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Glossary of Financial Planning Terms

Please find below a glossary of financial planning terms to assist you with some of the financial terminology that is used.

An annuity is an investment option that is typically offered by insurance companies that allows the investor to make an up front payment or a series of payments in exchange for periodic payments in the future after interest is accrued. Annuities are often used as a means to guarantee a steady stream of income in retirement. Whilst the principle is the same, there can be variations, annuities in Spain, for example are treated differently than in the UK.

An asset is anything that is owned that has a value assigned to it. Examples include shares, residential property, commercial property, gold, commodities, currency etc.


Bankruptcy occurs when a person or company legally declares that they are not able to pay off the debt that they owe to their creditors. In the majority of cases, the bankrupt party (debtor), voluntarily declares bankruptcy. However, at times, creditors file a bankruptcy petition against a debtor in order to reclaim debts that they are owed.

Basel III
An international agreement governing Banks, principally covering the amount of reserves a bank must hold.

A bond is a type of fixed-income security that is a form of debt. Essentially, when an investor purchases a bond, they are lending funds to the bond issuer. In exchange for lending the funds, the bond issuer then pays interest to the purchaser at specified times, in addition to paying back the principal amount of the bond. Types of bonds include Gilts, T-bonds and corporate bonds.

Capital Gain

A capital gain occurs when an investment is sold for more than it was purchased for. Capital gains are considered to be short-term when the investment was held for less than a year. They are considered to be long-term when the investment was held for more than a year. In most countries there is a Capital Gains Tax (CGT).

Capital Gains Tax
Capital gains are taxed when an investment is sold for more than it was purchased for. Capital Gains Tax varies from country to country and opportunities exist for planning as a result.

Capital Loss
Capital loss occurs when an investment is sold for less than it was purchased for. If you have capital gains and losses within the same tax year, your losses will wipe out taxes on your gains if higher or be subtracted from your gains if lower. For this reason, many investors sell off poor investments at the end of the year to help in canceling out some of their taxable capital gains.


Residence is generally the residence where you have your permanent home or principal establishment and to where, whenever you are absent, you intend to return. It is particularly relevant regarding the law governing inheritance and succession. Care should be taken if you are from the UK as different definitions apply to Domicile in the UK.


An exemption is something that excludes certain things from something else.

Estate Planning
Estate planning is the legal preparation and planning for the distribution of assets and properties owned by an individual both prior and after their death. Estate planning is also known as Inheritance Tax planning. It is particular relevant to expats who may have to deal with more than one inheritance tax regimes.

Final salary pension

The final salary pension is a pension scheme that is set up by employers. At the normal pension age, the staff member will receive a pension income based on a proportion of their final salary times by the number of years in the pension. The final salary pension can be on a contributory or non-contributory basis (i.e. you may or may not have to contribute from your own wages depending on your employer’s policy). Upon retirement age you can also opt for a lower pension income but tax a lump sum payment at retirement if you prefer.

​Inheritance tax
Inheritance Tax is the tax that is usually paid on an estate when somebody dies. It is also sometimes payable on trusts or gifts made during someone’s lifetime.To find out more click Inheritance Tax Planning.

Insurance is a contract that is intended to safeguard an individual against loss or future expenses in exchange for periodic payments called premiums. Insurance policies can be purchased for variable purposes such as health expenses, disability, automotive, travel, home, life insurance, and more. It is important that you shop around to make sure that you are getting a good rate from a financially secure company.

Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income, or appreciation of the capital value of the instrument. There are many forms of investment, some of which are tax efficient investments.

Life insurance

Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual’s or individuals’ death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount (at regular intervals or in lump sums).

A liability is an obligation owed to another party. For instance, if you have a home mortgage, it is considered to be a liability.

Expat Medical Insurance

If you are ill or need medical treatment as a result of an accident, not all countries provide the same level of medical care. In some countries, the care is available but is very expensive. Consequently, a number of insurance companies have policies that will allow you to have private treatment, often in a private room or ward and often much more quickly than through the state system. Some companies also have policies where you can be flown to your home countries.


Pensions consist of two parts, the accumulation of a pension fund and then the payment of a pension in retirement. Pensions are a type of savings plan. How much you need in your pension fund will depend on your lifestyle. In some countries the money you build up has to be used to buy an annuity. Most pensions allow you to take a lump sum at retirement. In some countries this is a tax free lump sum whilst in others it is taxed. However, a Qualifying Recognised Overseas Pension plan is an international pension plan.


Qualifying Recognised Overseas Pension Scheme (QROPS). Advice about this type of pension is given at this ​QROPS​ link.

QROP rules
For a QROPS to be successful for YOU and your family you must take into account all of the following elements. If you do not receive proper advice on ALL these elements BEFORE you move your pension the chance of you having a successful QROPs will fall. There is therefore a list of rules that have to be abided before it is successful. Follow this link for an easy to follow guide on ​QROPS rules.


Person or entity that owns shares or equity in a company. The person is entitled to the dividend proceeds if the directors declare a dividend.

Tax Exemption

A tax exemption allows a certain amount of income or other value to legally avoid taxation.

An appointed person or institution that manages assets for the benefit of someone else. Trustees are tend to be trust corporations or trust departments of commercial banks that manage the assets for a fee based on a percentage of the size of the trust (usually under 1%).


A process for calculating the monetary value of an asset. Valuation is subjective and results in wide disparities for the values of most assets.










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