Investment world needs to lose the jargon

The use of jargon in the investment world is putting people off getting into investing according to research from Saga Investment Services.

Investment world needs to lose the jargon

A Financial Conduct Authority (FCA) market study into the asset management industry, published in November, found that in some cases too much jargon was used which customers could not understand.  This prompted Saga Investment Services to survey over 11,500 over 50s.

The study reveals that whilst many are savvy, some struggle to understand even the most commonly used jargon, indicating that the industry has much to learn about the way it talks to its customers.

The survey asked people to explain a range of common investment terminology such as SIPPS (self-invested personal pensions), asset allocation, returns and OEICs (open ended investment companies).

Whilst 86% of people knew what a SIPP was just 59% knew that a defined benefit pension was a company pension paying a set amount when you retire – one in ten thought this was the amount of money you get from your state pension.

While two thirds of people knew that asset allocation is the mix of different investments you choose to hold, one in five thought it was the amount of an investment you are able to buy.

Over 50s are much more knowledgeable about income drawdown – with 92% understanding this meant taking an income from your pension while it was still invested. ISA is also well understood, with 93% of people correctly saying it stands for an individual savings account.


There is some confusion when it comes to the money you make on investments. Whilst 86% knew that a return is the amount you make on an investment, 14% described this as the interest rate on your investment.  Of course investments can go up or down; they do not have an interest rate like a simple cash savings account. This indicates that people need to be given better explanations about how invested money grows.

The Saga survey showed that there were large differences in understanding between the generations and between the sexes.  Whilst just under half of people overall understood that an OEIC stands for open ended investment company, men (53%) were much more likely to know this than women (43%).

Surprisingly just 39% of people in their 50s knew this term, compared to 46% of people in their 60s which indicates that people tend to get more confident with investing the closer they get to retirement.

Similarly, three quarters of men knew that AIM stands for alternative investment market, compared to 56% of women.

“The investment industry has often come under the spotlight for being confusing about charges, but now we are able to reveal that even the terminology is off-putting for many people,” said Sally Merritt, head of product , Saga Investment Services.

“This is an unintended consequence of the way the industry has developed over the years. Financial services can be complex, but it’s down to providers to make things as clear as possible.”

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