Topic 5 key terms(saving products)

Question 1

AER

Answer 1

definition:annual equivalent rate it’s the interest that will be earned on the money in one year and takes into account how often the provider pays the interest

Question 2

bank rate

Answer 2

definition:the interest rate that the bank of england uses when it lends money to other banks

Question 3

child trust fund

Answer 3

definition:long-term saving account only available to children born between september 1 2002 and january 2 2011,set up by government to encourage parents to start and set up savings for children

Question 4

customer prices index

Answer 4

definition:one of the means the government uses to measure inflation,calculated by checking the price of representative sample of goods on monthly basis

Question 5

coronavirus

Answer 5

definition:caused global pandemic with wide range economic effects

Question 6

financial conduct authority (FCA)

Answer 6

definition:one of the main two regulators of financial services in the uk

Question 7

financial services compensation scheme (FSCS)

Answer 7

definition:compensation scheme that pays compensation to account holders of up to a certain amount per provider if the provider goes into default

Question 8

HMRC

Answer 8

definition:her majesty’s revenue and customs-collects taxes on behalf of the government

Question 9

income tax

Answer 9

definition:tax paid on earnings from employment,self employment and interest on savings

Question 10

individual savings account(ISA)

Answer 10

definition:an account that pays interest tax-free on savings up to a certain level, two types ISA-cash ISA and stocks and shares ISA,junior ISA also available

Question 11

inflation

Answer 11

definition:a rise in prices,purchasing power of money falls

Question 12

instant access account

Answer 12

definition:an account from which the holder can withdraw their money at any time without losing any interest

Question 13

interest

Answer 13

definition:money either paid to an account holder by the provider or charged to the account holder by provider,interest is paid on savings accounts and some current account and charged on borrowing

Question 14

interest rate

Answer 14

definition:the amount expressed as a percentage that financial service provider charges a borrower when it lends money

Question 15

junior ISA

Answer 15

definition:Long-term savings accounts set up by a parent or guardian
specifically for the child’s future,child can only access the money once they turn 18

Question 16

national savings and investment (NS&I)

Answer 16

definition: provider that is backed by the Treasury,governments department that manages UK’s finances

Question 17

notice account

Answer 17

definition: account for which the holder has to tell the provider in advance if they want to withdraw their money

Question 18

personal allowance

Answer 18

definition:amount individual has to earn before they have to pay income tax

Question 19

personal savings allowance

Answer 19

definition:amount of savings interest that can be earned before the
saver pays tax,the amount of the allowance varies according to
how much other income the saver has eamed in the tax year

Question 20

rate of return

Answer 20

definition:the amount a saver gains in interest on their savings

Question 21

retail prices index (RPI)

Answer 21

definition: another ways the government measures inflation is calculated by checking the price of a representative sample of goods on monthly basis,unlike CPI it also takes into account mortgage interest payments and other costs associated with home ownership

Question 22

savings bonds

Answer 22

definition:saving product held for a fixed period,holder can only make limited withdrawals or bone at all in fixed period

Question 23

starting rate band

Answer 23

definition: amount of savings that an individual can earn tax-free if their
total income is less than the personal allowance

Question 24

stocks and shares

Answer 24

definition:investment that gives holder part ownership of a company

Question 25

tax year

Answer 25

definition:known as financial year,tax year runs from 6th April to 5th April following year