CEMAP Final Revision Flashcards
Family Income Benefit Term Insurance
is different from a normal Term Insurance, how?
Instead of giving out a lump sum on death, which can be spent quickly, such policies give a regular income to beneficiaries
How long Family Income Benefit Term Insurance pays out ?
Only until the end of the term, not indefinitely. This also means the insurance provider will pay the least of the policy holder dies in the last year of the plan, and pay the most if one dies at the beginning of the policy.
Can Unit value fall in Unitised with-profit plan?
No, strangely, the unit value cannot fall.
Tax treatment of Insurance policy payout, which was arranged by the employer?
If the policy paid by the employer then is treated as Benefit in Kind,
so income tax liability on an employee for premiums paid as income received,
Plus Insurance Premium tax on premiums
however, no tax is due on claims when needed, and employers can deduct premiums as a business expense”
Tax treatment of Insurance policy payout one received as surrender value?
Policy need to be a Qualifying policy, otherwise tax apply.
“What is the difference between Accident, Sickness, and Unemployment Insurance and Income Protection Insurance?
ASU are generally short-term, generally bought to cover mortgage payments etc, IPI is long-term benefit where benefits are paid until retirement, death, or policy term etc.
Also unemployed is misnomer here, as policies cover protention from redundancy and dismissal only, but not when someone resigns”
“How Income Protection Insurance is different from Family Income Benefit Term Insurance?
Different because term insurance gets paid after death, while this insurance gets paid after sickness, disbility
While both provide long term benefits of regular income to self or survivors”
What else is done by partners in addition to setting out one of three arrangements - Automatic Accrual, Buy-Sell, Cross-Option if a partner dies?
”
A Term Insurance Policy is taken out for each partner and kept in trust, so that remaining partners have the money to buy the shares of deceased partner”
Is FOS membership is compulsory for
all firms authorized under FSMA 2000?
Yes
FOS Compensation limits is
upto £375,000
The intestate person’s share to wife is £270000
POS handles complaints related to personal & occupational schemes or one of them
Both,
PPF does not provide cover to Personal pensions schemes
Is POS decision binding on all parties, what about FOS decision
Yes, the POS decision is binding on all parties. FOS decision is binding on the firm only, not customer.
Do claims about Pensions go to POS?
No,POS only deals with running and administation related complaints. It does not deal with issues relating to sales, marketing, performance and customer services; that is covered by the FCA.
Should the complaint be made to POS directly?
No, first to the Pension Provider, then to TPAS (The Pension Advisory Group, now part of MaPS), and only then to POS
Does the FSCS scheme assists everyone?
The general public and smaller businesses only, NOT larger businesses. Also exclude Channel Island & Isle of Man
FSCS limit for Deposits/money?
85K, in exceptional cases like temproary deposits, upto £1m is covered. Compesnation is given per person and per account so could be £170,000 for joint account holders
FSCS limit for
Protection-related insurances & Pension annuities,
100% of cover with no limit
FSCS limit for
Non-protection insurance, other insurance & brokers
90% of cover with no limit
EPA/LPA must be registered with?
and can’t be revoked without permission from?
Registered with - OPG (Office of Public Guardian)
Revoked by - Court of Protection
EU Money Launder Directive says the state must keep a register of beneficial owners who control how many shares in any legal entity.
Beneficial owners are those who own 25% share
Customer Due Diligence CDD must happen for all new clients.
”
All NEW Clients (e.g opening account, selling a new policy etc) OR any change in the circumstances of existing client relationship
Transaction limits for CDD, money transactions, insurance premiums, Art transactions, Let properties, Pre-paid cards, and Remote payments?
Euro (10,10) (10,15) (10, 25) (50,150) rule
Euro 15000 - single or a series of transactions
Euro 10000 - for Business trading in goods/services)
Life insurance premiums exceeding
Euro 1000 annual, or Euro 2500 single transaction
Art transaction over Euro 10K, let properties with more than Euro 10k rent per month
Pre-Paid card (like ICICI travel abroad card) storing more than Euro 150/month. And remote payments above Euro 50.
To whom GDPR data breach should be reported?
Information Commissioner
Consumer Credit Act not only covers general consumers but also?
Sole Traders
Small Partnerships (upto 3 partners)
Unincorporated associations
Extended coverage to - suppliers
Dept Counselling Service
Debt administration services
Credit information services
“
Consumer credit act does not cover?
