Topic 2 Flashcards
Annual exempt amount
The annual tax free allowance for capital gains tax
Annuity
A financial product that pays a regular guaranteed income, in return for a lump sum paid for the product. It is used in retirement
Assets
Things that a business or person owns, e.g. Property, jewellery or shares
Bonds
See corporate bonds, government bonds and savings bonds
Capital gains tax
A tax payable on the gain/profit made when you sell or give away an asset, for example property or shares. Each person is allowed to make a certain level of profit before being taxed
Capital growth
An increase in the market value of an investment, over and above the amount the investor paid for it or into it.
Capital sum
The total amount borrowed or saved or invested before the addition of interest. E.g. It can refer to the amount borrowed with a mortgage loan or the amount paid into an investment product
Cash NISA
An account that pays interest tax free on savings up to a certain level
Children’s bond
An investment bond taken out by a parent, legal guardian or grandparent for a child under 16. Investing between £25 and £3000, fixed interest rate is guaranteed for 5 years, when the bond matures. Nominated parent or guardian controls the bond until the child is 16
Collective investments
Investment products such as unit trusts or open ended investment companies (OECI) that let many retail investors pool their money together
Commodity
Goods that share the same characteristics, wherever they are produced or whoever purchases them unlike manufactured products. Examples include raw material like gold and iron, or crops like wheat and rice
Corporate bond
A product that companies can use to borrow money over periods of 5 years or more. The company offers a number of bonds for sale; buyers can then sell the bonds on to other investors if they wish. A key difference between bonds and shares is that the bondholders don’t own a share in the company
Corporation tax
A tax levied on the taxable profits of limited companies and some other organisations
Credit union
A mutual organisation owned by its members that provides a range of financial products e.g. Savings accounts and personal loans. Must share a common bond, e.g. Working for the same employer or living in the same district
Deposit
A sum of money placed by a customer with a producer such as a bank, building society and credit union
Diversification
Spreading investments across a range of products so as to reduce the impact of any doing badly.
Dividend
A payment of profits from a company to its shareholders, often at twice yearly intervals, either as cash or as further shares or reacquisition of shares.
Endowment policy
An insurance product that pays out a lump sum after a specified term or if the insured person dies before the end of the term. Used as a way of saving long term
Final salary scheme
A type of occupational pension that pays an income related to the last salary an individual earned before retirement
Friendly society
A mutual organisation that offers its members a wide range of financial products
FTSE 100
Financial Times Stock Exchange Index, known as ‘footsie’. Index of the share prices of the 100 companies with the highest market capitalisation (total value of shares) on the London stock exchange
Gilt
A bond issued by the U.K. Government as a way for the government to borrow money. Most girls are issued with a redemption date, that is the date at which the government agrees to bug them back. Between their issue and the redemption date the gilts can be traded.
Government bond
A bond issued by a national government - it is a way for the government to borrow money. Gilts are ones done by the UK government.
Hedge fund
An organisation that takes in funds from investors such as pension companies, insurance companies and very wealthy individuals and invests those funds to try and get a high return. Investment in these funds is seen as high risk.
