Cutting through financial jargon

Logic Wealth Planning - wise words about money, finance, investments & pensions (4)

Understanding pensions, investments and mortgages is hard enough without overly technical words. We think cutting through financial jargon is essential to help people make the right choices and plans.

Each day, savers and investors are bombarded with enticing adverts for products and services that could potentially change their lives.

There are bold claims about performance, predicted earnings and results.

Unfortunately, those offers tend to come wrapped up in confusing language. When people sit down with advisers the same sometimes happens – more jargon.

Whether it’s annuities, indexes, equity release, asset allocation or trusts, these kind of technical terms can cause barriers. That doesn’t help anyone. Here are some plain English explanations:

What are annuities?

An annuity is a payment that occurs regularly and consistently. Annuities are usually associated with pensions. When you reach retirement age, you can buy an “annuity” with the money from your pension fund.

This kind of investment then guarantees a steady income for the rest of your life. An annuity can help to provide you with certainty in retirement, and not be worried about economic changes.

How do indices affect investments?

An index is a measurement of how a specific group of investments is performing. Indices are usually made up of grouped companies that have similar characteristics. For example, this could be based on size. This might be large corporate companies bundled together as the FTSE 100.

By watching the index of the UK’s largest 100 companies we see an average performance. It helps to show how the overall market is performing. People wanting to invest can then make decisions by comparing how different indices are rising or falling.

Please be aware that the value of investments or income from them can fall as well as rise.

Is equity release right for me?

When we talk about equity, we often mean the value held in a property. The equity is the difference between how much you have already bought and paid for, against what you still owe. In basic terms, the amount left on a mortgage helps you work out the equity if you know the market value of your home.

Equity release is also known as a lifetime mortgage. It allows a homeowner to stay living in their house but also draw income based on the equity held in the property. It is a way to unlock cash during retirement, but it can be an expensive way of achieving this.

What is asset allocation?

Investments come in all shapes and sizes. Asset allocation is the process of deciding how and where portions of your investments go. It is about creating the best mix of investments to achieve a goal.

Different factors will help you and your financial adviser decide how to allocate and target investments. Time is often a consideration, as is how much risk you want to take. In the simplest of terms, asset allocation makes sure that you do not put all of your eggs in one basket.

How do trusts work?

We all have assets (a home, an ISA, cash in the bank, a valuable watch). A trust is a way to hold assets on behalf of others when they might not be able to manage their own affairs. It is a legal arrangement where someone is allowed to make financial decisions for someone else.

One key benefit of using a trust is to help minimise inheritance tax. A trust can also reduce the time and usual costs of transferring assets to named relatives after someone in the family dies.

Understanding financial jargon

Do you struggle to understand some of the financial jargon you see in the press and on the Internet?

If so, you are not alone. There are hundreds of more terms to think about. We try to break through barriers so that money, investing and wealth is easier to understand.

Logic Wealth Planning works hard to offer wise words about money without using too much jargon.

Just call 0808 1234 321 or email if you’d like experience that kind of approach to wealth planning.