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I

ICVC

Investment Company with Variable Capital. Another term used to describe an *OEIC*. This term is used rarely but you may come across it in formal documents relating to an OEIC.

Income

The *return* on your investment that arises from *dividends* and *interest* earned by the fund.

Income tax

A tax payable to HM Revenue and Customs on any *income* you receive whether it is wages or income from investments and savings. Different rates of income tax apply; the one you pay depends on how much money you have coming in. For the 2009/2010 tax year you are able to earn up to £6,475 before you have to pay any income tax.

Income units/shares

This type of *unit*/*share* pays out to you on set dates each year any *interest* or *dividends* your investment makes.

Index/indices

A grouping of *shares* or *fixed interest securities* on the stock market which are often similar in size or represent similar industries. For example, the *FTSE 100* index represents the largest 100 UK companies by *market capitalisation*.

Index tracking funds

Funds which aim to mirror the progress of a stock market index, e.g. the *FTSE 100*, by buying and selling *shares* in the same proportions as represented on the index.  These are also sometimes called tracker, index or passive managed funds.

Independent Financial Adviser (IFA)

An authorised and qualified professional who can advise on all financial services products across the whole of the market and tailor them to your needs.

Individual Savings Account (ISA)

A tax efficient means of saving.

Inflation

A general rise in the level of prices on the high street. This is measured by the retail price index.

Inflation risk

The *risk* to your savings caused by rising *inflation*. If inflation rises but *interest* on your savings doesn’t keep up it can reduce the spending power of your money. A £1 coin will always be worth £1, but what you can buy with that coin will reduce with increased inflation. 

Initial charge

A charge that is paid to the *fund manager* when you invest to cover their expenses, such as commission, advertising, administration and dealing costs.

Interest

An amount, in percentage form, which a bank or building society will credit to you if you save with it in a *deposit account* or savings account. The amount paid to you will be a percentage of whatever *capital* you have in your account. *Gilts* and *bonds* also pay *income* in the form of *interest*.

Interest distributions

*Income* paid out by *unit trusts* and *OEICs* that invest predominantly in *gilts* and *bonds*. 

Intermediary

When buying a financial product you may not want to buy from the fund management company directly but go to a third party who may be able to offer you advice or a discount. These third parties are known as *intermediaries* and include banks, building societies and *independent financial advisers*.

Investment funds

A general term for *unit trusts* and *OEICs*.

Investment grade bonds

These *bonds* have a low risk of the company that issued them being unable to repay them. The most secure forms are known as “triple A” rated bonds. See "*Credit ratings*".

Investment trusts

Similar to *unit trusts* and *OEICs* in that they provide a means of *pooling* your investment but with a different structure and governed by different regulations. They are *closed-ended funds* and public listed companies whose *shares* are traded on the London Stock Exchange.