Topic 8 Collective Investments Part 2 Flashcards
What is a Endowment?
A investment based on life assurance and savings
When is Endowment paid?
If the assured person dies or survives the life term
The two most common types of Endowment policies are?
- With Profits
- Unit Linked (Riskier)
What is a Tax-exempt Savings plan offered by a Friendly Society?
Is similar to a endowment policy but it does not pay corporation tax on it’s investment returns
What is the maximum that can be saved per year in a tax-exempt savings plan offered by a Friendly Society?
- £270 per year (lump sum)
- £25 per month
- £75 per quarter
How long is the initial phase on a tax-exempt savings plan from a building society?
10 years
What is a Investment Bond?
Collect investments on unitised funds from Life Assurance Companies (very different from Unit Trust)
How does an investor invest in a Investment Bond?
By paying a lump sum payment to the life company
What does an investor receive when they purchase a life policy?
Policy document showing that a policy has been purchased & details of the funds
When a investor cashes in an investment bond what do they accept?
- Surrender value of the policy
- Value of units sold on bid price that day
- Ease of switching between funds
- Ease of investment & surrender
- Simplicity of documents
Are what?
Advantages of Investment Bonds
Investment Bonds are set up as Single Premium, Whole of Life Policy
True or False
True
If a person assured in a Investment Bond dies what percentage of the bid value is paid?
101% on the day of death
Why is an Investment Bond helpful for basic rate tax payers?
The tax is taken at source at 20% rate so they will not own any tax
What is a Qualifying Life Policy?
No tax is payable on death or policy maturity
What is a Non-Qualifying Life Policy?
Tax is payable on maturity or death
An Investment Bond is a qualifying policy?
True or False
No it is Non-Qualifying because it make a lump sum premium payment
Premiums:
Payable for Annually, Half yearly, Quarterly for at least 10 years.
Qualifying or Non-Qualifying?
Qualifying
Discontinuation of premium payments:
- Payments ending within 10 years
- Less than 75% of the term if less than 10 years
Qualifying or Non-Qualifying?
Non-Qualifying
Sum payable on death
Must be at least at least payable to 75% of the total premiums
Qualifying or Non-Qualifying?
Qualifying
Balance of payments
Premiums in 1 year must not exceed twice the premiums in another year
Qualifying or Non-Qualifying?
Qualifying
On an investment bond what are higher and additional rate tax payers liable for on any gain of an investment bond?
Tax at the their appropriate rate -20% all ready paid at source
What is top slicing?
Is the division of a gain from an investment bond over the policy term
Why is top slicing used?
To ensure that the policy holder is not unfairly disadvantage on tax in the year of the gain
What is the maximum that can be withdrawn by an investor each year on an investment bond?
- 5% on a cumulative basis
- Withdrawals are subject to tax
What is a Non-Mainsteam Pooled Investment (NMPI)?
A collective investment schemes that doesn’t meet then FCA’s investment and Promotion rules
- Unit in an Unregulated Collective Investment Scheme (UCIS)
- Unit in a qualified Investor scheme
- Security issued by a special vehicle
- Traded Life policy
Example of Non-Mainstream Pooled Investments (NMPI) set out by the FCA
What is an advantage of a Structured Product?
Enable some protection of capital invested while enables investment in higher growth assets
What is a Structured Capital-at-Risk Product (SCARP)?
Product that delivers an agreed level of income over a set period
What is a Non-SCARP structured investment product?
Promises at 100% return of initial capital if company remains solvent
What are the risks of Structured Products?
- Counterparty Risk
- Market Risk
- Inflation Risk
What is a Wrap?
An online account that enables investors to see all their holdings within one place
Who normally offers Wraps?
Independent Financial Advisors for a fee
What is a Fund Supermarket?
Allows an investor access to a wide range of investment funds for a fee
Can an investment trust be accessed by fund Supermarkets
No Fund Supermarkets don’t deal with Investment Trusts
What is Sustainable Finance?
An investment factor that takes into consideration
- Environmental Factors
- Social Factors
- Governance Factors
May limit what an investor can invest in
Is a disadvantage of what?
Sustainable Finance
Can be seen as progressive and forward thinking and may be more successful than peers
Is an advantage of what?
Sustainable Finance
What is Green washing?
An investment company making claims or exaggerating about the sustainability of their investment products
What are the measures to clamp down on Green washing?
Introducing the following
- PS23/16 Sustainability Investment Label
- Disclosure Requirements
- Restrictions on Sustainable Terms
What are Cryptoassests?
-Digital representation of value
-Ownership proven using a computer code
What happens when a digital wallet is created by a Crypto asset user?
They receive a pair of digital keys. 1 public and 1 private to send and receive transactions
How are Cryptoassest transactions recorded?
Using Distribution Ledger Technology (DLT)
What is the most common DLT used in Cryptoassests?
Blockchain
What is a Blockchain?
Transactions entries called blocks that record transactions
What is a “Hash” in relation to a Blockchain?
It links blocks together using a digital fingerprint
Are Cryptoassets regulated by the FCA?
No they are not regulated
The main Cryptoassets defined by UK Cryptoassets Taskforce are (UKTF) are?
- Exchange Tokens
- Utility Tokens
- Security Tokens
Which Cryptoassets type is this?
- Means of exchange
Exchange Tokens
Which Cryptoassets type is this?
- Grant access to current/prospective product
- Does not grant same rights as specified investments
Utility Tokens
Which Cryptoassets type is this?
- Special characteristics that provide rights to specified investments like shares
Security Tokens
If a person withdraws 5% from an investment bond is tax payable immediately?
No it is tax deferred until the policy ends or death of the Policy holder
What is “Fungibility”?
The ability of Cryptoassets to be exchanged with good or assets of the same kind
