LP2 Flashcards
(183 cards)
1
Q
What is the purpose of life assurance?
A
To provide money to someone’s family if they die during the policy term.
2
Q
What is term assurance?
A
Life cover that pays out only if the person dies within a set time.
3
Q
What is whole of life assurance?
A
A policy that pays out whenever the person dies, no matter when.
4
Q
What is decreasing term assurance for?
A
To cover a repayment mortgage. The payout reduces over time.
5
Q
What is level term assurance?
A
A policy with a fixed payout amount during the term.
6
Q
What is critical illness cover (CIC)?
A
Pays a lump sum if the person gets a serious illness listed in the policy.
7
Q
What is income protection insurance (IP)?
A
Pays a monthly income if someone can’t work due to illness or injury.
8
Q
What is family income benefit?
A
Pays a regular income to dependants if the policyholder dies.
9
Q
What’s the main feature of a joint life policy?
A
It covers two lives but pays out only once, usually on the first death.
10
Q
What is a waiver of premium?
A
Covers premium payments if the policyholder is too ill to work.
11
Q
What is an investment bond?
A
A lump sum investment in a life insurance wrapper.
12
Q
What is a cash ISA?
A
A savings account with no tax on the interest earned.
13
Q
What is a stocks and shares ISA?
A
An investment account with no tax on capital gains or dividends.
14
Q
What is the ISA limit for 2024/25?
A
£20,000 per person.
15
Q
What is a collective investment?
A
A pooled fund from many investors, professionally managed.
16
Q
What is an OEIC?
A
Open-ended investment company that issues or cancels shares as needed.
17
Q
What is a unit trust?
A
A collective investment where investors buy units in a pooled fund.
18
Q
What is diversification in investing?
A
Spreading money across different assets to reduce risk.
19
Q
What is liquidity in investments?
A
How quickly an investment can be turned into cash.
20
Q
What is capital risk?
A
The risk that an investment could lose value.
21
Q
What is income risk?
A
The risk that the income from an investment may reduce or stop.
22
Q
What is inflation risk?
A
The risk that returns won’t keep up with rising prices.
23
Q
What is interest rate risk?
A
The risk that changes in interest rates will affect investment value.
24
Q
What is market risk?
A
The risk of losing money due to market fluctuations.
25
What is a pension wrapper?
A tax-efficient way to save for retirement.
26
What is auto-enrolment?
A rule where employers must put eligible workers into a pension scheme.
27
What is a defined contribution pension?
Pension value depends on contributions and investment performance.
28
What is a defined benefit pension?
Pays a fixed retirement income based on salary and service.
29
What is a SIPP?
Self-Invested Personal Pension with control over investments.
30
What are annuities?
Products that turn a pension pot into a guaranteed income.
31
What is pension drawdown?
Withdrawing money from a pension while the rest remains invested.
32
What is a master trust pension?
A large pension scheme for multiple employers, run by a board of trustees.
33
What are lifestyle investment strategies?
Funds that reduce risk as retirement approaches.
34
What is a stakeholder pension?
A low-cost pension plan with capped charges.
35
What is annual allowance for pensions?
The maximum amount you can pay into pensions each year with tax relief.
36
What is carry forward?
Using unused pension allowances from the last 3 years.
37
What is a basic rate tax relief?
Government adds 20% to your pension contribution if you're a basic rate taxpayer.
38
What is tapering of annual allowance?
High earners may get a reduced pension allowance.
39
What is a beneficiary in life assurance?
The person who receives the payout if the insured dies.
40
What is a trust in life insurance?
Legal arrangement to pass life policy benefits outside of the estate.
41
What is an inheritance tax advantage of trusts?
The payout doesn't count as part of the estate for IHT.
42
What is underwriting in insurance?
Assessing the risk of insuring a person.
43
What is a premium loading?
An increase in premiums due to higher risk (e.g. health or job).
44
What is an exclusion in a policy?
Something the insurance will not cover.
45
What is a sum assured?
The amount of money paid out by the policy.
46
What is an index-linked policy?
A policy where the payout rises with inflation.
47
What is a reviewable premium?
Premiums that can be changed by the insurer over time.
48
What is a guaranteed premium?
Premiums that stay the same for the life of the policy.
49
What is an equity investment?
50
What is a bond?
A loan to a company or government that pays interest.
51
What is a gilt?
A bond issued by the UK government.
52
What is a corporate bond?
A bond issued by a company.
53
What is credit risk in bonds?
The risk that the issuer won't repay the bond.
54
What is a fund manager?
A person or team who chooses how to invest pooled money.
55
What is a fund fact sheet?
A document showing key details about an investment fund.
56
What is the Financial Services Compensation Scheme (FSCS)?
