topic 5 Flashcards
AER
annual equivalent rate is the interest that will be earned on the money in one year and takes into account how often the provider pays the interest, the effect of compounding the interest and any fees and charges
bank rate
The interest rate that the Bank of England uses when it lends money to other banks. Financial services providers take account of the Bank rate when they decide how to set interest rates on their own products.
CTF
child trust fund - A long-term savings account only available to children born between 1 September 2002 and 2 January 2011. CTFs were set up by the government to encourage people to build up savings for their children. They have been replaced by junior ISAs.
CPI
consumer prices index - used to measure inflation and is calculated by checking the price of a representative sample of goods on a monthly basis which enables statisticians to measure how much prices are rising or falling
coronavirus
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.
FCA
financial conduct authority - One of the two main regulators of financial services in the UK
FSCS
financial services compensation scheme - a compensation scheme that pays compensation to account holders of up to a certain amount per provider if the provider goes into default
HMRC
her majesty’s revenue and customs - the organisation that collects taxes on behalf of the government
income tax
Tax paid on earnings from employment, self-employment and interest on savings
ISA
individual savings account - An account that pays interest tax-free on savings up to a certain level. There are two types of ISA: cash ISAs and stocks and shares ISAs. Junior ISAs are available for people under 18.
inflation
A rise in prices, which means that the purchasing power of money falls.
instant access account
An account from which the holder can withdraw their money at any time without losing any interest.
interest
money either paid to an account holder by the provider or charged to the account holder by the provider. Interest is paid on savings accounts and some current accounts and charged on borrowing. Each provider decides the rate of interest it will pay or charge, depending on the type of account and, in some cases, the credit history of the individual account holder
interest rate
The amount, expressed as percentage, that a financial services provider charges a borrower when it lends money, or pays to a saver.
junior ISA
Long-term savings accounts set up by a parent or guardian specifically for the child’s future. The child can only access the money once they turn 18 years old.
NS&I
national savings and investment - A provider that is backed by the Treasury
notice account
An account for which the holder has to tell the provider in advance if they want to withdraw their money. If they do not give the provider the required amount of notice, they lose interest on their savings.
personal allowance
The amount that an individual can earn before they have to pay income tax.
personal savings allowance
The amount of savings interest that can be earned before the saver pays tax. The amount of the allowance varies according to how much other income the saver has earned in the tax year.
rate of return
The amount a saver gains in interest on their savings.
RPI
retail prices index - used to measure inflation and is calculated by checking the price of a representative sample of goods on a monthly basis but unlike CPI, it also takes into account mortgage interest payments and other costs associated with home ownership.
savings bonds
A savings product held for a fixed period and the holder can only make a limited number of withdrawals, or none at all, during that period without incurring a penalty.
starting-rate band
An amount of savings that an individual can earn tax-free if their total income is less than the personal allowance.
stocks and shares
used to describe an investment that gives the holder part ownership of a company. Shares are bought and sold on stock exchanges.
tax year
Also known as the financial year, the tax year runs from 6 April to 5 April in the following year. The tax people owe is calculated according to how much they have earned April to April rather than January to December.
