@ Savings

Question 1

Name the types of Saving methods

Answer 1

• Individual savings account (ISAs)
• Premium bonds
• Shares
• Deposit and savings account
• Bonds and gilts
• Pensions

Question 2

Individual savings account (ISAs)

Answer 2

Allows you to save without paying tax on the interest or profits you earn

Question 3

Premium bonds

Answer 3

A government scheme that allows individuals to save, up to a set amount, in bonds. No interest is earned but the bond is placed into a regular draw for cash prizes

Question 4

Shares

Answer 4

Investments in business in return for equity. The shareholder becomes a part-owner of the business

Question 5

Deposit and savings account

Answer 5

An easy access savings account which allows you instant access to your savings whereas other saving accounts may ask for notice to withdraw money.

Question 6

Bonds and gilts

Answer 6

These are fixed-term securities where the individual lends money to companies and governments in return for interest payments. (Compaines- corporate BONDS, Government- GILTS)

Question 7

Pensions

Answer 7

Long term saving plans where individuals make regular contributions through their working life. This is then repaid upon retirement.

Question 8

Ad of Individual savings account (ISAs)

Answer 8

• Income tax is not charged on interest earned allowing you to keep all of the rewards for saving
• Interest rates can be slightly higher than in alternative saving accounts

Question 9

Dis of Individual savings account (ISAs)

Answer 9

• There is a limit on the amount you can put into an ISA each year
• Notice is often required to make withdrawals and there is often a limit on the number of withdrawals made

Question 10

Ad of Premium Bonds

Answer 10

• Chance of winning substantially more than could be earned in interest
• Can be easily withdrawn with no loss or penalty

Question 11

Dis of Premium Bonds

Answer 11

• No guaranteed return on investment

- The amount invested, assuming zero or low returns, loses value due to inflation

Question 12

Ad of Shares

Answer 12

• Share prices fluctuate offering a potential high reward

- Additional benefits for being a shareholder e.g discounts and special offers

Question 13

Dis of Shares

Answer 13

• There is no guarantee of return on the investment

- Shareholders could lose investment if the company underperforms- high risk

Question 14

Ad of Deposit and savings account

Answer 14

• Interest is earned on positive balances

- Setting up a regular deposit amount can encourage good financial habits

Question 15

Dis of Deposit and savings account

Answer 15

• Interest earned is taxed
• Interest earned will be less than the interest paid on borrowing, therefore any benefits are lost if the individual has borrowing to pay

Question 16

Ad of Bonds and gilts

Answer 16

• Regular fixed returns

- Spread risk across a range of market

Question 17

Dis of Bonds and gilts

Answer 17

• Risk of losing some value or all of investment if bond or gilt falls
• Interest payments may not be received if the issuer is unable to make payments

Question 18

Ad of Pensions

Answer 18

• Provides structure to plan for financial security after retirement
• Some policies are boosted by employer contributions which increase the final value of the savings

Question 19

Dis of Pension

Answer 19

• Final outcomes and value of the pension is difficult to predict
• If individuals move jobs it may mean that a number of policies are held, reducing the increasing value of savings