A4 - Types of Saving & Investment Flashcards
Outline and evaluate the use of an Individual Savings Account (ISA).
It’s a tax-free way to save or invest.
+ Income tax isn’t charged on interest earned & interest rates are slightly higher than in other saving accounts
- Limit on how much money can be placed in an ISA & notice may be required to withdraw funds
Outline and evaluate the use of deposit and savings accounts.
It’s an account where interest is paid on the balance.
+ Interest earned on positive balances & regular deposits encourage good financial habits
- Interest is taxed & has lower interest rates
Outline and evaluate the use of premium bonds.
They are government schemes allowing individuals to save, up to a set amount and with no interest, in bonds and the bond is placed into a regular draw for cash prizes.
+ Can be easily withdrawn & chance to win more compared to interest rates
- No guaranteed return on investment & amount invested loses value due to inflation
Outline and evaluate the use of bonds and gilts.
These are fixed term securities where the individual lends money to companies and governments in return for interest payments.
+ Regular fixed returns & spread risk over markets
- Risk of losing value if the bond falls & interest won’t be received if the issuer can’t make payments
Outline and evaluate the use of shares.
They are investments in businesses in return for equity where the shareholder becomes a part-owner of the business.
+ Share prices fluctuate, possibly high reward & there could be additional benefits of being a shareholder such as decision making depending on size of shares
- High risk from price fluctuation & no guaranteed return on investment
Outline and evaluate the use of pensions.
They are long-term savings plans where individuals make regular contributions through their working life and it’s repaid upon retirement, either as a lump sum or regular payments.
+ Encourages saving for retirement & some policies boost employer contributions
- Pension outcome is difficult to predict & moving jobs may mean different policies, resulting in less value
