Types of Investment

Question 1

Advantages of an Individual Savings Account (ISA)

Answer 1

• No tax on the interest paid on money saved in an ISA

- No tax paid on dividend income

Question 2

Disadvantages of an Individual Savings Account (ISA)

Answer 2

• Limit on the maximum amount that can be deposited into account every year
• Withdrawn money can not be put back into an ISA

Question 3

Advantages of a Savings Account

Answer 3

• Money is safe and protected under government regulations

- Helps to negate the impacts of inflation

Question 4

Disadvantages of a Savings Account

Answer 4

• Lower interest rates than those typically on an ISA

- Tax is charged on interest paid

Question 5

Advantages of Premium Bonds

Answer 5

• The chance every month to win tax free prizes up to £1 million
• 100% security for their money

Question 6

Disadvantages of Premium Bonds

Answer 6

• No guaranteed returns

- Small chance to win any prizes

Question 7

Advantages of Bonds and Gilts

Answer 7

• Government gilts are typically seen as a safe and sound investment as governments tend to always have capital to make repayments
• Bonds and Gilts tend to return a higher rate of interest payments that are available elsewhere

Question 8

Disadvantages of Bonds and Gilts

Answer 8

• If a government was to run out of capital for some reason, then you run the risk of not being repaid your gilt on “maturity”
• The money you invest in Bonds and Gilts can only be released when it matures

Question 9

Advantages of Pensions

Answer 9

• Employers will top up the amount that is paid into your pension
• Money put into pensions will qualify for a tax relief

Question 10

Disadvantages of Pensions

Answer 10

• Money is typically tied up in these schemes and can’t be released until it has matured
• Tax is payable on income from pensions