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Financial Studies Unit 2 > Topic 2 > Flashcards

Topic 2 Flashcards

1
Q

Annual exempt amount

A

The annual tax free allowance for capital gains tax

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2
Q

Annuity

A

A financial product that pays a regular guaranteed income, in return for a lump sum paid for the product. It is used in retirement

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3
Q

Assets

A

Things that a business or person owns, e.g. Property, jewellery or shares

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4
Q

Bonds

A

See corporate bonds, government bonds and savings bonds

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5
Q

Capital gains tax

A

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

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6
Q

Capital growth

A

An increase in the market value of an investment, over and above the amount the investor paid for it or into it.

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7
Q

Capital sum

A

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

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8
Q

Cash NISA

A

An account that pays interest tax free on savings up to a certain level

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9
Q

Children’s bond

A

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

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10
Q

Collective investments

A

Investment products such as unit trusts or open ended investment companies (OECI) that let many retail investors pool their money together

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11
Q

Commodity

A

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

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12
Q

Corporate bond

A

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

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13
Q

Corporation tax

A

A tax levied on the taxable profits of limited companies and some other organisations

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14
Q

Credit union

A

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

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15
Q

Deposit

A

A sum of money placed by a customer with a producer such as a bank, building society and credit union

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16
Q

Diversification

A

Spreading investments across a range of products so as to reduce the impact of any doing badly.

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17
Q

Dividend

A

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.

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18
Q

Endowment policy

A

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

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19
Q

Final salary scheme

A

A type of occupational pension that pays an income related to the last salary an individual earned before retirement

20
Q

Friendly society

A

A mutual organisation that offers its members a wide range of financial products

21
Q

FTSE 100

A

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

22
Q

Gilt

A

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.

23
Q

Government bond

A

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.

24
Q

Hedge fund

A

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.

25
Q

HMRC

A

Her majesty’s revenue and customs, the organisation that collects taxes on behalf of the government

26
Q

Income tax

A

Tax paid on earnings from employment, self employment and interest on savings.

27
Q

Index linked

A

Rising in line with inflation.

28
Q

ISA

A

Individual savings account, an account that pays interest tax free up to a level. Cash and stocks and shares. Junior for under 18s. NISAs introduced in 2014 with simpler rules but now known as ISAs.

29
Q

Investment trust

A

A type of collective investment which operates as a public limited company. Investors buy shares in the trust and the trust uses the money to trade the stocks and shares of other companies.

30
Q

Money purchase scheme

A

A type of pension where the employee pays into the plan over their working life. The scheme is invested and provides the employee with the resulting lump sum on retirement. The amount they receive depends on how well the scheme performed

31
Q

National Employment Savings Trust NEST

A

A pension scheme run by a public organisation which aims to ensure that the majority of workers are enrolled in an occupational pension

32
Q

National insurance contributions

A

Money deducted from the pay of people who are employed or self employed and used by the government to find state pensions and other benefits.

33
Q

NS&I

A

National savings and Investments, producer that is backed by the Treasury.

34
Q

Open ended investment company OEIC

A

A pooled collective investment vehicle, a cross between a unit trust and an investment trust. The number of shares issued can very and be created or liquidated according to the number of buyers and sellers on the market. OEIC expands as people invest

35
Q

Pension

A

An income that people receive after retiring from work. In the U.K. people also receive a state pension, some people also receive income from schemes run by their employers or their own arrangements

36
Q

Personal pension plan

A

Long term money purchase products provided by banks, insurance companies and other producers to help customers build up a pot of money which they can use to buy an income upon retirement

37
Q

Portfolio

A

The combination of long term savings and investment products chosen by any particular investor.

38
Q

Rate of return/return

A

The amount of money gained or lost on an investment relative to the amount invested. Also known as the rate of return.

39
Q

Savings bonds

A

A savings product held for a fixed period e.g. 2 years. Holder can only make a limited number of withdrawals or none at all.

40
Q

Shares

A

Investments that represent part ownership of a company

41
Q

Stock exchange

A

A formal marketplace for the trading of shares and other investments

42
Q

Tax relief

A

An amount deducted from annual income e.g. Pension contribution to reduce the amount on which an individual must pay tax.

43
Q

Tax return

A

A tax form completed annually by people in certain situations, e.g. Self employed people. Sets out details of income and expenditure and allows the taxpayer or HMRC to calculate the amount of tax and NI contributions owed.

44
Q

Term assurance

A

An insurance plan that runs for a fixed period of time and pays out a lump sum if the insured person dies during the term.

45
Q

Unit trust

A

A type of collective investment, the most common form in the U.K.

46
Q

Volatility

A

When the value of an investment varies often and widely

Financial Studies Unit 2 (3 decks)

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