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R01 CS > How The Customer Is Served > Flashcards

How The Customer Is Served Flashcards

1
Q

What is the hierarchy of needs?

A
  1. Budgeting
  2. Managing debt
  3. Borrowing
  4. Protection
  5. Saving and investing
  6. Retirement planning
  7. Estate planning
  8. Tax planning
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2
Q

What are priority debts?

A

Mortgages, utilities and council tax

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3
Q

What are the circumstances for a creditor filing for bankruptcy of a debtor?

A

The debt must be at least £5,000.

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4
Q

What is a payday loan?

A

A very short, unsecured loan. Often with high interest costs and charges.

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5
Q

What are the two methods of interest repayment?

A
  • Capital and Interest - the loan is guaranteed to be paid off at the end of the term if the required repayments are made. Each monthly payment consists of an element of interest and an element of capital reduction.
  • Interest Only - only the interest is paid each month.
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6
Q

What is fixed rate?

A

The rate of interest is fixed for a specific period of time providing the borrower with stable repayments for the specified term.

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7
Q

What is discounted rate?

A

Repayments vary but are always lower than standard rate. The discount amount will be set for the term of the arrangement.

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8
Q

What is capped?

A

Interest rates are variable but will not exceed a pre-agreed rate.

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9
Q

What is cap and collar?

A

A variation of a capped rate where there is also a lower rate that the interest rate charged will not go below.

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10
Q

What is equity-linked or shared appreciation mortgages?

A

When the borrower can’t afford to purchase a property outright. With these schemes the lender also has a stake in the property equity. When the property is sold the borrower and lender share an equity.

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11
Q

What is flexible reverse?

A

Where monthly repayments can be varied and capital lump sum payments can be made at any time.

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12
Q

What is an offset mortgage?

A

The mortgage is linked to a bank account so interest on savings can be offset against the interest payable on the loan.

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13
Q

What are the 3 life cycle stages?

A
  • Vulnerable years - early years of a marriage/relationship. Clients may have children. Income and affordability is likely to be low. Financial protection high.
  • relaxed years - entering their 40’s. Increased income. Children becoming independent. Financial planning priorities may change. Investments and pensions become important.
  • anxious years - entering their 50’s. Mortgage probably been repaid. Earning capacity reached peak. Children financial independent. Increased anxiety. Concerned about inheritance tax planning.
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14
Q

What are the terms of investment?

A
  • Short-term - up to 5 years (emergency expenses)
  • Medium-term - 5-15 years (life expenses)
  • Long-term - 15 years plus (supplementing retirement income)
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15
Q

What are the features of a savings account?

A

Instant access, paying interest

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16
Q

What are the features of a cash ISA?

A

Instant access, pays interest tax-free, subject to annual limits

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17
Q

What are the features of fixed-notice accounts?

A

Higher interest than savings, notice of withdrawals, accessing funds early can result in a penalty

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18
Q

What are the features of fixed rate bonds?

A

Provide a fixed return, minimum deposit level, subject to a set term, accessing funds early results in a penalty.

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19
Q

What are the features of a high interest savings account?

A

Higher interest rate, regular monthly savings, maximum annual cap.

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20
Q

What are the income tax payers and rates due?

A
  • Non taxpayer - 0%
  • £5,000 starting rate - 0%
  • Basic rate - 20%
  • Higher rate - 40%
  • Additional rate - 45%
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21
Q

What are the types of cash accounts?

A

ISAs, Instant access savings & Notice accounts

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22
Q

What are the risks of cash accounts?

A

Subject to inflation.
The FSCS only covers £85,000 per person per provider.

23
Q

What are the types of fixed interest accounts?

A

Gilts, bonds, shares

24
Q

What are the risks of fixed interest accounts?

A
  • Gilts are low risk
  • Bonds are quite risky
25
Q

What are the types of property account?

A

Residential, commercial & pooled investments.

26
Q

What are the risks of property accounts?

A
  • liquidity risk
  • ancillary risks (tenants not paying on time)
27
Q

What are types of equity accounts?

A

Shares, investments

28
Q

What are the risks of equity accounts?

A
  • Prices of shares can fluctuate.
  • shareholders are last in order for repayment should a company be liquidated.
29
Q

What does actively managed mean?

A

The fund appoints a manager who buys and sells investments to achieve the best return in line with the stated risk profile.

30
Q

What does passively managed mean?

A

Often called tracker funds. The fund aims to match the value of the clients investment to the performance of a selected market.

31
Q

What is Discretionary Fund Management?

A

The client sets up an agreement with an investment manager. The manager does not need client permission for each trade.

32
Q

What is Advisory Fund Management?

A

The client sets up an agreement with an investment manager. The manager needs client permission for each trade.

33
Q

What are the key pension provisions in retirement?

A
  • state pension
  • private and occupational pensions
  • annuities
34
Q

What is the single tier state pension?

A

Those reaching state pension age on or after 6th April 2016. 35 years of NI contributions for the full entitlement.

35
Q

What is the state second pension?

A

Also known as S2P

  • 2002-2016
  • not available to self-employed.
36
Q

What is the state earnings related pension scheme?

A

Also known as SERPS

  • 1978 - 2002
  • not available to self employed
37
Q

What is the graduated pension scheme?

A
  • 1961 - 1975
  • available to employees only.
38
Q

How do you calculate DB pension scheme entitlement?

A

Number of years service x scheme accrual rate
Then apply resulting fraction to final pensionable salary.

39
Q

What is the nil rate band of an individuals estate?

A

£325,000

40
Q

What are the examples of an exempt transfer?

A
  • money left to a uk spouse or civil partner
  • gifts out of normal expenditure
41
Q

What are the examples of potentially exempt transfers?

A
  • outright gifts but only if the donor survives for 7 years.
42
Q

What policy can be taken out to prevent an IHT charge on gifts?

A

Gift inter vivos policies.

43
Q

What is a child benefit?

A

Paid to support the bringing up of children. Non taxable.

44
Q

What are child tax credits?

A

Paid regardless of whether parents work. Non taxable.

45
Q

What is maternity allowance?

A

Paid to those that cannot claim statutory maternity pay. Non taxable.

46
Q

What is income support?

A

Financial support for those working but on low income. Non taxable.

47
Q

What is Jobseeker’s Allowance?

A

Unemployment benefit for those who work less than 16 hours per week and are seeking full time work. Taxable.

48
Q

What are statutory redundancy payments?

A

Payments made by employers in line with set criteria when making people redundant. First £30k non taxable.

49
Q

What are working tax credits?

A

In work credits to those on low incomes. Non taxable.

50
Q

What is attendance allowance?

A

Provides help with paying care for those 65 and over. Non taxable.

51
Q

What is carers allowance?

A

Provides help for someone caring for the disabled for a minimum of 35 hours a week. Taxable.

52
Q

What is personal independence payment? (PIP)

A

Help people becoming more independence. Paid to ages between 16 and 64. Non taxable.

53
Q

What is employment & support allowance? (ESA)

A

Paid to those unable to work due to illness or disability with aim to return them to work. Taxable through assessment phase. Non taxable after.

54
Q

What is statutory sick pay?

A

Paid by employers for up to 28 weeks. £120 weekly earnings required. Taxable.

R01 CS (15 decks)

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