HNI
Unfair Relationship Test?
to cover existing and new loans,
which allowed borrowers to
challenge the agreement as being Unfair in court
Notice periods to terminate a Consumer Credit Agreement for lender and borrower?
Borrower - 30 days
Lender - 60 days PLUS explanation
Payday lender limits?
Payday multiply 0.8 x 15 =100 rule
“Interest and fees charged must not exceed 0.8%/ day
default fees cannot exceed £15,
and borrowers must never be required to repay more than
100% of the amount borrowed by way of fees and charges”
FCA does not regulate
Foreign Currency Exchange
Investment advisors must complete their remaining qualification modules within how many years
4 years
How long training records are kept until one resigns or changes role?
Trai(n)(in)g NMOP rule
1) Non-Mifid - 3 years
2 Mifid - 5 years
3) Pension - Indefinitely
Solvency, Leverage, Cap Adequacy for Opertation risk ratios, and TLAC ratio?
10 3 15 18 rule
Solvency - 10.5% Cap/Assets
Leverage - 3% Cap/Assets
Cap adequacy for op risk - 15% Cap/Income”
TLAC - 18% capital and leverage ratios
Solvency Ratio as a concept?
A capital adequacy measure which is about min capital required to ensure the business is sustainable, measured by Solvency Ratio.
Assets value is risk-adjusted, e.g. gilts with zero risk are treated differently to other risky assets”
EU Solvency Directive II is mainly aimed to ?
reduce the risk of Insurance companies
Suitability report is optional for?
Mortgages
What kind of advice is offered for Stakeholder products?
Basic advice is sufficient
Apart from Investment Advisors, who else cannot claim commission from suppliers?
Personal pension scheme advisors, as they have investment element in it
KID is a must in what kind of products?
where amount payable back to customer may fluctuate
KID vs KIID
UCITS use similar document called KIID, which contain synthetic risk/reward indicator
Right to cancel does not apply to which policies?
Key - Short duration policies of 1 6 months
Travel policies - less than 1 month
Pure protection policies - less than 6 months
Pure protection policies - effected by trustees or employers
Cooling off periods
14 - 30 Cool LPPy
- all 14 days, except 30 days for Life, Pension, Protection policies “
Jail terms
2 5 10 15 (€20m,4% rule)
A reckless statement, or failure to follow rules
Tipping Off
Bribery
Actual Money laundering
GDPR
Long-term investments - Guilts, PIBS, Bonds - are they CGT-free?
Yes, but regular incomes are taxed as Savings income (subject to allowances)_ for all investment types, Guilts, PIBS, Bonds, T-Bills, CoD, Commerical paper
Names of Short-term investments offered by Govt, Banks/Building Societies & Corporate, and what are their time durations?
T Bills (30,60, 90 days)
CoD (90, 180 days)
Commercial Paper (5-45 days)
The limit on pension contribution is £40k per year, can it be carried forward if unused?
Yes, upto three years £120k
How many days allowed to respond to a complaint, for business and FCA?
FCA for super complaints - 90 days
Business - 8 weeks (but only 15 days for Payment Service)
Mortgage provider days limit for 1) allowing a customer to consider contract terms 2) informing the customer he is in arrears
Contact review - 7 days
In arrears - 15 days
Are complaints records shared with FCA?
Yes, every 6 months, As customer is the main FCA focus
For what minimum period must the firm keep a record of the complaint made
Key - Co(m)pl(a)i(u)ts are odd 3 5 7
“Records must be kept for
All firms - Min 3 years
UCITS - 5 years
MiFID - 5-7 years”
How long a firm must keep records of CDD , to assist in Money Laundering investigation later on
“ID checks must be kept for 5 years AFTER the relationship had ended
Supporting document for 5 years AFTER the transaction has occurred”
Retention of Records
RR 3 5 infinity rule
Pension transfers, OPT-OUTS, FSAVCs (Free Standing AVCs) Lifelong
Pension Contracts, Life policies, MiFID products 5 years
Others including Mortgage 3 years
maximumage for exercising the renewal option on a renewable term assurance policy
65+ (NOT 68)
Claim duration limits of state benefits
SSP (Statutory Sick Pay)
Child Benefit
Disability living allowance
Attendance allowance
SSP (Statutory Sick Pay) 4 days to 28 week -
Child Benefit 0-16 years age, up to 20 but not 20
Disability living allowance 16-68 age
Attendance allowance 68+ age
Deed of variation to a Will must be done within
2 years of death
Key Employee Insurance is generally a Term Insurance of how many years?
