Savings and Investments advantages and disadvantages

Question 1

ISA advantage

Answer 1

-Tax free interest
-Interest rates can be slightly higher than in alternative savings account

Question 2

ISA disadvantages

Answer 2

-There are higher interest rates offered elsewhere
-There is a limit on the amount that can be placed in an ISA
-Notice is often required to make withdrawals and there is often a limit on the number

Question 3

Deposit and savings accounts advantages

Answer 3

-Offers higher interest rates
-Interest is earned on positive balances
-Setting up a regular deposit amount can encourage good financial habits

Question 4

Deposits and savings accounts disadvantages

Answer 4

-Some are bank current account specific
-Normally fixed rate for one year and then they fall next.
-Interest earned is taxed
-Interest earned will be less than interest paid on borrowing, therefore any benefits are lost if the individual has borrowing to repay.

Question 5

Premium bonds advantages

Answer 5

-Can be easily withdrawn with no loss or penalty
-A chance to win substantially more than could be earned in interest

Question 6

Premium bonds disadvantages

Answer 6

-Not guaranteed to get money back (kinda like lottery)
-Maximum amount of £50,000.
-The amount invested, assuming zero or low returns, loses value due to inflation.

Question 7

Bonds and Gilts advantages

Answer 7

-Regular fixed returns
-Spread risk across a range of markets

Question 8

Bonds and Gilts disadvantages

Answer 8

-The issuer could go default and you could lose your money.
-Risk of losing some, or all of the value of the investment if the bond or gilt value falls
-Interest payments may not be received if the issuer is unable to make payments

Question 9

shares advantages

Answer 9

-Share prices fluctuate giving the potential for high reward
-Additional benefits for being a shareholder e.g. discounts and special offers

Question 10

Shares disadvantages

Answer 10

-Share prices fluctuate offering a potential high risk
-There is no guarantee of a return on the investment

Question 11

Pensions advantages

Answer 11

-Encourages individuals to save throughout their working life for retirement
-Some policies are boosted by employer contributions which increase the final value of the savings

Question 12

Pensions disadvantages

Answer 12

-Final outcome 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 cumulative value of savings