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Headroom Check

A check which is carried out where proposed Free Standing Additional Voluntary Contribution payments exceed a specified limit, (currently £2400 per annum), to ensure that total benefits do not exceed the maximum permitted by the Inland Revenue.

Health Insurance

Insurance against financial losses resulting from sickness or accidental bodily injury. Included under this definition are accident insurance, disability insurance and accidental death and dismemberment insurance. Private Medical Insurance (to provide for the cost of private - ie not within the National Health Service - medical treatment also comes under this general heading).

Hedging

A strategy used to offset investment risk. Usually makes use of futures or options.

Higher Rate Tax

Under U.K. income tax regulations, bands of personal income are taxed at different rates. The highest rate of income tax is currently set at 40% and for 1999/2000 it is payable on taxable earnings above £28,000.

Hire Purchase (HP)

A method of buying goods in which the purchaser takes possession of them as soon as he has paid an initial instalment of the price (a deposit) and obtains ownership of the goods when he has paid all the agreed number of subsequent instalments.

A hire-purchase agreement differs from a credit-sale agreement and sale by instalments (or a deferred payment agreement) because in these transactions ownership passes when the contract is signed. It also differs from a contract of hire, because in this case ownership never passes. Hire-purchase agreements were formerly controlled by government regulations stipulating the minimum deposit and the length of the repayment period. These controls were removed in 1982.

Hire-purchase agreements were also formerly controlled by the Hire Purchase Act (1965), but most are now regulated by the Consumer Credit Act (1974). In this Act a hire-purchase agreement is regarded as one in which goods are bailed in return for periodical payments by the bailee; ownership passes to the bailee if he complies with the terms of the agreement and exercises his option to purchase. A hire-purchase agreement often involves a finance company as a third party. The seller of the goods sells them outright to the finance company, which enters into a hire-purchase agreement with the hirer.

Home Income Plan

Home income plans allow elderly homeowners to use the equity tied up in their home to purchase an income and thus increase their standard of living. Homeowners can release this capital without having to sell their home.

With a reversion plan, the home is sold to an insurance company that then pays a regular income to the owner. On the death of the owner, the house becomes the property of the insurance company.

With an annuity plan, the proceeds of a new mortgage on the property are used to purchase a regular income via an annuity. On the death of the homeowner, the mortgage debt must be repaid.

Home Service Insurance

See: Industrial insurance

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