Topic 15 Flashcards
The main advice areas
The main advantage of writing a life assurance policy in trust is to:
a. create a tax-exempt fund.
b. ensure that the policy obtains qualifying status.
c. increase personal allowances.
d. place the proceeds outside the individual’s estate.
d. place the proceeds outside the individual’s estate.
For an investment to grow in real terms, it must increase in value:
a. after allowing dealing costs.
b. at a rate greater than inflation.
c. at regular intervals.
d. in line with national average earnings.
b. at a rate greater than inflation.
Ethel has £50,000 in a building society savings account. Her son has pointed out that her savings are losing value in real terms.
This is specifically because:
a. her savings interest rate is below the rate of inflation.
b. she receives gross interest payments.
c. sterling is performing poorly against the US dollar.
d. her savings account requires notice for withdrawals.
a. her savings interest rate is below the rate of inflation.
What is a key feature of a mortgage, from a lender’s perspective, compared to other forms of unsecured lending?
Mortgages:
a. are only available to commercial entities for business purposes.
b. are secured against a property, providing the lender with collateral in the event of default.
c. have a shorter term than most unsecured loans.
d. typically have higher interest rates due to the increased risk.
b. are secured against a property, providing the lender with collateral in the event of default.
What is the purpose of the mortgage stress test?
a) To assess the strength and service standards of the lender.
b) To ensure the mortgage will be affordable if interest rates increase.
c) To confirm the borrower’s income and expenditure.
d) To ensure the mortgage is suitable in view of the borrower’s circumstances.
b) To ensure the mortgage will be affordable if interest rates increase.
Which calculation is used to determine the ‘real’ rate of return on a savings account?
a) Rate of inflation plus the nominal interest rate.
b) Nominal interest rate minus the rate of inflation.
c) Rate of inflation divided by the nominal interest rate.
d) Nominal interest rate divided by the rate of inflation.
b) Nominal interest rate minus the rate of inflation.
Which of the following statements is incorrect in relation to the effect of a breadwinner’s death on their family?
a) There may be a need for the survivor to fund childcare.
b) The survivor may struggle to maintain mortgage payments.
c) The surviving partner may need to work to maintain the family.
d) State benefits are designed to ensure a good standard of living for the surviving family.
d) State benefits are designed to ensure a good standard of living for the surviving family.
Shareholder protection is appropriate for:
a) private limited companies.
b) limited liability partnerships.
c) public limited companies and large corporations.
d) private limited companies and large corporations.
a) private limited companies.
An investment product’s tax treatment is the most important factor when deciding suitability.
True or False?
False: Tax is just one factor in assessing suitability – risk, accessibility, product type, minimum contributions and investment term are just some of the other factors to be considered.
Bland Plc has taken out a key employee assurance policy on Jim, the sales director. In order to qualify as a business expense for corporation tax purposes, the policy would need to be:
a) a whole-of-life policy.
b) a non-qualifying life assurance policy.
c) a term assurance policy with a term of at least ten years.
d) a term assurance policy with a term of five years or less.
d) a term assurance policy with a term of five years or less.
Which of the following is not a usual method of setting up a partnership agreement?
a) Buy-and-sell agreement.
b) Automatic accrual.
c) Cross-option agreement.
d) Automatic aggregation agreement.
d) Automatic aggregation agreement.
What percentage of national average earnings is the state pension intended to provide?
a) 20%.
b) 25%.
c) 40%.
d) 50%.
b) 25%.
There are no negative aspects to consolidating a credit card debt into a mortgage.
True or False?
False: The debt will be secured as part of an increased mortgage, which means there is more chance of repossession if the borrower defaults on the mortgage.
Which of the following would be of least concern in later life planning?
a) Estate planning.
b) Power of attorney.
c) Income protection.
d) Long‑term care insurance.
c) Income protection.
