Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

R01 > Chapter 2: Retail consumer > Flashcards

Chapter 2: Retail consumer Flashcards

1
Q

Income tax bands for 23/24

A

0-12570 (0%)
12570-50270 (20%)
50270-125410 (40%)
125410+ (45%)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the key aspects of a KYC

A
  1. Current financial situation
  2. Investment objectives
  3. Client knowledge and understanding
  4. Impact of advice given
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are some main considerations when making recommendations

A
  1. KYC assessment
  2. Recommendations within client risk profile
  3. Considering affordability, suitability, debt repayments, tax
  4. Providing level of service disclosed up-front
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is cashflow modelling used for

A

Analysing a clients situation throughout their lifetime in order to stress test

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are suitability reports

A

Provide background to recommendations and WHY a course of action is being recommended. Justification for decision, advantages and disadvantages, and any needs that are not addressed in the current recommendation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the hierarchy of needs

A
  1. Budgeting
  2. Managing debt
  3. Borrowing
  4. Protection
  5. Savings and investments
  6. Retirement planning
  7. Estate planning
  8. Tax planning
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is MaPS

A

Money and Pensions Service that offers free advice on personal finance - succeeded now by Money Helper

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the three types of expenditure

A
  1. Essential (Mortgage, tax)
  2. Day to day (food, travel, education)
  3. Non-essential (clothes, going out)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are signs of debt problems

A
  1. Use of payday loans
  2. Adding debt to mortgage
  3. Using credit cards to pay bills or taking cash advances
  4. Minimum payments on credit cards
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are debt repayment plans

A

Self managed arrangement where repayments are negotiated with creditors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are debt management plans

A

Involves an adviser who is licensed under the Consumer Credit Act, where the adviser negotiates with creditors and payments are made by the individual to the adviser, who pays the creditor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is debt consolidation

A

Negotiating a new loan of mortgage extension that pays off previous loans and lowers monthly repayments - likely that the repayment terms are longer even if less per month

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is an Individual Voluntary Agreement

A

IVA are where an insolvency practitioner will negotiate the repayment terms with the creditors (creditors get back less than owed) for a 5 year period. This is legally binding and reviewed each year, this avoids ‘bankruptcy`

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is a mortgage

A

Security offered to the lender in exchange for a loan (not the loan itself)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is bankruptcy

A

When debt is 5k+, a creditor will file for bankruptcy of the debtor and a trustee will take control of the debtors assets. Creditors are repaid in a set order and the debtor may lose their home, however bankruptcy is discharged after 1 year where no further liability to repayments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is assignment

A

Transfer of ownership from lender to borrower - usually conducted by registering a charge on the property on the Land Registry. Once the loan is repaid, the assignment ends and the borrower assumes full ownership (equity of redemption)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the Mortgage Market Review

A

MMR came into effect in 2014 and reduced the number of interest only mortgages given and generally more careful assessment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the main types of mortgage interest rate options

A
  1. Fixed
  2. Discounted (rate is set % lower than standard variable rate)
  3. Capped (upper limit)
  4. Capped and collared (upper and lower limits)
  5. Foreign currency
  6. Equity-linked (shared ownership with lender)
  7. Flexible reserve (Repayments act as a reserve which can be drawn down on again in the future)
  8. Equity-release (Takes a loan out against their property)
  9. Offset (interest on savings directly pays mortgage interest as bank account is linked)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the Mortgage Credit Directive

A

Rules that increase the level of consumer knowledge regarding mortgage costs. Includes initial document disclosure and 7-day reflection period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the two classes of BTL mortgages

A

Accidental (regulated, for consumers) and Professional (unregulated, for businesses)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What age is appropriate to consider equity release

A

60+

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a lifetime mortgage

A

Equity release mortgage where the individual still owns the property
Can be
- Roll up (interest added through the term and paid on sale)
- Fixed repayment (no interest but premium paid on sale)
- Interest-only (interest paid monthly and loan repaid on sale)
- Home income plan (loan buys an annuity, repaid on sale)
- Shared-appreciation (lender owns equity and receives share pf profit)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the home reversion scheme

A

% of house is sold to the lender and the original owner can live in the property and pay ‘peppercorn’ rent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What additional qualifications does an adviser need to have to give advice on equity release mortgages

A

CII Long-Term Care CF8

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the sale and rent back arrangement

