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Financial Studies - Year 1 > Unit 2 Topic 2 > Flashcards

Unit 2 Topic 2 Flashcards

(68 cards)

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1
Q

What is the annual exempt amount?

A

The annual tax-free allowance for capital gains tax.

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2
Q

Annuity
When is it used?

A

A financial product that pays a regular guaranteed income in return for a lump sum paid to the product provider.
Used by people when they retire.

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3
Q

Assets

A

Things that a person or business owns.

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4
Q

Name 3 types of bonds

A

Corporate bonds
Government bonds
Savings bonds

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5
Q

Capital gains tax

A

A tax payable in the gain (profit) made when you sell or give away an asset, for example property or shares.

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6
Q

Capital Growth

A

An increase in the market value of an investment, over and above the amount the investor paid for it or paid into it.

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7
Q

Capital sum

A

The total amount borrowed or saved/invested, before the addition of interest.

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8
Q

Cash ISA

A

An account that pays interest tax-free on cash savings up to a certain level.

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9
Q

Children’s bond

A

An investment bond taken out by a parent, legal guardian or (great) grandparent of a child under the age of 16.

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10
Q

How long was the investor guaranteed interest for on a children’s bond?

A

5 years, after which the Bond matured.

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11
Q

Collective investments

A

Investment products such as unit trusts or open ended investment companies (OEICs) that let many retail investors pool their money together.

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12
Q

Commodity

A

Goods that share the same characteristics wherever they are produced and whoever produces them.

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13
Q

Corporate bond

A

A product that companies can use to borrow money over periods of five years or more.

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14
Q

Corporation tax

A

A tax levied on the taxable profits of limited companies and some other organisations.

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15
Q

Credit union
What must members share?

A

A mutual organisation that provides a range of financial products to members.
Members must share a common bond.

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16
Q

Diversification

A

Spreading investments across a range of different products, funds or types of assets so as if to reduce the potential impact of any doing particularly badly.

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17
Q

Dividend

A

A payment of profits from a company to its shareholders, often at twice yearly intervals, either as cash or as further shares or requisition of shares.

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18
Q

Endowment policy
What time frame are they usually used to save over?

A

An insurance product that pays out a lump sum after a specified term or if the insured person dies before the end of the term.
Often used as a way of saving over the longterm.

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19
Q

Final salary scheme
What have these largely been replaced by?

A

A type of occupational pension that pays an income related to the amount of the last salary an individual earned before retirement.

Money purchase schemes.

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20
Q

Friendly society

A

A mutual organisation that offers its members a wide range of financial products.

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21
Q

what is the FTSE 100?

A

The Financial Terms Stock Exchange Index, known as the ‘footsie’.
An index of the share price of the 100 companies with the highest ‘market capitalisation’ listed on the London Stock Exchange.

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22
Q

What is market capitalisation?

A

The total value of issued shares.

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23
Q

Gilt
What does it come with?
When can it be traded?

A

A bond issued by the UK government to borrow money.

A redemption date

Between it’s issue and it’s redemption date

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24
Q

Government bond

A

A bond issued by a national government - it is a way for the government to borrow money.

