Topic 8 Collective Investments Part 2

Question 1

What is a Endowment?

Answer 1

A investment based on life assurance and savings

Question 2

When is Endowment paid?

Answer 2

If the assured person dies or survives the life term

Question 3

The two most common types of Endowment policies are?

Answer 3

• With Profits
• Unit Linked (Riskier)

Question 4

What is a Tax-exempt Savings plan offered by a Friendly Society?

Answer 4

Is similar to a endowment policy but it does not pay corporation tax on it’s investment returns

Question 5

What is the maximum that can be saved per year in a tax-exempt savings plan offered by a Friendly Society?

Answer 5

• £270 per year (lump sum)
• £25 per month
• £75 per quarter

Question 6

How long is the initial phase on a tax-exempt savings plan from a building society?

Answer 6

10 years

Question 7

What is a Investment Bond?

Answer 7

Collect investments on unitised funds from Life Assurance Companies (very different from Unit Trust)

Question 8

How does an investor invest in a Investment Bond?

Answer 8

By paying a lump sum payment to the life company

Question 9

What does an investor receive when they purchase a life policy?

Answer 9

Policy document showing that a policy has been purchased & details of the funds

Question 10

When a investor cashes in an investment bond what do they accept?

Answer 10

• Surrender value of the policy
• Value of units sold on bid price that day

Question 11

• Ease of switching between funds
• Ease of investment & surrender
• Simplicity of documents

Are what?

Answer 11

Advantages of Investment Bonds

Question 12

Investment Bonds are set up as Single Premium, Whole of Life Policy

True or False

Answer 12

True

Question 13

If a person assured in a Investment Bond dies what percentage of the bid value is paid?

Answer 13

101% on the day of death

Question 14

Why is an Investment Bond helpful for basic rate tax payers?

Answer 14

The tax is taken at source at 20% rate so they will not own any tax

Question 15

What is a Qualifying Life Policy?

Answer 15

No tax is payable on death or policy maturity

Question 16

What is a Non-Qualifying Life Policy?

Answer 16

Tax is payable on maturity or death

Question 17

An Investment Bond is a qualifying policy?

True or False

Answer 17

No it is Non-Qualifying because it make a lump sum premium payment

Question 18

Premiums:

Payable for Annually, Half yearly, Quarterly for at least 10 years.

Qualifying or Non-Qualifying?

Answer 18

Qualifying

Question 19

Discontinuation of premium payments:

• Payments ending within 10 years
• Less than 75% of the term if less than 10 years

Qualifying or Non-Qualifying?

Answer 19

Non-Qualifying

Question 20

Sum payable on death

Must be at least at least payable to 75% of the total premiums

Qualifying or Non-Qualifying?

Answer 20

Qualifying

Question 21

Balance of payments

Premiums in 1 year must not exceed twice the premiums in another year

Qualifying or Non-Qualifying?

Answer 21

Qualifying

Question 22

On an investment bond what are higher and additional rate tax payers liable for on any gain of an investment bond?

Answer 22

Tax at the their appropriate rate -20% all ready paid at source

Question 23

What is top slicing?

Answer 23

Is the division of a gain from an investment bond over the policy term

Question 24

Why is top slicing used?

Answer 24

To ensure that the policy holder is not unfairly disadvantage on tax in the year of the gain

Question 25

What is the maximum that can be withdrawn by an investor each year on an investment bond?

Answer 25

- 5% on a cumulative basis - Withdrawals are subject to tax

Question 26

What is a Non-Mainsteam Pooled Investment (NMPI)?

Answer 26

A collective investment schemes that doesn't meet then FCA's investment and Promotion rules

Question 27

- Unit in an Unregulated Collective Investment Scheme (UCIS) - Unit in a qualified Investor scheme - Security issued by a special vehicle - Traded Life policy

Answer 27

Example of Non-Mainstream Pooled Investments (NMPI) set out by the FCA

Question 28

What is an advantage of a Structured Product?

Answer 28

Enable some protection of capital invested while enables investment in higher growth assets

Question 29

What is a Structured Capital-at-Risk Product (SCARP)?

Answer 29

Product that delivers an agreed level of income over a set period

Question 30

What is a Non-SCARP structured investment product?

Answer 30

Promises at 100% return of initial capital if company remains solvent

Question 31

What are the risks of Structured Products?

Answer 31

- Counterparty Risk - Market Risk - Inflation Risk

Question 32

What is a Wrap?

Answer 32

An online account that enables investors to see all their holdings within one place

Question 33

Who normally offers Wraps?

Answer 33

Independent Financial Advisors for a fee

Question 34

What is a Fund Supermarket?

Answer 34

Allows an investor access to a wide range of investment funds for a fee

Question 35

Can an investment trust be accessed by fund Supermarkets

Answer 35

No Fund Supermarkets don't deal with Investment Trusts

Question 36

What is Sustainable Finance?

Answer 36

An investment factor that takes into consideration - Environmental Factors - Social Factors - Governance Factors

Question 37

May limit what an investor can invest in Is a disadvantage of what?

Answer 37

Sustainable Finance

Question 38

Can be seen as progressive and forward thinking and may be more successful than peers Is an advantage of what?

Answer 38

Sustainable Finance

Question 39

What is Green washing?

Answer 39

An investment company making claims or exaggerating about the sustainability of their investment products

Question 40

What are the measures to clamp down on Green washing?

Answer 40

Introducing the following - PS23/16 Sustainability Investment Label - Disclosure Requirements - Restrictions on Sustainable Terms

Question 41

What are Cryptoassests?

Answer 41

-Digital representation of value -Ownership proven using a computer code

Question 42

What happens when a digital wallet is created by a Crypto asset user?

Answer 42

They receive a pair of digital keys. 1 public and 1 private to send and receive transactions

Question 43

How are Cryptoassest transactions recorded?

Answer 43

Using Distribution Ledger Technology (DLT)

Question 44

What is the most common DLT used in Cryptoassests?

Answer 44

Blockchain

Question 45

What is a Blockchain?

Answer 45

Transactions entries called blocks that record transactions

Question 46

What is a "Hash" in relation to a Blockchain?

Answer 46

It links blocks together using a digital fingerprint

Question 47

Are Cryptoassets regulated by the FCA?

Answer 47

No they are not regulated

Question 48

The main Cryptoassets defined by UK Cryptoassets Taskforce are (UKTF) are?

Answer 48

1. Exchange Tokens 2. Utility Tokens 3. Security Tokens

Question 49

Which Cryptoassets type is this? - Means of exchange

Answer 49

Exchange Tokens

Question 50

Which Cryptoassets type is this? - Grant access to current/prospective product - Does not grant same rights as specified investments

Answer 50

Utility Tokens

Question 51

Which Cryptoassets type is this? - Special characteristics that provide rights to specified investments like shares

Answer 51

Security Tokens

Question 52

If a person withdraws 5% from an investment bond is tax payable immediately?

Answer 52

No it is tax deferred until the policy ends or death of the Policy holder

Question 53

What is "Fungibility"?

Answer 53

The ability of Cryptoassets to be exchanged with good or assets of the same kind