Decoding financial planning jargon

From Annuity to Wealth Management, do you know your drawdown from your AVC’s? The world of financial planning can be a minefield for the uninitiated.

We have created this handy list to help those outside the industry make sense of some common financial planning terms.

Accrual rate

This term refers to the rate at which pension benefits build up in a final salary pension each year.


This is a type of retirement income product that you buy with some or all of your pension pot. An Annuity will pay a regular retirement income either for life or for a set period.

AVCs – Additional Voluntary Contribution

This is a voluntary extra contribution you can pay into an occupational pension.

Capital Gains Tax

You may have to pay this on the profit if you give away or sell an asset that has increased in value. Capital Gains tax typically applies to shares and other investments.

Care fees Planning

This is the term used for the process of ensuring that a plan for long term care is in place, should you need it. There are different ways of doing this and they include ‘Immediate Needs Annuity’ which once purchased, will pay a regular tax free income to your care provider for the rest of your life.

Defined Benefit Pension

This type of pension scheme is one where the amount you’re paid is based on several factors. These are how many years you’ve worked for your employer and the salary you’ve earned.

Defined Contribution Pension

In this type of pension, the income you might get from it depends on several factors. These  include the amount you pay in, the fund’s investment performance and the choices you make at retirement.


This is the opposite of inflation and usually happens during a recession. Deflation is a decrease in the price of goods, services, and the value of wages.

Equity release

This is a way of releasing cash against the value of your home without having to move out. Either by borrowing on it or by selling all or part of it for a regular income or lump sum.


The term estate refers to everything you own, minus your debts.

Final salary scheme

This is a type of occupational pension scheme. The amount of pension you will get when you retire is worked out on your salary at retirement or when you left the job. It also takes into account how long you were a member of the scheme.


The Financial Conduct Authority (FCA) is a public body tasked with ensuring that financial planning firms remain compliant.

Income drawdown

This is a type of pension where you withdraw money directly from the fund while the pension fund remains invested. Income drawdown can also be known as income withdrawal.

Inheritance Tax

This is a tax paid on your estate after you die if it’s valued over a certain amount – currently £325,000


This is an umbrella term covering many different types of insurance. Such as Life Insurance, Critical Illness Cover and Income Protection.

Personal Finance Society (PFS)

The Personal Finance Society (PFS) a professional body dedicated to building trust in the financial planning profession.

Personal pension

This is a pension you take out yourself rather than through an employer. For example, if you’re self-employed.


This is the term used to refer to a significant economic decline. During this decline, unemployment rises and the GDP (Gross Domestic Product – the value of all the goods and services a country produces in a year) goes down.

Self Invested Personal Pension (SIPP)

A SIPP is is a pension ‘wrapper’ that holds investments until you retire and begin to draw a retirement income. The main difference between a standard personal pension and a SIPP is that with a SIPP, you have more flexibility with the investments you can choose.

Time horizon

An Investment Time Horizon is a period where an individual expects to hold an investment in order to achieve a specific goal.

Transfer value

This is what you’ll get if you transfer your pension from one company scheme to another, or to a personal pension. 

Wealth Management

A wealth management service is when a financial adviser delivers a full range of financial services and products to a client.


If you would like to learn more about what an Independent Financial Adviser can you for you then the True Bearing team will be happy to help. Contact us or call 01257 260011.