Don't be confounded by obscure financial terms. By Nic Cicutti
ANYONE WHO has tried to delve into the investment world will have come across a range of bizarre terminology which appears designed to put people off the idea of saving money. Here are a few of the most common terms you are likely to come across, together with an explanation.

Accumulation units: with some unit trust PEPs you will be given the choice between accumulation and income units. Accumulation is what you should choose if you don't want an income. This means that if a dividend is paid, it will automatically be reinvested in the trust, increasing the total value of your investment.

Bid/offer spread: the difference between the price you can pay for an investment and the price you can sell at, at any time. It includes the initial charge levied on the fund.

CGT (capital gains tax): a tax on the increase in the value of your investments. CGT is levied at the taxpayers' marginal rate. This means gains in excess of pounds 6,800 are taxed at income tax rates (as top slice of income), at 20 per cent, 23 per cent or 40 per cent depending on your circumstances. Since the March 1998 Budget, the rate of CGT tapers downwards to 20 per cent over a 10-year period.

Distributions: income paid from a unit trust PEP. Dividends: the portion of a company's profits distributed to share-holders, normally paid half- yearly.

Exit charge: a charge that is levied by some PEPs for selling up in the first few years.

Income units: the opposite of accumulation units (see earlier).

Qualifying funds: unit and investment trusts which qualify for the full pounds 6,000 annual PEP allowance. They must have 50 per cent of their investments in the EU.

Share exchange: some PEPs allow you to exchange an existing portfolio of shares, usually at a special price, and reinvest the proceeds in one of their funds.

Tax credits: dividends and income are normally paid net of basic tax. Tax credits are a record that this tax has been deducted.