2. Deposit-based

Question 1

Who are considered building society members (2) and who is not (1)

Answer 1

Share account holders
Mortgage borrowers

Deposit account holders are not, but take higher precedence on winding up

Question 2

What is the income level used to determine income tax bands and how is it calculated?

Answer 2

Net adjusted income

Gross income deducted by:
- trading losses
- pension contributions
- gift aid
Then add savings income

Question 3

Key features of premium bonds (2)

Answer 3

Monthly draw for tax free prizes £25 - £1m

Min investment £25 then £10 multiples, max £50k

Question 4

Key features of NS&I income bonds (4)

Answer 4

Variable monthly interest
Can invest £500 - £1m
Taxable as savings income
Initial period of 10yrs but can be cashed in without penalty

Question 5

Key features of Direct ISA (2)

Answer 5

Invest £1 - ISA limit (£20k)
Interest is tax free

Question 6

Key features of NS&I Direct Saver (2)

Answer 6

Invest £1 - £2m
Interest taxable

Question 7

Key features of Junior ISA (4)

Answer 7

For 16-18s or parents/guardians on behalf of U18s
Invest £1 - JISA limit (£9k)
Interest is tax free
Converts to cash ISA @ 18

Question 8

Key features of green savings bond (3)

Answer 8

3yr fixed interest bond
£100 - £100k
Interest paid at end of Y3 and taxable then

Question 9

Key features of NS&I guaranteed growth bond (3)

Answer 9

1yr fixed interest
£500 - £1m
Interest paid on maturity and taxable

Question 10

Key features of NS&I guaranteed income bond

Answer 10

1yr fixed interest
£500 - £1m
Interest paid monthly and taxable

Question 11

Key features of NS&I Investment Account (4)

Answer 11

Not marketed, available by request
Postal only
£20 - £1m
Interest variable, paid annually and taxable

Question 12

Describe a credit union (2)

Answer 12

Financial cooperative run for benefit of members
Owned by members linked by “common bond”

Question 13

What are the criteria for becoming a credit union member? (3)

Answer 13

16+ (kids can be juvenile but not full member)

Meet requirements of common bond

Pay any entrance fee and buy at least £1 share

Question 14

Other key features of credit union (4)

Answer 14

All members are equal regardless of shareholding

Run by volunteer board elected at AGM

Authorised + regulated by FSA and subject to FSCS

Most provide free life assurance equal to savings/loan balance

Question 15

How do credit union savers earn a return and how is it taxed?

Answer 15

Savers receive share or union’s profits via annual dividend

Treated as gross interest - savings income

Question 16

How are credit union funds used?

Answer 16

Lend to other members
Max 3% monthly interest (1% in NI)

Question 17

How is offshore interest taxed for UK doms and non-doms?

Answer 17

UK res + dom:
Taxable as savings income

UK res non-dom:
Remittance basis (pay charge and lose allowances)

Question 18

What are the charges for using the remittance basis (3)

Answer 18

Resident for:
<7yr - £0
7/9 yrs - £30k
12/14 yrs - £60k

£0 if U18 or unremitted income <£2k

Question 19

When is one deemed domicile and what is the impact?

Answer 19

Resident for 15/20 yrs

Cannot use remittance basis

Question 20

Key features of Sharia law? (3)

Answer 20

Cannot give/receive interest - instead receive share of profits (taxed as interest)

Cannot invest in unethical areas:
- alcohol, tobacco, gambling, porn, banks
- any co deriving 5% income from these
- any firm with gearing >33%

Additional contract law - no major uncertainty of existence, ownership, availability of object, price, delivery