Asset classes

Question 1

What are the costs involved with fixed interest

Answer 1

Individual may have to pay dealing and stockbroker costs on buying and selling.

Question 2

What are the costs involved in buying & selling equities

Answer 2

Individual may have to pay dealing and stockbroker costs on buying and selling.
In addition, Stamp Duty/SDRT, POTAM charge may be payable on share purchases.

Question 3

What are the costs involved in buying & selling property

Answer 3

Individual may have to pay various upfront costs such as SDLT, Surveyors Fees and
Legal Fees.
Ongoing costs may include maintenance, repairs and void periods.

Question 4

What is the FSCS protection is applied to cash accounts

Answer 4

Protected by the FSCS up to £85,000 per individual per group.

Question 5

What is the FSCS protection is applied to fixed interest

Answer 5

Not applicable for direct investment.

Question 6

What is the FSCS protection is applied to Equities

Answer 6

Not applicable for direct investment.

Question 7

What is the FSCS protection is applied to property investments

Answer 7

Not applicable for direct investment.

Question 8

what are the dealing / trading options with cash accounts?

Answer 8

Directly with the provider Dependent on account type, but there is a shift in focus to online banking/management. Treasury bills issued through the Debt Management Office
(DMO).

Question 9

what are the dealing / trading options with fixed interest?

Answer 9

Primary market for UK government bonds via the DMO.
Corporate bonds issued from the company.
Secondary markets available for trading
bonds thereafter.

Question 10

what are the dealing / trading options with Equities?

Answer 10

Listed on the LSE or AIM. Primary market allows companies to issue shares to investors for the first time.
Secondary market allows investors to
trade shares between each other.

Question 11

what are the dealing / trading options with Property investment?

Answer 11

Through estate agents or property
management firms.
No exchange for trading of physical
property, but shares in property firms can be accessed through the equity markets.

Question 12

What are the types and options of cash accounts?

Answer 12

Current account
Savings account
Notice accounts
Term deposits
Money market
instruments
National Savings & Investment

Question 13

What are the types and options of fixed interest?

Answer 13

Gilts
Index-linked gilts
Floating rate notes
Repos
Corporate bonds
Convertible bonds

Question 14

What are the types and options of Equities?

Answer 14

Ordinary shares (inc. non-voting and deferred)
Preference shares (inc. non-cumulative,
participating, redeemable and
convertible)

Question 15

What are the types and options of property investments

Answer 15

Residential (buy-to-let) Commercial

Question 16

How accessible and liquid are cash accounts?

Answer 16

Easy access, although term deposits will have minimum periods for withdrawals (and
possible interest penalties).

Rarely barriers to access other than residency and age.
Term deposits may have higher minimums.
Money market investments unlikely to be available to retail investors due to high
entry limits (£500,000 for Treasury Bills).

Question 17

How accessible and liquid are fixed interest securities? (Corporate bonds and GILTS)

Answer 17

Gilts likely to be more liquid than corporate
bonds as market is more responsive and credit ratings are typically higher.

Only available on the primary market to
large institutional investors.
May be accessed by retail investors through the secondary market.

Question 18

How accessible and liquid are Equities?

Answer 18

Depends on how well established the company is and it’s reputation. Some
shares may be highly illiquid and difficult to sell at the right price.

Exchanges and market makers may set
minimums/maximum on the amount of shares that can be bought or sold,
dependent on market conditions at the time.

Question 19

How accessible and liquid are property investments?

Answer 19

May not always be a buyer for every seller, which impacts on the ability to liquidate the asset for the right amount of cash.
Cannot be broken down into smaller units.

Where borrowing is not available or appropriate, physical investment in
property will require a large capital outlay that most investors may struggle to access.

Question 20

What is the taxation situation when investing in cash

Answer 20

Pays regular interest at prevailing rate – paid gross of tax and taxed at 0%, 20%, 40% and 45%.
Tax-free savings allowance of £1,000 and
£500 available to basic and higher rate
taxpayers respectively.

Question 21

What is the taxation situation when investing in fixed interest

Answer 21

Pays regular interest at prevailing rate –
paid gross of tax and taxed at 0%, 20%, 40%
and 45%.
Tax-free savings allowance of £1,000
and £500 available to basic and higher rate
taxpayers respectively.

Question 22

What is the taxation situation when investing in Equities

Answer 22

Dividends paid, dependent on share class
and level of profits.
Paid gross and taxed at 8.75%, 33.75% and
39.35%.
Tax-free dividend allowance of £1,000
available.
CGT may be payable at 10% or 20% on disposal (£6,000 annual exemption available).

Question 23

What is the taxation situation when investing in Property

Answer 23

Rental income paid gross and taxed at
20%, 40%, 45%.
CGT may be payable at 18% or 28% on
disposal (unless the property is principal
residence).