Case Study 2 Aim 1 Flashcards
Additional Info for Aim 1
18 points
Level of income needed in death or illness
Lump sum required in death or illness
Term of cover
Premium of existing protection
Does Sam’s employer offer any benefits
Emergency fund needed
Fund Choices / Asset allocation
Performance of ISA / Pension
Interest Rate of Deposit Account
Return on ISAs
Extent of ethical preferences
CFL
Expected Inheritance
Current Expenditure / Cash Flow Modeller
Willing to transfer assets between them
Willing to use ISA allowances
Objectives for investments
Planned retirement age / BR19
Why should they consider Lifetime ISAs
8 points
Can invest 4k pa and have 16k remaining ISA allowance
Government bonus of 25%
Can use for retirement
Not linked to earnings
Can invest up to age 50
Tax-Free growth
Wide fund choice
Can access at 60 without penalty
Why might Lifetime ISA not be suitable
7 points
Limited contributions
Already own home
No tax-relief / bonus is less than HRT relief
Cant withdraw until 60 withouit penalty
Charges to setup
Can only contribute to age 50
Legislation may change
Why should Kerry consider investing in a range of global equity funds
13 points
Global Diversification
Current fund doesnt match ATR
Larger selection of companies
Greater growth prospects
Reduces correlation
She has time for some volatility
Professional Management
May benefit from currency movements
Pound cost averaging
Benefits from volatility
Inflation protection
CFL may increase when back at work
Wide range of funds
Ads and Disads of Global Equity Tracker Fund
8 ads 5 disads
Ads: Low Cost
Run by computer
Matches ATR
Performs in line with index
Geographical Diversification
Liquid
Easy to follow performance
Can track large range of indexes
Disads
Will underperform market slightly due to charges
Tracking error
Perform poorly in falling market
No active management
Lack of control over assets
Risks of Emerging market funds
8 points
Liquidity
Non Systematic
Systematic
Currency
Political Risk
Regulatory Risk
Default Risk
Event Risk
Benefits of Multi-Asset
8 points
Risk matched to ATR
Wide asset range
Diversification
Good prospect for long term growth
Actively Managed
Rebalanced Regularly
Access to specialist investments
Reduces need for reviews
Tax consequences of Collective Investment Funds
8 points
Gains not taxed in the fund
If equity based they can use dividend allowances
Above this dividends taxed at marginal rates
Interest from fixed-interest taxed at marginal rates
They have CGT allowance to use
CGT at 10% for Kerry 20% for sam
Any assignment or fund switch is a CGT disposal
Tax return required / more admin
Drawbacks of Salary Sacrifice
4 points
Money isnt accessible to pension age
May decrease borrowing amount
May decrease employee benefits
May need money with Kerrys lower pay
Recommend and Justify
5 points and justify
Make use of ISA allowances. No IT or CGT
Transfer deposit to kerry. higher PSA. basic rate taxpayer
Sam consider VCT/EIS/SEIS. Income tax relief.Suits risk profile. Tax-Efficient
Transfer some current account into ISAs - Too much emergency fund, interest rates are low. Will use allowance + potentially higher interest rates
Increase pension contributions - Tax relief. Tax efficient. Employer matches contributions. Pound cost averaging
