GLOSSARY

At Astute Financial Planning, we want to make sure you’re always in the know. Below are simple explanations of some common terms you might hear during our work together:

AIM (Alternative Investment Market) – A market for smaller, growing companies. High risk, high reward potential.

Annuity – A product that provides guaranteed income for life or a set period, bought with your pension.

APR (Annual Percentage Rate) – The yearly interest rate on loans or credit cards.

Assets – Things you own that have value, like your home, savings, or investments.

Bonds – Loans you give to a company or government in exchange for interest.

Budgeting – A plan to manage your income and expenses.

Capital Gains Tax – A tax on the profit when you sell assets like property or shares.

Cash Flow – The money coming in and going out of your finances.

Compound Interest – Interest earned on both your savings and the interest itself.

Defined Benefit Pension – A pension that guarantees a specific payout based on your salary and years of work.

Defined Contribution Pension – A pension where payouts depend on how much was contributed and how well investments perform.

Diversification – Spreading investments across different areas to reduce risk.

Dividends – A portion of company profits paid to shareholders.

EIS (Enterprise Investment Scheme) – High-risk investment in small companies with significant tax relief.

Emergency Fund – Savings set aside for unexpected expenses.

Equity – The difference between your home’s value and what you owe on the mortgage.

Estate Planning – Planning how your assets will be passed on after you die.

Fixed Interest – A type of investment that pays a set rate of interest over a specified period, like bonds.

Flexi-Access Drawdown – A way to take money from your pension while leaving the rest invested.

Inflation – The rise in prices over time, reducing purchasing power.

Inheritance Tax – Tax on the estate (property, money, etc.) passed on after someone dies.

Interest Rate – The cost of borrowing or the reward for saving.

Investment Portfolio – A collection of all your investments.

ISA (Individual Savings Account) – A savings or investment account where earnings are tax-free.

Liabilities – Money you owe, like a mortgage or credit card debt.

Lifetime Allowance – Previously a limit on how much could be saved in a pension without extra tax. Abolished in 2023.

Lump Sum Death Benefit – Replaces the Lifetime Allowance; now, any death benefit lump sum over £1,073,100 will be taxed at your beneficiary’s marginal income tax rate.

Liquidity – How quickly you can access your money.

National Insurance – A tax that funds benefits like healthcare and the state pension.

Net Worth – Your assets minus your liabilities.

Offshore Investment Bonds – Investments from non-UK providers with potential tax advantages.

Onshore Investment Bonds – Investments from UK providers with specific tax benefits.

Pension – A savings pot to provide an income during retirement.

Rebalancing – Adjusting your investments to stay aligned with your goals.

Risk Tolerance – Your comfort level with investment risks.

SEIS (Seed Enterprise Investment Scheme) – A tax-efficient, high-risk investment in start-ups.

State Pension – A regular payment from the government once you retire, based on your National Insurance contributions.

Stocks & Shares – Buying a piece of a company. Can increase or decrease in value.

Tax Efficiency – Organizing your finances to minimize tax.

VCT (Venture Capital Trust) – High-risk investment in small, unlisted companies with tax relief.

Will – A legal document stating what should happen to your assets after you die.

Inheritance Tax planning, Estate Planning & Tax Planning are not regulated by the Financial Conduct Authority.