Protects customers if a financial firm fails.
57
What is the role of the FCA?
To protect consumers and keep markets honest and fair.
58
What is the PRA?
Prudential Regulation Authority - oversees financial strength of firms.
59
What is a financial adviser?
Someone who gives personal financial advice.
60
What is an execution-only service?
A service that carries out trades but gives no advice.
61
What is a tied adviser?
Can only recommend products from one provider.
62
What is a whole-of-market adviser?
Can recommend products from across the market.
63
What is suitability in advice?
Making sure the advice matches the client's needs.
64
What is a fact-find?
A document used to gather client information.
65
What is capacity for loss?
How much loss a person can afford without serious impact.
66
What is attitude to risk?
A person's comfort level with financial risk.
67
What is a key features document?
Summarises a financial product in plain language.
68
What is a cancellation notice?
Gives time to cancel a financial product after buying it.
69
What is an authorised firm?
A company allowed by the FCA to sell financial products.
70
What is a product provider?
A company that creates and sells financial products.
71
What is a wrap platform?
A service that lets people manage many investments in one place.
72
What is rebalancing?
Adjusting investments to maintain a target mix.
73
What is pound cost averaging?
Investing a fixed amount regularly, which can reduce average costs.
74
What is an open market option (OMO)?
The right to shop around for a retirement income.
75
What is a death benefit?
Money paid out when a policyholder dies.
76
What is a policy term?
The length of time the policy is active.
77
What is a beneficiary nomination?
Telling the provider who should get the payout.
78
What is lapse in insurance?
When a policy ends due to missed payments.
79
What is a savings account?
An account that earns interest and is safe but low return.
80
What is compound interest?
Earning interest on both the money saved and the interest earned.
81
What is a fixed-rate bond (savings)?
Pays a set interest rate for a fixed time.
82
What is an easy access account?
You can take money out anytime without penalties.
83
What is a regular saver account?
Requires monthly payments and often pays higher interest.
84
What is FSCS protection for savings?
Covers up to £85,000 if a bank goes bust.
85
What is a budget planner?
Tool to track income and spending.
86
What is a financial goal?
A target for saving or investing (e.g. house deposit).
87
What is risk profiling?
Assessing someone’s ability and willingness to take risk
88
What is an authorised firm?
A company allowed by the FCA to sell financial products.
89
What is a product provider?
A company that creates and sells financial products.
90
What is a wrap platform?
A service that lets people manage many investments in one place.
91
What is rebalancing?
Adjusting investments to maintain a target mix.
92
What is pound cost averaging?
Investing a fixed amount regularly, which can reduce average costs.
93
What is an open market option (OMO)?
The right to shop around for a retirement income.
94
What is a death benefit?
Money paid out when a policyholder dies.
95
What is a policy term?
The length of time the policy is active.
96
What is a beneficiary nomination?
Telling the provider who should get the payout.
97
What is lapse in insurance?
When a policy ends due to missed payments.
98
What is a savings account?
An account that earns interest and is safe but low return.
99
What is compound interest?
Earning interest on both the money saved and the interest earned.
100
What is a fixed-rate bond (savings)?
Pays a set interest rate for a fixed time.
101
What is an easy access account?
You can take money out anytime without penalties.
102
What is a regular saver account?
Requires monthly payments and often pays higher interest.
103
What is FSCS protection for savings?
Covers up to £85,000 if a bank goes bust.
104
What is a budget planner?
Tool to track income and spending.
105
What is a financial goal?
A target for saving or investing (e.g. house deposit).
106
What is compound interest?
Earning interest on both the money saved and the interest.
107
What is a fixed-rate bond (savings)?
Pays a set interest rate for a fixed time.
108
What is an easy access account?
You can take money out anytime without penalties.
109
What is a regular saver account?
Requires monthly payments and often pays higher interest.
110
What is FSCS protection for savings?
Covers up to £85,000 if a bank goes bust.
111
What is a budget planner?
Tool to track income and spending.
112
What is a financial goal?
A target for saving or investing (e.g. house deposit).
113
What is risk profiling?
Assessing someone's ability and willingness to take risk.
114
What is asset allocation?
Dividing investments across different types of assets.
115
What is reinsurance?
When an insurer transfers some risk to another insurer.
116
What is an adviser charge?
Fee you pay to a financial adviser.
117
What is a cooling-off period?
Time when you can cancel a financial product without penalty.
118
What is gross interest?
Interest before tax is deducted.
119
What is net interest?
Interest after tax is taken out.
120
What is a trust deed?
Legal document setting up a trust.
121
What is a discretionary trust?
Trustees decide how to use the money in the trust.
122
What is a bare trust?
Beneficiary has full rights once they're 18.