A

Selling your home to a private firm at a reduced price when in financial difficulty (avoids repossession)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What Islamic purchase plans are used commonly

A

Ijara (bank leases to individual)
Murabaha (bank sells to individual by monthly payments at a higher price than house purchase)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a structured loan

A

Loan with fixed payment terms and penalties for early repayment (Car financing)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is level term assurance

A

Set term and sum assured where payment is made on death (used for interest only mortgages)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is decreasing term assurance

A

Set term and decreasing sum assured until the end of the term (used for capital and interest mortgages)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is a family income benefit

A

Type of DTA with set term that pays out regular payments for the remainder of the term, following death of the life assured (low-cost assurance for young families

22
Q

What is increasing term assurance

A

Sum assured can be increased with increasing premiums (form of guaranteed insurability used to combat inflation)

23
Q

What is convertible term assurance

A

Policy can be converted to more permanent (WOL or endowment) (used when there are future underwriting concerns)

24
Q

What is renewable term assurance

A

Option to renew the policy at the end of the term (used when there are future underwriting concerns)

25
Q

What are endowment policies

A

Policy that involves life assurance and investment where a lump sum is guaranteed at the end of the term or on death (can be unit-linked)

26
Q

What are whole of life policies

A

Sum assured guaranteed on death provided premiums are up to date, with no end date. Flexible WOL plans are popular where individuals can choose how much sum assured they want and it can be changed throughout life (premiums will reflect the sum assured)

27
Q

What are the main types of sickness and health policies

A
  1. Income protection (long term, permanent payment of approx 60% of earnings paid tax free, deferred period is included, cannot be cancelled by provider)
  2. Personal Accident and Sickness (short term 12-24 months, paying lump sum or monthly payments, can be cancelled by provider)
  3. Accident Sickness Unemployment (Short term 12-24 months, paying monthly payments, can be cancelled by provider)
  4. Critical Illness Cover (Lump sum paid on diagnoses, disability or terminal illness, sometimes include a ‘survival period’ between 14-30 days where you need to remain alive to claim)
  5. Private Medical Insurance (Private medical attention for short term conditions, sometimes subject to moratorium where conditions suffered in the last 5 years wont be covered for first 2 years)
  6. Long term care (Payment towards elderly care, can be immediate [lump sump premium is invested and income funds care] or [pre-funded [just in case insurance]
28
Q

What is payment protection insurance

A

Insurance against the inability to pay back a loan due to poor health or injury (for a max of 2 years)

29
Q

What is mortgage payment protection insurance

A

Insurance against the inability to pay back a mortgage due to poor health or injury. Ancillary costs such a insurance or endowment premiums are also covered. There is a deferred period for 30-180 days (max 2 years)

30
Q

What is meant by short term, med term and long term savings

A

Short - up to 5 years
Med - 5-15 years
Long 15+ years

31
Q

What was a HTB ISA

A

For a first home worth 450k (London) or 250k (outside of London), the government would match 25% of deposits up to 3k maximum (replaced with LISA)

32
Q

What is a LISA

A

Government bonus of 25% on contributions for a max of 1k per year (4k contributions)
Can open until age 39
Can contribute until age 50
Can use on home worth 450k or draw on at age 60

33
Q

What are the main savings accounts at NS&I

A

Direct saver, Investment account

34
Q

What are regular income products at NS&I

A

Income bonds (taxable)

35
Q

What are some guaranteed returns products at NS&I

A

Guaranteed bonds, Green savings bonds (taxable)

36
Q

What are some tax free products at NS&I

A

Premium bonds, ISAs, National Savings Certificates

37
Q

What are PIBS and PSBs

A

Permanent Interest Bearing Bonds (issued by building societies with no maturity date and no obligation to pay interest, but offer higher rates of interest). Upon building society demutualisation, these turn to Perpetual Subordinated Bonds (PBS)

38
Q

What dates of birth would be eligible for a Child Trust Fund

A

Born between 1 Sep 2002 - 2 Jan 2011

39
Q

What is the state retirement age

A

66 rising to 67 in 2028

39
Q

What are the pension allowances

A

60k pa or 3600 if no earnings
1,073,100 lifetime limit

40
Q

What is the difference between a lifetime annuity (compulsory purchase annuity) and a purchased lifetime annuity

A

Purchased lifetime annuity is bought with savings and offers higher rates of payments with more favourable tax treatment.

