Topic 2 - Savings and investment products

Question 1

personal pension plans

Answer 1

• long term money purchase products that help customers build up a pot of money that can be used to buy an income when they retire
• tax efficient as they have tax relief at the basic rate of income tax

Question 2

Auto enrolment and NEST

Answer 2

• where workers are automatically enrolled by their employer into a workplace pension scheme
• NEST: a large trust based signed contribution pension scheme that aims to enrol majority of workers in an occupation pension

Question 3

advantages of NEST

Answer 3

• when people retire, they don’t have to rely solely on the state pension
• open to employers of any size and self employed workers
• single retirement pit which makes it easy for workers to save

Question 4

state pension

Answer 4

• regular payment made by the government to people when they reach state pension age
• current pension age is 66

Question 5

rule of risk and reward

Answer 5

the greater the risk of a product, the higher the rate of return must be offered to investors

Question 6

dividends

Answer 6

• A share of profits made by a company to its shareholders

Question 7

Capital gains tax

Answer 7

• tax on any profit made when some disposes of an asset (selling, giving it away etc)
• annual tax-free allowance is provided