123
What is probate?
The legal process for dealing with a deceased person's estate.
124
What is an estate in financial terms?
All a person's assets and debts at death.
125
What is capital gains tax (CGT)?
A tax on profit when you sell something that's increased in value.
126
What is the CGT annual exempt amount (2024/25)?
£3,000 for individuals.
127
What is income tax?
Tax on earnings from work, savings, or investments.
128
What is a personal allowance?
Amount you can earn before paying income tax (currently £12,570).
129
What is dividend allowance?
£500 of dividend income is tax-free (2024/25).
130
What is the basic rate of income tax?
20% on income from £12,571 to £50,270.
131
What is the higher rate of income tax?
40% on income from £50,271 to £125,140.
132
What is the additional rate of income tax?
45% on income above £125,140.
133
What is a non-taxpayer?
Someone whose income is below the personal allowance.
134
What is tax relief?
Reduces the amount of income tax you pay, e.g., on pension contributions.
135
What is inheritance tax (IHT)?
Tax on the value of your estate when you die.
136
What is the IHT nil rate band?
£325,000 (2024/25).
137
What is the residence nil rate band?
Up to £175,000 extra if leaving home to direct descendants.
138
What is a potentially exempt transfer (PET)?
A gift that may become tax-free if you live 7 years after giving it.
139
What is a chargeable lifetime transfer?
A gift that may incur tax immediately, e.g. into some trusts.
140
What is taper relief?
Reduces IHT on gifts made 3-7 years before death.
141
What is a gift with reservation?
A gift that still counts in your estate if you benefit from it.
142
What is domicile for tax purposes?
Your permanent home affects tax treatment of overseas.
143
What is domiche for las purposes?
Your permanent home, affects tax treatment of overseas.
144
What is a discretionary fund manager (DFM)?
Manages investments on a client's behalf, with discretion.
145
What is a model portfolio?
A ready-made mix of investments matched to risk profiles.
146
What is a passive fund?
Tracks a market index like the FTSE 100.
147
What is an active fund?
A fund manager picks investments aiming to beat the market.
148
What is a fund of funds?
Invests in a range of other funds.
149
What is a with-profits fund?
Investments with bonuses and smoothing of returns.
150
What is a guaranteed fund?
Offers a minimum return at the end of a period.
151
What is a hedge fund?
High-risk fund using advanced strategies for big returns.
152
What is gearing?
Borrowing money to invest, which increases risk.
153
What is a structured product?
Combines investments with a set return if conditions are met.
154
What is a tracker fund?
Another name for a passive fund.
155
What is the FTSE 100?
An index of the 100 biggest UK companies by market value.
156
What is the risk of inflation to cash savings?
Inflation reduces the real value of savings.
157
What is real return?
Return after inflation is taken into account.
158
What is nominal return?
The stated return, not adjusted for inflation.
159
What is volatility?
How much an investment's value goes up and down.
160
What is financial resilience?
Your ability to cope with financial shocks like job loss.
161
What is emergency savings?
Money set aside for unexpected costs (usually 3-6 months' expenses).
162
What is budgeting?
Planning your income and spending to stay in control.
163
What is a credit score?
Showing how likely you are to repay debt.
164
What is debt consolidation?
Combining debts into one loan for easier management.
165
What is APR?
Annual percentage rate - total cost of borrowing money.
166
What is a mortgage?
A loan to buy property, secured on the home.
167
What is a repayment mortgage?
You pay interest and part of the loan each month.
168
What is an interest-only mortgage?
You only pay the interest - must repay the loan separately.
169
What is a fixed-rate mortgage?
The interest rate stays the same for a set time.
170
What is a variable-rate mortgage?
Interest can go up or down.
171
What is a tracker mortgage?
Follows the Bank of England base rate.
172
What is an offset mortgage?
Links savings to reduce mortgage interest.
173
What is a buy-to-let mortgage?
For properties rented out to tenants.
174
What is loan-to-value (LTV)?
Loan amount as a percentage of the property value.
175
What is an equity release plan?
Lets older homeowners access cash from their home.
176
What is a lifetime mortgage?
Borrowing secured against your home, repaid on death/sale.
177
What is a home reversion plan?
Sell part of your home for a cash lump sum.
178
What is early repayment charge (ERC)?
A fee for repaying a mortgage early.
179
What is a key facts illustration (KFI)?
Shows full mortgage costs and features in a standard format.
180
What is affordability assessment?
Checks if you can afford mortgage repayments.
181
What is credit scoring in mortgages?
Lenders assess how risky it is to lend to you.
182
What is a mortgage offer?
A formal agreement to lend money.
183
What is a valuation survey?
A process to determine the value of a property.
