Voice dictation on all mobile devices is server based. It all goes to a server. If the server is going to do a good job it's going to store related info (at least temporarily).
If you are already using iCloud, or pretty much any other online service you are already trusting private data to other people's servers. You do realize that all your email is on a server too, yes?
The question is no longer whether you can trust your data to other companies, it is who you are going to trust, and are there sufficient laws and regulations to make sure they stay trustworthy (or pay the penalty).
Or we can become luddites and eschew the whole online thing.
Skippable Opinionating:
Other than the stated reasons of improving their service, Apple has little reason to abuse your trust, and a great deal to lose by doing so. It is not impossible they might do something that stupid; but I'd be suspicious of other companies with far greater incentives before I got too worried about Apple.