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CeMAP Unit 1 > Topic 8 Collective Investments Part 2 > Flashcards

Topic 8 Collective Investments Part 2 Flashcards

1
Q

What is a Endowment?

A

A investment based on life assurance and savings

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2
Q

When is Endowment paid?

A

If the assured person dies or survives the life term

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3
Q

The two most common types of Endowment policies are?

A
  • With Profits
  • Unit Linked (Riskier)
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4
Q

What is a Tax-exempt Savings plan offered by a Friendly Society?

A

Is similar to a endowment policy but it does not pay corporation tax on it’s investment returns

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5
Q

What is the maximum that can be saved per year in a tax-exempt savings plan offered by a Friendly Society?

A
  • £270 per year (lump sum)
  • £25 per month
  • £75 per quarter
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6
Q

How long is the initial phase on a tax-exempt savings plan from a building society?

A

10 years

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7
Q

What is a Investment Bond?

A

Collect investments on unitised funds from Life Assurance Companies (very different from Unit Trust)

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8
Q

How does an investor invest in a Investment Bond?

A

By paying a lump sum payment to the life company

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9
Q

What does an investor receive when they purchase a life policy?

A

Policy document showing that a policy has been purchased & details of the funds

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10
Q

When a investor cashes in an investment bond what do they accept?

A
  • Surrender value of the policy
  • Value of units sold on bid price that day
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11
Q
  • Ease of switching between funds
  • Ease of investment & surrender
  • Simplicity of documents

Are what?

A

Advantages of Investment Bonds

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12
Q

Investment Bonds are set up as Single Premium, Whole of Life Policy

True or False

A

True

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13
Q

If a person assured in a Investment Bond dies what percentage of the bid value is paid?

A

101% on the day of death

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14
Q

Why is an Investment Bond helpful for basic rate tax payers?

A

The tax is taken at source at 20% rate so they will not own any tax

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15
Q

What is a Qualifying Life Policy?

A

No tax is payable on death or policy maturity

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16
Q

What is a Non-Qualifying Life Policy?

A

Tax is payable on maturity or death

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17
Q

An Investment Bond is a qualifying policy?

True or False

A

No it is Non-Qualifying because it make a lump sum premium payment

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18
Q

Premiums:

Payable for Annually, Half yearly, Quarterly for at least 10 years.

Qualifying or Non-Qualifying?

A

Qualifying

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19
Q

Discontinuation of premium payments:

  • Payments ending within 10 years
  • Less than 75% of the term if less than 10 years

Qualifying or Non-Qualifying?

A

Non-Qualifying

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20
Q

Sum payable on death

Must be at least at least payable to 75% of the total premiums

Qualifying or Non-Qualifying?

A

Qualifying

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21
Q

Balance of payments

Premiums in 1 year must not exceed twice the premiums in another year

Qualifying or Non-Qualifying?

A

Qualifying

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22
Q

On an investment bond what are higher and additional rate tax payers liable for on any gain of an investment bond?

A

Tax at the their appropriate rate -20% all ready paid at source

23
Q

What is top slicing?

A

Is the division of a gain from an investment bond over the policy term

24
Q

Why is top slicing used?

A

To ensure that the policy holder is not unfairly disadvantage on tax in the year of the gain

25
Q

What is the maximum that can be withdrawn by an investor each year on an investment bond?

A
  • 5% on a cumulative basis
  • Withdrawals are subject to tax
26
Q

What is a Non-Mainsteam Pooled Investment (NMPI)?

A

A collective investment schemes that doesn’t meet then FCA’s investment and Promotion rules

27
Q
  • Unit in an Unregulated Collective Investment Scheme (UCIS)
  • Unit in a qualified Investor scheme
  • Security issued by a special vehicle
  • Traded Life policy
A

Example of Non-Mainstream Pooled Investments (NMPI) set out by the FCA

28
Q

What is an advantage of a Structured Product?

A

Enable some protection of capital invested while enables investment in higher growth assets

29
Q

What is a Structured Capital-at-Risk Product (SCARP)?

A

Product that delivers an agreed level of income over a set period

30
Q

What is a Non-SCARP structured investment product?

A

Promises at 100% return of initial capital if company remains solvent

31
Q

What are the risks of Structured Products?

A
  • Counterparty Risk
  • Market Risk
  • Inflation Risk
32
Q

What is a Wrap?

A

An online account that enables investors to see all their holdings within one place

33
Q

Who normally offers Wraps?

A

Independent Financial Advisors for a fee

34
Q

What is a Fund Supermarket?

A

Allows an investor access to a wide range of investment funds for a fee

35
Q

Can an investment trust be accessed by fund Supermarkets

A

No Fund Supermarkets don’t deal with Investment Trusts

36
Q

What is Sustainable Finance?

A

An investment factor that takes into consideration

  • Environmental Factors
  • Social Factors
  • Governance Factors
37
Q

May limit what an investor can invest in

Is a disadvantage of what?

A

Sustainable Finance

38
Q

Can be seen as progressive and forward thinking and may be more successful than peers

Is an advantage of what?

A

Sustainable Finance

39
Q

What is Green washing?

A

An investment company making claims or exaggerating about the sustainability of their investment products

40
Q

What are the measures to clamp down on Green washing?

A

Introducing the following

  • PS23/16 Sustainability Investment Label
  • Disclosure Requirements
  • Restrictions on Sustainable Terms
41
Q

What are Cryptoassests?

A

-Digital representation of value
-Ownership proven using a computer code

42
Q

What happens when a digital wallet is created by a Crypto asset user?

A

They receive a pair of digital keys. 1 public and 1 private to send and receive transactions

43
Q

How are Cryptoassest transactions recorded?

A

Using Distribution Ledger Technology (DLT)

44
Q

What is the most common DLT used in Cryptoassests?

A

Blockchain

45
Q

What is a Blockchain?

A

Transactions entries called blocks that record transactions

46
Q

What is a “Hash” in relation to a Blockchain?

A

It links blocks together using a digital fingerprint

47
Q

Are Cryptoassets regulated by the FCA?

A

No they are not regulated

48
Q

The main Cryptoassets defined by UK Cryptoassets Taskforce are (UKTF) are?

A
  1. Exchange Tokens
  2. Utility Tokens
  3. Security Tokens
49
Q

Which Cryptoassets type is this?

  • Means of exchange
A

Exchange Tokens

50
Q

Which Cryptoassets type is this?

  • Grant access to current/prospective product
  • Does not grant same rights as specified investments
A

Utility Tokens

51
Q

Which Cryptoassets type is this?

  • Special characteristics that provide rights to specified investments like shares
A

Security Tokens

52
Q

If a person withdraws 5% from an investment bond is tax payable immediately?

A

No it is tax deferred until the policy ends or death of the Policy holder

53
Q

What is “Fungibility”?

A

The ability of Cryptoassets to be exchanged with good or assets of the same kind

CeMAP Unit 1 (18 decks)

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