Property investment glossary


Deeds

A legal document confirming the official ownership of a property.


Defined Benefit Scheme

Defined Benefit Schemes (DBs) are commonly known as final salary or career average schemes, in which you as a member are entitled to annual income. The amount of income that you are entitled to however, depends on your previous earnings and length of service. The investment risk hereby lies with the pension fund, so if the fund fluctuates, the benefits to which you are entitled to won’t change.


Defined Contribution Scheme

In a Defined Contribution Scheme (DC) you build up savings and the amount of retirement income that you receive is based on the monetary value of the fund at your retirement and what you then choose to do with it. The investment risk here sits with you, the individual – if the size of the fund varies as a result of investment performance, this directly affects the money available to you to secure an income in retirement.


Deflation

The opposite of inflation, deflation is when prices generally begin to lower. This lack of demand makes the economy suffer and unemployment levels rise.


Dependant

A person who is reliant upon another person, mainly a family member, for financial support.


Disposable Income

The income you have left after taxes and National Insurance contributions are deducted from your salary, and you have deducted important costs like living costs, bills and necessary expenses.


Diversification

A risk-management strategy that incorporates a wide variety of investment asset classes within one portfolio in an attempt to mitigate the risk of suffering substantial financial loss.


Drawdown

A method of withdrawing benefits from a UK Registered Pension Scheme, in the form of either income or a lump sum. There are two types of drawdown available through the new pension reforms:

  • Capped Drawdown: A form of making withdrawals from your pension pot, with a limit on the amount of money you can take out from your pension scheme each year. Capped drawdowns have the benefit of being more flexible than annuities, yet restrict the capacity of a full pension withdrawal so as to maintain an element of financial security for the pension-holder.
  • Flexible Drawdown: Unlike capped drawdown, the flexible option allows withdrawals from your pension pot without a limit to the amount that you can take from your scheme each year. Although in previous years there have been conditions placed on who can withdraw their pension, from April 2015 the minimum income requirement will be completely removed so that everyone can get access to their retirement savings at age 55. With a flexi-access drawdown, you can take out 25% of your pension pot out completely tax-free, whilst the remaining 75% of your pension fund are taxable at your marginal income tax rate.

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