of less than 5 years “
Which State Benefits are taxed, and not tax-free
Contri ESA + JSA + Statutory + Carer + State pension
State Pension
Carer Allowance
Contribution Based. ESA
Job Seeker Allowance (JSA)
Statutory Pays (Statutory maternity pay, Statutory Sick Pay)
Which State benefits are means-tested
Income plus Credit buy Council House
“1) Benefits having ‘Income’ in the name, Income-based JSA, Income-related ESA, Income Support
2) Benefits having ‘Credit’ in name, Universal Credit, Income Tax Credti, Child Tax Credit, Working Tax credit
3) Home-related benefits, Council Tax Support, Housing Benefit
VCT/EIS limits on money and min time to remain invested for tax relief of 30%?
EIS is more attractive compared to VCT
VCT - £200000
EIS - 1 million (or £2m if companies are knowledge-intensive)
VCT - 5 years
EIS - 3 years”
Shareholders’ interests are safeguarded by;
Investment Trust?
Unit Trust?
OEIC?
Investment Trust - Directors
Unit Trust - Trustee
OEIC - Depository
these shemes are run by?
Investment Trust
Unit Trust
OEIC
IT - Directors
UT - Trust Manager
OEIC - Corporate Director
Days limit to make Additional Permitted Allowances for ISA
Cash ISA - 3 years from death,
or 180 days from the grant of administration, whichever is later.
Stocks and shares ISA - only 180 days after administration
Help to Buy ISA contribution limits were
could pay 200/month, and govt bonus of £50/month (max bonus limit was £3000 for all years)
What a unit trust is called Equity trust or Income trust?
“Equity trust (60%+ are equities) pays a dividend
Fixed Income Trust (60% are interest-bearing investment) pays Interest”
Friendly Society Plans limits
270, 75, 25 &10 years
very small savings endowment plans (£270 per year, £25/month, £75/quarter) which offer 0% tax benefit on investment returns
Generally set up for 10 years
REIT limits & benefits?
0.5 75 90 10 rule
REITs attract only 0.5% Stamp Duty Reserve tax which is a lot higher when investing directly in Real Estate
No Corporation tax due on Profits”
75% of income must be from Rent
90% of profits must be distributed to shareholders
10% limit on one shareholder can hold the portfolio
Allowable expenses condition for self-employed and employed?
Self Employed are not necessary
For self‑employed people - wholly and exclusively
Employed - “wholly, exclusively and necessarily” “
Qualifying Insurance Policy
75% x 10-year rule
75%
Twice
1) Premiums paid for at least 75% duration for minimum of 10 years
2) Maturity sum payable must be a minimum of 75%+ of the total premiums payable
3) Any one-year premium must not exceed twice of premiums paid over any other year
Minimum year of NI contributions for State Pension - to claim min/max pension
Min 10 Years for any pension
35 years for a full state pension
Rule to get listed on Main Stock Market
25%, 3-year rule
25% capital in public hands, + 3 year trading history
Intestate person assets are allocated in which order
BL>Jwak>Bapu>Lovely>Dada>Chacha>Raja to wife - £270k plus half of rest, remaining half among kids
Within what timeframe, one can make a complaint?
6 months, 6 years, 3 years
6 months of receiving the final response, pr
within 6 years of the event or
within 3 years when the customer becomes aware of the issue
Who can make a complaint?
50, £6.5m, £5 million
any business with less than 50 employees or business/charity with less than a 6.5million turnover/income
Trust assets less than £ 5 million
PLUS any Individual
Credit Union and Building society Accounts, special limits attached for paying dividends/interest or borrowing?
BB CID 5%, £50k, 50% rule
CID - Union can pay Interest or Dividends - if min £50k or 5% of assets are in reserve
BB - Building Society can borrow upto - a max of 50% liabilities”
Pension Auto-enrolment rule by employer?
22 age, £10k salary
Stakeholder Pension limits
1.5%, £20 rule
As it is a pension rule, so 1.5% can be a max charge, and £20 can be min contribution needed
CAT Standard Mortage
2%, £150 rule
With mortgages, % the rate is max above the Bank rate, and £150 is the maximum arrangement fee
Does PPF protect Personal pension schemes
No
Does a joint tenant share get transferred to another party on death, by Wills, etc?.