Purchased lifetime annuities have an income element (taxed) and return on capital element (tax free) and the ratio is determined by health and age

41
Q

What are single tier pensions

A

State pensions for people reaching SPA after 6 April 2016
£185.15 pw
Eligibility = 35 years of NIC for maximum / 10 year for minimum

42
Q

What is the basic state pension

A

State pensions for people reaching SPA before 6 April 2016
Eligibility = 30 years of NIC or 12 months for minimum
Top ups for BSP are
- Guaranteed Pension Scheme (NIC before 1975 for employees only and is a basic top up)
- SERPS (NICs before 2002 for employees only to combat inflation)
- S2P (NICs before 2016 for low earners or carers)

43
Q

How do you calculate defined benefits entitlement

A

By 60th or 80th fractions where you take the years of service as a fraction of 60 or 80 (i.e 20 years of 60th = 20/60 or 1/3) meaning 1/3 of your final salary until you die

44
Q

What is the minimum employer contributions to a DC pension

A

3%

45
Q

What is NEST

A

National Employment Savings Trust - low cost workplace pension scheme to encourage saving for your retirement

46
Q

What is an eligible job holder

A

Aged between 22-SPA earning 10k+

47
Q

How was the IHT RNRB introduced

A

Introduced in increments of 25k starting at 100k, in 2017/18

48
Q

How are NRBs transferred to spouses

A

The unused portion in that year is transferred as a percentage (not nominal value) i.e if you used 25% of your NRB, your wife would add on 75% of the NRB allowance at the time to hers, even if the allowance has increased from when you died

49
Q

What is the child benefit

A

Payment to support bringing up a child
Large tax charge if income is over 50k but otherwise non-taxable
Not means tested on income

50
Q

What is the Child tax credit

A

Benefit paid by HRMC regardless if parents work - means tested on income and is non-taxable

51
Q

What is the maternity allowance

A

Paid to mothers who cannot claim statutory maternity pay
Either 90% of average weekly wage or 172.48 (whichever is lower)
Taxable

52
Q

What is statutory maternity pay

A

For mothers, paying for 39 weeks either 90% of average weekly wage or 172.48 (whichever is lower)
£123 LEL weekly earnings required to be eligible
Taxable

53
Q

What is statutory paternity pay

A

For new fathers, pays for 1-2 weeks either 90% of average weekly wage or 172.48 (whichever is lower)
Must have worked for the same employer for 26 weeks
Parental leave can be shared for up to 50 weeks of leave and 37 paid
Taxable

54
Q

What is income support

A

Financial support for those on low incomes
means tested
non taxable

55
Q

What is the jobseekers allowance

A

Unemployment benefit for those who work less than 16 hours but looking for full time work
NIC record based then means tested after 6 months
Taxable

56
Q

What are statutory redundancy payments

A

Payments made by employer
First 30k not taxable then taxable thereafter

57
Q

What is the working tax credit

A

In-work credits to those on low incomes
Means tested
Non-taxable

58
Q

What is the attendance allowance

A

Provides help with paying for care
Not means tested
Non taxable

59
Q

What is the carer’s allowance

A

Help for someone providing care and working 35 hours a week
Means tested
Taxable

60
Q

What is personal independence payment

A

Benefit to help people become more independent if disabled
Individual assessment
Non taxable

61
Q

What is the employment and support allowance

A

Paid to those with illness or disability who are aiming to return to work (succeeded incapacity benefit)
NIC tested then means tested
Taxable when NIC tested then non taxable

62
Q

What is statutory sick pay

A

Paid by employers up to 28 weeks
LEL of 123 pw to be eligible
NIC based
Taxable

63
Q

What are some other benefits to know

A

Bereavement Support Payment
- If children younger than 20: Lump sum of 3500 then 350 paid monthly for 18 months
- If no children younger than 20: lump sum of 2500 then 100 monthly for 18 months

Cold weather - £25 daily for extreme cold weather bills

Winter fuel - Annual payment of 260-600 for cold weather

Council tax reduction

Housing benefit - help with rent

Local housing allowance - help with rent from private landlord

Healthcare travel cost scheme

Healthy start scheme

Health costs benefit

Funeral expenses payment - must be paid back from the deceased estate

64
Q
A

R01 (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions