 'ordinary' business.

Financial Services Authority.

Free Standing Additional Voluntary Contributions.

This is an index compiled by the Financial Times and is made up of all the companies listed on the UK Stock exchange (currently around 835). The purpose of the index is to provide a benchmark of the performance of the stock market as a whole. This benchmark is often used to measure the effectiveness of a fund manager.

An annuity which is payable for a fixed period regardless of whether the annuitant survives, and thereafter only while the annuitant is alive. Annuities guaranteed for 5 years are very commonly used in conjunction with pension arrangements.

general term for any investment vehicle which pools together the money of many small individual investors and invests it in certain markets and securities according to a defined set of investment aims and objectives. Covers such investments as unit trusts, investment trusts and pension plans.

Fund Manager
A fund manager is employed to invest money for (amongst other things) unit trusts and investment trusts. Fund managers aim to outperform their chosen index by buying shares, which they think will do particularly well. They can also choose to keep a percentage of their fund in cash if they're not optimistic about the outlook for the stock market. Naturally, fund managers get paid to do this, so charges for an actively managed fund tend to be higher than for an index tracker.

usually refers to the underlying economic factors affecting a particular market, country or sector and will include such aspects as industrial output, wages and raw materials costs, currency strength or weaknesses, trade balance and so on.

short for Futures Contract, which is an obligation to buy or sell a specific amount of a commodity, currency or financial instrument at a particular price on a stipulated future date. The price is established between buyer and seller on the floor of an exchange, such as the London International Financial Futures Exchange (LIFFE), using an 'open outcry' system. The contracts themselves may be traded with third parties. (See also Options)

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