Principles and Environment Flashcards
What is the Beveridge Plan 1942?
The state would provide some essential welfare benefits, such as, the state pension
What are the pay-as-you-go state benefits?
NI contributions (and other taxes) from employed people pay for others’ benefits
Are the pay-as-you-go state benefits means tested? If so, how?
Yes, it depends on claimant’s income/wealth and have to be ‘claimed’
What are some of the welfare problems post WW2 in 1940s?
State-run collectivist regime, provision of essential welfare benefits, pay-as-you-go state benefits
What are some demographic changes?
Life expectancy, ageing population, ‘pension time bomb’
What was the life expectancy of males in 1901 compared to 2011?
1901: 45 years compared to 2011: 79 years
What was the life expectancy of females in 1901 compared to 2011?
1901: 49 years compared to 2011: 82 years
What problems has arose with an ageing population?
There are less working and more retired
How many UK workers are there per pensioner?
3.9 (1976) down to 3.2 (2016)
What does a pension time bomb mean?
We’ll have people living longer, so we need to pay pensions for a longer time. There will be less working people to pay for the pension of the retired
What are some solutions for the demographic time bomb?
Offer less generous retirement benefits, increase retirement and pensionable age, make current generation pay more taxes, cut back on govt spending
Why has there been a trend towards individual responsibility?
Since the 1970s, driven parly by ideology (Thatcher tory govt), partly by necessity (demographic trends), continued by Blair ‘New Labour’ govt, and then the ‘Age of Austerity’
What must we do to have any hope of financial security in our retirement?
We have to start taking responsibility for our own financial welfare
What are the problems in making individuals responsible?
The lack of basic skills and mis-selling
What are some of the basic skills that the UK population cannot do?
Work out percentages and use Yellow pages
What are some examples of mis-selling?
When a product has a higher risk than clients realised, and when products are sold with reassurances or guarantees that were not met
What can an individual look into in regards to their financial affairs?
Endowment mortgages, equitable life pensions, personal pensions, and PPI
Why is there a lack of trust?
Various financial scandals, general ‘antagonism’ towards banks and the challenges to ethical behaviour
What is an intermediary?
Anyone who mediates between client and provider of financial products
Give examples of an intermediary.
Salesman (of life insurance or pension plans), financial adviser
What is an intermediary remunerated by?
Commission from product provider based on value of product ‘sold’
What are the fees from a client based on when using an intermediary?
Fixed amount, time spent advising client, % based on value of product bought
What elements does a product commission typically have?
For a medium- to long-term investment (commission often a high proportion of first year premiums), and the level of commission usually depends on size of the investment, not the time it takes to advise
What are the different types of financial advisers?
Independent Financial Adviser, Restricted Financial Adviser
What is an Independent Financial Adviser (IFA)?
They offer advice on a full range of products from any provider, undertake a fair and comprehensive analysis, and are free from any influence
What is a Restricted Financial Adviser?
Can only recommend certain types of products and/or products from limited number of providers
What types of questions should you ask a potential adviser?
What are your fees and how will I pay? What are your qualifications? Are you Financial Conduct Authority (FCA) registered?
Why should you ask a potential adviser what their fees are and how to pay them?
Because they must provide clear fee info and agree with this in advance (may be fixed, may be paid upfront, may be lump sum or instalments)
Why should you ask a potential adviser what their qualifications are?
As they must have qualifications that are level 4 or above and must hold a statement of professional standing
What is a Statement of Professional Standing?
It confirms suitability qualified, subscribes to a code of ethics and has maintained competence through continuing professional development
What professional qualifications are recognised as equivalent to degree level?
Certified Financial Planner and Chartered Financial Planner
How many individuals in the UK hold the Certified Financial Planner qualification?
About 1,000
How many individuals in the UK hold the Chartered Financial Planner qualification?
About 5,500
What does money advice services offer?
Free independent advice services, objectives to enhance the publics knowledge and understanding of financial affairs, and information (advice)
What is human capital?
The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community
Give examples of external risk factors.
Political, social, taxation, inflation or deflation, economic forces, demographic forces, immigration, emigration, globalisation, natural evens, and luck
Give examples of internal risk factors.
Health, education, income, spending and saving habits, risk tolerance, and how well we plan for the future
When would the human capital start to decline?
Being off work sick, accident, getting fired, natural disaster