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25
Hedge fund Is this a high or low risk investment?
An organisation that takes in funds from investors such as pension companies, insurance companies and very wealth individuals and invests those funds to try and get a high return. High risk
26
HMRC
Her Majesty’s Revenue and Customs - the organisation that collects taxes on behalf of the government.
27
Income tax
Tax paid on earnings from employment, self-employment and interest on savings.
28
Index-linked
Rising in line with inflation
29
Investment trust
A type of collective investment, which operates as a public limited company. Investors buy shares in the investment trust, and the trust then uses the money from the share issue to trade in the stocks and shares of other companies.
30
Junior ISA
Long term savings accounts set up by a parent or guardian specifically for the child’s future. The child can only access the money once they turn 18 years old.
31
Money purchase scheme What is this also known as?
A type of pension where the employee pays into the plan over their working life. The scheme is invested and provides the employee with the resulting lump sum on retirement. The amount they receive depends on how the scheme has performed. AKA - a ‘defined-contribution’ scheme
32
National Employment Savings Trust (NEST)
A pension scheme run by a public organisation, which aims to ensure that the majority of workers are enrolled in an occupational pension.
33
National insurance contributions
Money deducted from the pay of people who are employed or self-employed and used by the government to fund state pensions and other benefits.
34
NS&I Who are they backed by?
National savings and investments, a provider that is backed by the Treasury.
35
Open-ended investment company (OEIC) fund When does it expand and shrink?
A pooled collective investment vehicle which is a cross between a unit trust and an investment trust. The number of shares issued can vary and be created or liquidated according to the number of buyers and sellers in the market. It expands as people invests and shrinks as people withdraw their money.
36
Pension
An income that people receive after retiring from work.
37
Personal pension plan Is there any tax relief on the payments made into this plan?
Long-term money-purchase products provided by banks, Insurance companies and other providers to help customers build up a pot of money they can use to buy an income when they retire. Yes
38
Portfolio
The combination of long-term savings and investments products chosen by any particular investor.
39
Return
The amount of money gained or lost on an investment relative to the amount invested. AKA the rate of return (ROR) or return on investment (ROI).
40
Savings bond
A savings product held for a fixed period e.g two years. The holder can only make a limited number of withdrawals, or none at all, during that period without incurring a penalty.
41
Shares
Investments that represent part-ownership of a company.
42
Stock exchange
A formal marketplace for the trading of shares and other investments.
43
Tax relief
An amount deducted from annual income to reduce the amount in which an individual must pay tax.
44
Tax return
A tax form completed annually by people in certain situations (e.g self-employed people). It sets out details of income and expenditure and allows the taxpayer or HMRC to calculate the amount of tax and NI contributions owed.
45
Term assurance
An insurance plan that runs for a fixed period of time and pays out a lump sum if the insured person dies during the term.
46
Unit trust
A type of collective investment, the most common form in the UK.
47
Volatility
When the value of an investment varies often and widely.
48
Name two ways in which people can use their savings or investment funds when they mature in the future
They can hope for capital growth They can use their fund for income
49
Name 3 features of an investment project
Medium/long term Higher risk Returns are higher
50
Name as many providers of long term savings and investment products as you can (aim for at least 3)
Banks Building Societies NS&I Post offices Friendly societies Insurance companies Investment companies
51
Name the four main categories of investment products
Stocks and shares Property Corporate and government bonds Stocks and shares ISAs
52
Name five features of stocks and shares
Bought from the stock market Part ownership of a company Prices may rise or fall Sellable Can earn dividends
53
Name four features of stocks and shares ISAs
Transferable Flexible Allows you to put money into different types of investments Long-term
54
Name four features of corporate and government bonds
Traded on a financial market Values fluctuate Backed by the faith and credit of issuing government Many pay semi-annual interest payments until they mature
55
Name three features of ‘properties’
Risky as prices may fall Prices tend to rise in long-term Included in someone’s investment portfolio
56
Name two investment funds offered by FSP’s
Collective investments Pensions
57
Name an advantage of a collective investment firm
Their risk is reduced because the fund invests in a large number of different types of company The cost of hiring the services of a skilled fund manager is shared among all the investors There’s a wide choice of investment funds and collectives which cater for all types of investors, preferences and risk profiles
58
Name four features of a unit trust
Value of investment or income from a unit trust may fluctuate Accessible Regulated by FCA Managed by a professional
59
Name four features of an investment trust
Not utilised funds Public limited companies Allowed to borrow money (unlike unit trusts) Must buy shares to invest
60
Name four features of an OEIC
Managed by an unauthorised corporate director Tax benefits Medium to long term Value to fluctuate
61
Name four features of an endowment policy
Tax benefits Low risk Flexible No surrender value
62
Name three features of an annuity
Tax benefits Guarantees a source of income for fixed amount of years after retirement/until death May be index linked
63
Name three features of a final salary scheme
Usually backed by a sponsoring employer Provides valuable benefits Based on an average of your salary throughout your career
64
Name four features of a money purchase scheme
Employers make regular payment Pays over woking life Amount depends on how the scheme’s performed Provides lump sum at retirement
65
Name two features of a personal pension plan
No maximum limits on the amount of income you can take Tax relief at basic rate of income tax
66
Explain the concept of ‘auto-enrolment’
Programmes where citizens are automatically included in a pension scheme unless they opt out.
67
Name two features of the state pension
Increases to compensate inflation Provides regular taxable income for rest of life
68
Name three features of capital gains tax
Can be short it long term Tax levied on gain that amount received Applies to most assets, excluding cars, homes, other personal possession less than £6,000

Financial Studies - Year 1 (22 decks)

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