Settle around lake and have fun (4)
I believe the answer is:
play
'have fun' is the definition.
(I've seen this in another clue)
'settle around lake' is the wordplay.
'settle' becomes 'pay' (paying is a kind of settling).
'around' indicates putting letters inside.
'lake' becomes 'L' (geographical abbreviation).
'pay' enclosing 'l' is 'PLAY'.
'and' is the link.
(Other definitions for play that I've seen before include "Scope - entertainment" , "Theatre performance" , "Theatrical performance" , "Theatrical production" , "Freedom of movement" .)