Topic 2: Savings and investment products Flashcards
Annual exempt amount
The annual tax-free allowance for capital gains tax.
Annunity
A financial product that pays a regular guaranteed income, in return for a lump sum paid to the product provider. It is used by people when they retire
Assets
Things that a person or a business owns. For a person their assets might include property, jewellery or financial products such as company shares
Bonds
See corporate bond, government bond and savings bond
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 on it (see annual exempt amount)
Capital growth
An increase in the market value of an investment, over and above the amount the investor paid for it or paid into it.
Capital Sum
The total amount borrowed or saved/invested, before the addition of interest. For instance, it can refer to the amount borrowed with a mortgage loan, or the amount paid into an
investment product
Children’s bond
An investment bond taken out by a parent, legal guardian or (great) grandparent for a child under the age of 16. Investing
between £25 and £3,000, the investor was guaranteed interest at a fixed rate for five years, after which the Bond matured. A nominated parent or guardian controlled the Bond until the child reached 16.
Collective investments
Investment products such as unit trusts or open-ended investment companies (OEICs) that let many retail investors pool their money together.
Commodity
Goods that share the same characteristics wherever they are produced and whoever produces them – unlike a manufactured
product, where different manufacturers can add specific features. Examples include raw materials such as iron ore, gold and silver, or agricultural produce such as wheat and rice.
Coronavirus
Coronavirus disease, known as Covid-19, is a respiratory illness that causes mild to moderate symptoms in a majority of cases
but proves debilitating or fatal for a significant minority. It caused a global pandemic with wide-ranging economic effects
Corporate bond
A product that companies can use to borrow money over periods of five 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
bondholders do not 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 (that is, owned by its members) that provides a range of financial products to members, eg savings accounts and personal loans. Members of a credit union must share a common bond, eg all work for the same employer or all work in the same district.
Diversification
Spreading investments across a range of different products, funds or types of asset so as to reduce the potential impact of any doing particularly badly.
Dividend
A payment of profits from a company to its shareholders, often at twice-yearly intervals, either as cash or (depending on the
plan) 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.
Endowment policies are often used as a way of saving over the long term
Final salary scheme
A type of occupational pension that pays an income related to the amount of the last salary an individual earned before retirement. Final salary schemes have largely been replaced by
money purchase schemes
Friendly society
A mutual organisation that offers its members a wide range of financial products
FTSE 100
The Financial Times Stock Exchange Index, known as the ‘footsie’. It is an index of the share price of the 100 companies
with the highest ‘market capitalisation’ (total value of issued shares) listed on the London Stock Exchange
Gilt
A bond issued by the UK government as a way for the government to borrow money. Most gilts are issued with a redemption date – that is, the date at which the government
agrees to buy 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 thegovernment to borrow money. Gilts are bonds issued 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 to get a high return. Investment in such funds is seen as a high risk
HMRC
Her Majesty’s Revenue and Customs – the organisation that collects taxes on behalf of the government.
