The jargon decoder
Financial services runs on vocabulary that keeps outsiders out. Here's the translation: 40 terms in plain English, each linked to the guide or calculator that covers it properly. No definition on this page is advice — see anything personal with an FCA-authorised adviser.
A C D E F G I L M N P Q R S T W
A
- Annual allowance
- The cap on tax-advantaged pension contributions each tax year — £60,000 for most people, lower for very high earners and for anyone who has flexibly accessed a pension (see MPAA). Learn more →
- Annuity
- An insurance product that converts a pension pot into a guaranteed income, usually for life. Rates depend on age, health and markets — and disclosing health conditions can increase what you're offered. Learn more →
- Appointed representative (AR)
- A firm that carries out regulated activities under the wing of an FCA-authorised 'principal' firm, which takes responsibility for it. ARs appear on the FCA Register with their principal named. Learn more →
- Asset allocation
- How investments are divided between asset types — shares, bonds, property, cash. Over long periods it drives more of the outcome than picking individual investments. Learn more →
- AUM / percentage-of-assets fee
- An adviser charge set as a percentage of the money they manage for you ('assets under management'). Always convert it to pounds on your pot. Learn more →
C
- Chartered Financial Planner
- A planner who has completed substantially more than the minimum qualifications (Level 6 plus experience requirements). A meaningful quality signal — but still verify the firm on the FCA Register. Learn more →
- Compound growth
- Growth earned on previous growth. The reason small monthly amounts become large pots over decades — and the reason percentage fees quietly become large costs. Learn more →
D
- Defined benefit (DB) pension
- A pension promising a set income for life, based on salary and service — common in the public sector, rare and valuable elsewhere. Transferring out gives up the guarantee and legally requires advice over £30,000. Learn more →
- Defined contribution (DC) pension
- A pension that is simply a pot of invested money. What you get out depends on contributions and growth; the investment risk is yours. Learn more →
- Drawdown (flexi-access)
- Keeping your pension invested at retirement and withdrawing what you choose. Flexible, but you carry the risk of the pot running out. Learn more →
E
- Emergency fund
- Cash set aside for genuine surprises — typically sized at three to six months of essential outgoings. The foundation that stops life events becoming debt events. Learn more →
F
- FCA (Financial Conduct Authority)
- The UK regulator for financial services firms. Its public Register is the official record of who is authorised to advise — checking it is the single most important piece of due diligence. Learn more →
- Financial promotion
- A communication inviting or inducing someone to engage in financial activity. Heavily regulated: promotions for regulated products generally need an FCA-authorised firm's approval (s21 FSMA). Learn more →
- FOS (Financial Ombudsman Service)
- The free, independent dispute service for complaints about authorised firms. It can order compensation; it only covers regulated dealings. Learn more →
- FSCS (Financial Services Compensation Scheme)
- The UK's compensation fund when authorised firms fail — £85,000 per person per banking licence for deposits, with separate limits for investments and advice claims, and up to £1m temporary cover for things like inheritances. Learn more →
- Fund / index fund
- A pooled investment owning many holdings at once. An index fund simply tracks a market index cheaply rather than paying a manager to pick — diversification in one purchase. Learn more →
G
- Guaranteed annuity rate (GAR)
- A promise inside some older pensions to convert the pot to income at rates far better than today's market. Often worth more than the pot's face value — and usually destroyed by transferring out. Learn more →
I
- IFA / independent adviser
- An adviser who can recommend from the whole market. 'Restricted' advisers are limited to certain providers or product types and must tell you so. Learn more →
- Intestacy
- The statutory formula that distributes your estate if you die without a will. Unmarried partners get nothing under it. Learn more →
- ISA
- A wrapper that shields savings and investments from income tax, dividend tax and capital gains tax. The overall allowance is £20,000 per tax year across the types. Learn more →
L
- Lasting power of attorney (LPA)
- A document appointing someone to act for you if you lose capacity — separate versions for finances and for health. Only works if made before it's needed. Learn more →
- Lifetime ISA (LISA)
- An ISA for 18–39 year olds paying a 25% government bonus on up to £4,000 a year, for a first home or for age 60 — with a 25% penalty that takes back more than the bonus if withdrawn otherwise. Learn more →
- Loan-to-value (LTV)
- The mortgage as a percentage of the property's value. Lower LTV bands unlock cheaper rates — it's the number remortgagers should know by heart. Learn more →
M
- MPAA (Money Purchase Annual Allowance)
- The sharply reduced pension contribution allowance (a fraction of the standard £60,000) triggered by flexibly taking taxable pension income. A one-way door that catches gradual retirees. Learn more →
N
- Nil-rate band
- The first £325,000 of an estate, taxed at 0% for inheritance tax — with up to £175,000 more for a home left to direct descendants, and unused bands transferring between spouses. Learn more →
P
- Pension sharing order
- A divorce court order moving a percentage of one spouse's pension into the other's own pension — the clean-break way pensions are split. Learn more →
- Pension Wise
- A free, government-backed guidance appointment about DC pension options, available from age 50 via MoneyHelper. Use it before paying anyone. Learn more →
- Personal recommendation
- The legal heart of 'advice': telling you to take a specific course of action with a specific product, based on your circumstances. Only FCA-authorised firms may give one — and this site never does. Learn more →
- Pound-cost averaging
- Investing a fixed amount regularly, which automatically buys more units when prices are low. Less a strategy than a useful side effect of monthly saving. Learn more →
Q
- Qualifying earnings
- The earnings band (roughly £6,240–£50,270) on which minimum auto-enrolment contributions are calculated — the reason '8%' is less than 8% of your salary. Learn more →
R
- Relief at source
- The pension tax-relief mechanism where your provider adds basic-rate relief automatically (£80 in becomes £100), with higher-rate payers reclaiming the rest via self-assessment. Learn more →
S
- Salary sacrifice
- A contractual swap of salary for employer pension contributions, saving National Insurance as well as income tax. Learn more →
- Sequencing risk
- The danger that poor returns early in retirement, combined with withdrawals, exhaust a pot that average returns suggest should survive. The core reason drawdown is hard. Learn more →
- SIPP
- A self-invested personal pension — a DC pension you open and control yourself, with a wide investment choice. Same tax rules; more rope. Learn more →
- Suitability report
- The written document in which an adviser must justify why their recommendation fits your circumstances. In any complaint, it's the battlefield. Learn more →
T
- Tax-free cash (PCLS)
- The portion of a pension — usually up to 25%, within the lump sum allowance — that can be taken free of income tax. Learn more →
- Term life insurance
- Life cover for a set period (often the mortgage term). Far cheaper than whole-of-life; it exists to protect dependants, not as an investment. Learn more →
- Triple lock
- The State Pension uprating rule: the highest of earnings growth, inflation or 2.5% each year. Politically contested; don't build 40-year plans on it surviving unchanged. Learn more →
W
- With-profits fund
- An older investment style that smooths returns via bonuses at the manager's discretion. Leaving at the wrong time can forfeit terminal bonuses or trigger a 'market value reduction'. Learn more →
- Workplace pension
- The auto-enrolment pension your employer must provide and pay into — see qualifying earnings, and capture the match before all else. Learn more →
About this page: general education from an independent publisher — definitions are simplified on purpose and rules change. FinancialAdvisor.co.uk is not an FCA-authorised firm; for advice tailored to you, consult one (our toolkit shows how).