What Financial Abbreviations Really Mean!

Turn gibberish into English:

AER (Annual Equivalent Rate)

This shows the effective yearly rate of interest paid by a savings account, if interest is left in the account and allowed to roll up. Alternative: After Effortless Returns.

AIM (Alternative Investment Market)

The London Stock Exchange's ‘junior' stock market, aimed at smaller and riskier companies. Alternative: Always Investigate Meticulously.

AMC (Annual Management Charge)

The yearly fee charged by an investment manager, typically 1.5% to 2.5% of your pot. Alternative: A Massive Cut.

APR (Annual Percentage Rate)

A method of showing borrowing costs, expressed as a yearly percentage, such as ‘7% APR'. The APR takes into account the interest rate and other charges for credit. Alternative: Awfully Pricey Rate.

AVC (Additional Voluntary Contribution)

An extra payment into your pension, on top of the usual contribution from you and your employer. Alternative: Always Very Costly.

BoE (Bank of England)

'The Old Lady of Threadneedle Street' works to maintain a stable financial system, issues banknotes and sets interest rates to regulate inflation. Alternative: Big Old Entity.

CDO (Collateralised Debt Obligation)

A highly complex derivative conjured up by financial wizards from a package of mortgages or other debts. The collapse of this ‘toxic waste' has hit investors all over the world and helped to create today's credit crisis. Alternative: Creating Disastrous Outcomes.

CGT (Capital Gains Tax)

A tax paid on profits made from selling assets such as shares or property. In 2008/08, you can make gains totalling £9,600 before paying CGT. Alternative: Claiming Great Tranches.

ETF (Exchange Traded Fund)

An ETF is a share which tracks a particular index or asset price. For example, the iFTSE100 is a cheap ETF which follows the FTSE 100 index. Alternative: Excellent Tracker Fund.

FOS (Financial Ombudsman Scheme)

An independent service for settling disputes between consumers and financial firms. Alternative: Fines Or Standards.

FSA (Financial Services Authority)

The City regulator or financial watchdog. Given the scandals involving Equitable Life, Northern Rock and so on, it could do better. Alternative: Falls Short Always.

FSCS (Financial Services Compensation Scheme)

A financial compensation scheme to protect the public from losing out to failed banks, insurance companies and investment firms. Alternative: Fixes Sloppy Companies' Slip-ups.

GEB (Guaranteed Equity Bonds)

A lump-sum investment with returns linked to the performance of one or more stock-market indices. Alternative: Going Easily Broke.

HMRC (Her Majesty's Revenue and Customs)

The taxman -- someone who grabs about three pounds out of every seven we earn. Alternative: Hand Me Ready Cash.

ISA (Individual Savings Account)

A tax-free wrapper surrounding a pot of cash, shares or other investments. In 2008/09, you can shelter up to £7,200 per tax year in an ISA. Alternative: I Save Admirably.

LSE (London Stock Exchange)

Europe's largest stock exchange, on which thousands of firms are listed. Alternative: Lovely Shares Empire.

MPC (Monetary Policy Committee)

The panel at the BoE which sets the Bank's base rate. Alternative: Must Prevent Collapse.

MEW (Mortgage Equity Withdrawal)

Borrowing money against your home to spend elsewhere, for people who view their home as a cash machine. Alternative: More Easy Wonga.

PEP (Personal Equity Plan)

A tax shelter which was replaced by the ISA in 1999. Alternative: Pretty Exciting Profits.

PPI (Payment Protection Insurance)

An insurance policy which pays out following a death, an accident, sickness or unemployment. Alas, this is a protection racket worthy of the Mafia! Alternative: Pushing Pathetic Insurance.

TAR (Total Amount Repayable)

The final tally of all the repayments and charges on a loan or other credit agreement. Alternative: Totally Astonishing Rip-off.

TER (Total Expense Ratio)

A measure of all the charges levied by an investment fund, expressed as a percentage. Known by Fools as the ‘Ferrari Factor'. Alternative: Taking Every Rupee.

I hope that this article has helped you to grasp financial TLAs!