Glossary of Key Terms

Here, Navigate Wealth explains key terms and phrases associated with financial planning to provide you with a better understanding.


Annuities can provide a guaranteed income payable for either the rest of your life, or a fixed number of years.

This method of generating an income provides the peace of mind of a guaranteed payments. You can also build in a continuing income to a surviving dependent - such as your spouse - in the event of your death.

Part of your pension fund can be used to purchase an annuity with the option of taking the rest as a tax-free lump sum or to provide an income in other ways.

Critical Illness cover

Critical illness cover pays a tax-free lump sum if you are diagnosed with a defined critical illness during the policy term. It is often available as a combined policy with life insurance.

Income Drawdown

Income drawdown is a way of taking income from the money you've built up in your pension fund without the need to buy an annuity.

The money remains invested in the fund, generally of your choosing and you take money from the fund as income, as and when you need it. You can take as little or as much as you want, subject to the terms and conditions of your contract. There may also be fees charged each time you take cash.

While you're making withdrawals from your pension fund, the remainder of your fund continues to be invested, giving it the potential for growth.

However, the value of your fund or funds, can go down as well as up and is not guaranteed, so you may not get back what you have invested.

Estate planning

Estate planning is the process of anticipating and arranging, during a person's life, for the management and disposal of that person's estate during the person's life and at and after death, while minimising inheritance tax. Estate planning includes planning for incapacity as well as a process of reducing or eliminating uncertainties over the administration the estate and maximizing the value of the estate by reducing taxes and other expenses. The ultimate goal of estate planning can be determined by the specific goals of the client, and may be as simple or complex as the client's needs dictate.

Final Salary Defined Benefit Pension

An occupational pension scheme that provides a set level of money when a person retires. The amount available depends on the length of service, the accrual rate on the scheme and level of earnings at retirement or in the years immediately preceding retirement classified as pensionable earnings.

Income protection

A long-term insurance policy that is designed to help if the policyholder becomes injured or unwell. This type of insurance will ensure the individual continues to receive regular income until they retire or are able to return to work.

Investment growth

A style of investment strategy that focuses on the growth of capital. Fund managers focused on growth often invest in companies that display signs of growth that is above average, even if the share prices appear to be expensive in terms of price-to-earnings ratios.

Investment income

Investment income is the money generated by interest payments, dividends, or capital gains after the sale of a security or other asset. Most individuals earn the bulk of their total net income each year through their salary. However, some people focus on investing in financial markets, which can grow savings in investment portfolios that can be used to generate investment income.


An Individual Savings Account (ISA) is a tax-free way to save or invest. On other savings accounts, income tax is regularly paid on the interest earnt. However, ISAs are free from tax on savings up to £20,000 per annum, so all the interest, capital growth and/or dividend income that is earnt is kept.

Life insurance

This type of insurance policy can pay dependents money as a lump sum or as regular payments in the event of your death. It is designed to provide peace of mind that any dependents will be looked after if you are no longer there to provide for your family.

Pension consolidation

Consolidating your pensions means combining a number of different schemes together within one existing plan or a completely new one, allowing you to manage your retirement savings in one place. People have many jobs throughout their lives, and it is common to start a new pension with each. This often leads to a number of pensions being scattered around with different providers, making it difficult to keep track of your savings. Consolidating your pensions will enable you to better manage your retirement fund.


Setting up a trust is a method of managing assets, including money, investment, land or buildings, on behalf of beneficiaries depending on their circumstances. They are most commonly set up to control and protect family assets, or when an individual is too young to handle their own financial affairs.

Will and testament

A legal document within which a person expresses their wishes for how their assets are to be distributed in the event of their death.

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