No, A joint tenancy means both owners technically own 100% of the property, and on one death legal ownership of the property automatically passes to the survivor, regardless of any will or the laws of intestacy.
Innovative Finance ISA is protected under FSCS?
No, Peer-to-peer lendings are not protected
Are Structured Deposits generally for a fixed or flexible term?
Fixed, generally for 10 years.
RNRB is available if someone leaves property to a spouse or descendants or both
Both
RNRB, is it a must for someone to have lived in that property for some time?
Yes, it need not be the main residence but one must have lived in it for some time
Inflation Indexed Gilts and Pension triple-lock guarantees are based on two different types of inflation indexes
CPI is old measure
Triple lock pension - CPI
Inflation Indexed Gilts - RPI
Pension Credit is given over and above State Pension when?
One is solely dependent on state pension only, or have less than £10k in savings)
Two types of ESA and how long they are paid?
One can be put under two groups depending on the disability
Work-related group - those who can get to work (maximum 365 allowances paid)
Support group - one cannot go back to employment (allowance can be paid indefinitely)
When is IHT payable on UK and overseas assets?
IHT is always payable on UK assets.
IHT on overseas assets may NOT be payable if someone is not domiciled. Remember, If IHT applies to all overseas assets always, what is the point of calculating Domicial then?
Unique feature of Credit Union accounts is
Loans are covered by Life Assurance policy
How PSLE, BPEEG related, vertically, and horizontally?
Veritally helps, horizontally works opposite
Which benefits from employers are tax-free?
Share Incentive Plan
Wedding Gifts
Gift aid should be multiplied by 1.25 or 1.20 to work out benefit for donor and charity?
1.25
CGT applies to the sale of domestic or overseas assets too?
Both
Condition for claiming Business Asset Disposal Relief
Must have 5% voting rights/shares in the business to claim relief
Is IHT on Chargable Lifetime transfers is it paid at a reduced rate or a full IHT rate of 40%?
Paid at a reduced rate of 20%
State benefit of Support for Mortgage interest, should it be paid back to govt?
Yes, it is form of a loan
State pension is generally set at what %age of national average earnings?
25%
Which NS&I products are not taxable?
ISAs and Premium products are tax free, everything else is taxed
Are COD bearer securities?
Yes
Out of Structured products, which one is covered by FSCS?
Structured - Yes
Structure ‘Protected’ - No
Structured Capital at Risk - No
Apart from Shared listed anywhere in world, and ITs/OEIC/UTs listed in UK, what else can be help in Stock & Shares ISA?
Individual (not Joint) Life Insurance
Stakeholder medium term investment
Shares from All employee saving schemes
Can spouse/partner claim Additional Permitted Allowance of ISA, even if the deceased left their ISA assets to someone else?
Yes
ADL - activities of daily life include
Washing
Dressing
Feeding
Moving from one room to another
Toilet use
Prepaing Food
Person get up, go to toilet, take shower, change dress, prepate omelte, and eat
What are Evidential provisions?
These are rules that are not binding in their own right but relate to a binding rule. Compliance with an evidential provision will mean the attached rule is being followed by the firm.
What is the position of UK UCITS after Brexit?
Since Brexit, they are called AIM (Alternate Investment Funds) and they need to get passporting rights to get marketed in EU (right is not given automatically)
Does FCA MCOB cover EU mortgages?
No
Money three MoE, UoA, SoV
VAE
1) Medium of Exchange
2) Unit of Account
- against which value of all products can be measured
3) Store of Value
- subject to inflation
Money PADS
Qualities needs for acceptable Medium Of Exchage
PADS
Sufficient in quantity
Acceptable to all
Divisible into small parts
Portable
Money MARG
Four advantages of intermediaries (MARG)
1) Maturity transformation (fund needed for longer term)
2) Aggregation
3) Risk transformantion
4) Geographic location
SONIA
FIs to calculate the interest paid on swap transactions and sterling floating rate notes
Sterling Overnigh Index Average
Managed by BoE, and NOT MPC which is part of BoE. As Sonia is not about monetlary supply or bank rate, so MPC has nothing to do with it
PSNCR
PSNCR
Public Sector Net Cash Requirement
government that has a deficit in budget, need to borrow money to meet the deficit
