Investments Topic 2 - Deposit Based Investments Flashcards
What are the tax implications for funds held in offshore investment bonds
No UK tax is taken from this, but gains are treated as income for tax purposes
What does NS&I provide
- Direct ISA
- Direct saver
- Income bonds
- Investment account
- Junior ISA
- Premium bonds
Investment accounts key details (NS&I)
- Variable rate of interest on minimum deposit of £20 (max. of £1m)
- Opened by anyone 16+
- Postal account – withdrawals, deposits and account applications done by post, withdrawals sent a warrant (cheque)
- Interest paid annually on 31 December and is taxable
Premium bonds key details (NS&I)
- Monthly draw for tax-free prizes
- Bought by anyone 16+
- Prize money available is % of total value of bonds issued. There are 2 £1m prizes and more than a million other prizes
- Bond can be cashed whenever for original value
- Minimum purchase price is £25, after the minimum purchases must be in multiples of 10 (max. holding of £50,000)
- Bonds become eligible for prizes after they have been held for a full calendar month after the months they were purchased
Premium bonds key details (NS&I)
- Monthly draw for tax-free prizes
- Bought by anyone 16+
- Prize money available is % of total value of bonds issued. There are 2 £1m prizes and more than a million other prizes
- Bond can be cashed whenever for original value
- Minimum purchase price is £25, after the minimum purchases must be in multiples of 10 (max. holding of £50,000)
- Bonds become eligible for prizes after they have been held for a full calendar month after the months they were purchased
Direct ISA key details (NS&I)
- Cannot accept transfers from other providers’ ISA
- Money withdrawn without penalty
- Same rules as normal ISA
Direct saver key details (NS&I)
- Min. £1 and max. £2m
- Variable interest, credited daily and paid annually
Junior ISA key details (NS&I)
- Set up by parents for kids aged under 18
- When they turn 18, the funds are transferred into a standard NS&I ISA and the child will have full access and control
What 4 NS&I products are unavailable for purchase
- Savings certificates
- Fixed interest certificates
- Index-linked certificates
- Children’s bond
Key features of guaranteed growth bonds
- Lump-sum investment for 1,2,3 or 5 years
- Currently only available to investors with maturing guaranteed growth bonds
- Interest is guaranteed and added to the bond annually but paid at the end of the term
- Interest eligible for PSA and cannot be cashed before the term ends
- At the end of the term, investor can cash out, reinvest into another term, or reinvest into another NS&I product
How to work out grossed up equivalent yield
Divide the rate of savings certificate by your corresponding tax bracket (0.80, 0.60, 0.55)
What is the ‘common bond’ when talking about credit unions
common bond is something that all members will have in common, usually same club, workplace, live in the same area etc. All members must be linked, and they are similar to building societies.
How does a credit union function
Money deposited into a credit union buys the investor shares in the company, and their deposited money is invested into fixed-interest securities providing the members with dividends.
How are credit union ‘dividends’ taxed
Although they are called ‘dividends’ the distribution of money is classed as interest so anything over the PSA is taxed accordingly
Credit unions offer a unique benefit which is
life assurance matched to the amount of loans and balances. This means upon death loans are paid off and a lump sum equal to the member’s share balance will be paid out.
