Financial Institutions

Question 1

Name all Financial Institutions (9)

Answer 1

• Building Society
• Bank
• Bank of England
• Credit Union
• Payday Loans
• Pawnbrokers
• Pension
• National Savings & Investments
• Insurance Companies

Question 2

Building Society

Answer 2

Organisations that handle financial transactions & store money on behalf of their members. Members (account holders) are part owners of the building society and have a right to vote and receive information on the running of the society.

Question 3

Bank

Answer 3

Organisation that handles financial transactions & store money on behalf of its customers

Question 4

Pension

Answer 4

Business that sells policies to individuals either privately or through employers, to allow them to save now to fund their retirement in the future

Question 5

Pawnbrokers

Answer 5

These are businesses or individuals who loan money against the security of a personal asset e.g an item of jewellery

Question 6

Bank of England

Answer 6

The UK’s central bank with responsibility for maintaining a healthy level of financial stability for the UK as a whole

Question 7

Insurance Companies

Answer 7

Business that sell protection against the risk of loss in return for a premium. They are profit making companies

Question 8

National Savings & Investments

Answer 8

This is a government backed organisation that offers a secure savings option

Question 9

Payday Loans

Answer 9

These are organisations that offer short-term source of finance to bridge the gap between now and next receiving a wage

Question 10

Credit Union

Answer 10

Non-profit organisation that handles financial & store money on behalf of their members

Question 11

Ad of Bank of England

Answer 11

• Set interest rates at a level designed to achieve a stable economy
• Lends to banks

Question 12

Dis of Bank of England

Answer 12

• Not a bank of members of the general public

- Can raise interest rates making borrowing more expensive

Question 13

Ad of Bank

Answer 13

• Offers a range of services & account types e.g current and savings accounts, loans
• Provide a secure place to store money

Question 14

Dis of Bank

Answer 14

• Savings are only protected up to £85,000, if the bank goes bankrupt anything above this would be lost
• Profit-making organisations owned by shareholders, therefore costs to individuals may be higher to meet shareholder objectives

Question 15

Ad of Building Societies

Answer 15

• Can offer better interest rates and savings than banks

- Owned by members so allows them to keep costs down, enabling higher interest payments

Question 16

Dis of Building Societies

Answer 16

• Savings are only protected up to the value of £85,000- if the building society goes bankrupt anything above this would be lost
• May lack the business drive of a commercial bank

Question 17

Ad of Credit Unions

Answer 17

• Owned by members and therefore costs can be kept down allowing higher interest payments
• They offer additional benefits to the community or to a good cause

Question 18

Dis of Credit Unions

Answer 18

• Online access to your money may be restricted and some offer very little in the way of an online presence
• There are fewer ATM’s provided by Credit Unions

Question 19

Ad of National Savings and Investments

Answer 19

• Offers a range of options e.g ISA’s, premium bonds and gilts
• Government backed, therefore offering security on 100% of savings with no upper limit

Question 20

Dis of National Savings and Investments

Answer 20

• Rates are variable, no interest payments on premium bonds
• Often required to give notice on withdrawals
• Not easy to access due to lack of high street presence

Question 21

Ad of Insurance Companies

Answer 21

• Offers a wide range of services and levels of cover to suit the needs of individuals
• Provide protection against unexpected losses or financial expenses

Question 22

Dis of Insurance Companies

Answer 22

• Profit-making organisation therefore premiums will be charged to ensure the shareholder needs are met
• Premiums are assessed on the estimated degree of risk which may be seen to penalise some individuals or groups in society too harshly

Question 23

Ad of Pension

Answer 23

• Experts are employed to make investment decisions

- Provides structure to help plan for financial security after retirement

Question 24

Dis of Pension

Answer 24

• Poor investment decisions by the pension company may result in a disappointing return on investments
• Money already invested in a pension cannot be released prior to the dates agreed in the policy and penalties if taken out early

Question 25

Ad of Pawnbrokers

Answer 25

• A quick way of acquiring cash needed for a short period

- Interest is not charged

Question 26

Dis of Pawnbrokers

Answer 26

• If the item is not bought back in a specified time period the pawnbroker will set it on to recover debt
• The amount given for an asset is often substantially lower than its actual worth

Question 27

Ad of Payday Loans

Answer 27

• A quick way of acquiring cash even for those with poor credit history
• Useful to meet emergency cash shortages

Question 28

Dis of Payday Loans

Answer 28

• Only available for relatively small amounts of money

- Interest rates charged are likely to be very high so get into deeper debt