UK Financial Services and Consumer Relationships (4/80) Flashcards by Breeze On

What are some key considerations when assessing individual income?

earned income from employed and self-employed jobs
income received from investments and deposits
rental income from investment property
financial support from others, eg, a former spouse or partner, or an existing trust
state benefits.

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What are some key considerations when assessing individual outgoings?

• rent or mortgage payments
• bills for food, heating and electricity
• council tax
• taxes – including National Insurance contributions (NICs)
• TV licence, phone and internet charges
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• maintenance being paid to a former spouse or in respect of a child
• credit card and loan outgoings
• regular insurance premiums
• contributions to pensions and regular savings plans
• sums budgeted for holidays and major life events.

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What is the financial life cycle?

The financial life cycle is a concept that is used for the purpose of considering what people’s financial
needs typically are at various stages in their lives.

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What are the typical stages of the financial life cycle?

Childhood
Single young adulthood
Young couple, no children
Parents with dependant children
Empty-nesters
Retired

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What are the two forms of Pension Scheme?

Salary-related (also known as defined benefit (DB)), or money purchase (defined contribution (DC)).

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What is the maximum amount you can have in a UK pension scheme?

GBP 1 mn

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What are the UK Tax bands?

Up to 12,500 - No tax (Personal Allowance)
12,500 - 50,000 - 20%
50,000 - 150,000 - 40%
Over 150,000 - 45%

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What is Inheritance Tax?

To summarise, IHT is a tax on gifts or transfers of value. There are two main chargeable occasions:

gifts made during the lifetime of the donor (lifetime transfers)
gifts or transfers on death, for example, when property is left to someone in a will (the death estate).

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What typical information would a Financial Advisor look for in an initial fact-find?

• basic information (such as name and address)
• current financial situation (level of savings, investments, mortgage)
• current income and outgoings (financial commitments such as loans, mortgage, bills)
• expected income and outgoings (potential future issues such as school fees, bonuses to be paid by
employee)
• aspirations and goals (retire early, move home).

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What are the requirements of the FCA’s Treating Customers Fairly (TCF) initiative?

Firms must be able to demonstrate that they are behaving fairly in all areas of their activities – from the way in which they communicate to the quality of their advice they provide to their customers.

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Is Financial Planning a one-off process?

No, it should be repeated at least annually or if circumstances change

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What is a term assurance life insurance?

Term assurance stays in force for a set period only, and pays out a sum on the death of the life assured.

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What are examples of Direct Investments?

Direct investments include securities such as bonds and shares.

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What are examples of In-Direct Investments?

Indirect investments include vehicles such as unit trusts, open-ended investment companies
(OEICs) and investment trust companies.

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What are some tools for Estate Planning?

a will (essential in every case)
a lasting power of attorney (LPOA)
trusts
life products, eg, life assurance
in some cases, other estate-planning vehicles or strategies.

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What is Income Support in the UK?

Income support is only available for people who are getting, or have recently stopped getting, severe
disability premium. Universal credit (UC) has now replaced income support for the majority of people.

What is Jobseekers Allowance in the UK?

Jobseeker’s allowance is paid if they are available for work and actively seeking work. To get it they must
be under 65 (men), or under 60 (women) and either not working, or working on average fewer than 16
hours per week.

What is Child Benefit in the UK?

Child benefit is a benefit for people raising children. It is paid for each child and is not affected by the
income or savings they have.

The income charge applies at a rate of 1% of the full child benefit award for each £100 of income
between £50,000 and £60,000. Therefore the charge on taxpayers with income in excess of £60,000 is equal to the amount of child benefit paid.

What is Council Tax Reduction in the UK?

CTR replaced council tax benefit and is sometimes known as council tax support. Local authorities have
responsibility for running their own schemes for help with council tax. CTR will be either a discount
worked out as a percentage of the council tax bill, a discount of an amount set out in the scheme or a
discount equal to the whole amount of the council tax bill.

What is Universal Credit in the UK?

UC has now replaced the following for most people:

Housing Benefit
Income-related Employment and Support Allowance
Income-based Jobseeker’s Allowance
Child Tax Credit
Working Tax Credit

How many years of NI does a person have to pay in order to get a State Pension?

10 years

How many years of NI are required for the Full State Pension?

35 years

What are the current state pension levels?

The basic state pension from April 2020 will rise to £134.25 (from £129.25), while those receiving the full
flat rate introduced in 2016 will see their pension increased to £175.20 (from £164.35). (Per week)

What is the minimum age for State Pension Payout?

66 (as of 2020). Plans to increase to 68 by 2028

What is secured borrowing?

Secured borrowing is when the lender has a legal charge over the borrower’s home or other assets they own, so that if they default on repayments, the lender can possess that property and sell it to get their money back.

What is a Consolidated Loan?

A consolidated loan is a type of secured loan. It allows the conversion of one or a number of unsecured loans – eg, credit card debts, overdrafts or bank loans – into one loan which is secured, usually against a property.

What are examples of unsecured borrowing?

* personal loans * overdrafts * credit cards * student loans * store cards.

What re the 6 major types of pension scheme in the UK?

• basic state pension • S2P (State Second Pension) • occupational pensions • stakeholder pensions • group personal pensions and personal/individual pensions • NEST – automatic enrolment and a minimum employer contribution pension which require minimum contributions from the employee of 5% and 8% from the employer and government respectively.

What is a Group Personal Pension (GPP)

Group personal pensions (GPPs) are personal pension arrangements, but are linked to an employer.

What is a Self-Invested Personal Pensions (SIPPs)

This is the name given to the type of UK government-approved personal pension scheme that allows individuals to make their own investment decisions from the full range of HMRC-approved investments.

Why choose a SIPP over a Personal Pension?

The HMRC rules allow for a greater range of | investments to be held in SIPPs than in personal pension plans, notably equities and property.

What are the 3 types of SIPP?

Deferred – this is effectively a personal pension plan in which most or all of the pension assets are generally held in insured pension funds (although some providers will offer direct access to mutual funds). Hybrid – a scheme in which some of the assets must always be held in conventional insured pension funds, with the rest being able to be self-invested. Pure or full – schemes offer unrestricted access to many allowable investment asset classes.

What is the minimum early retirement age?

Are SIPP contributions taxed?

No. Pension provider reclaims the base rate (20%). Higher tax payers can apply for rebate.

Are SIPP drawdowns taxed?

Not if the pot is under GBP 1mn. Over 1mn and they are taxed at 25% for income or 55% for lump sum.

What are the 3 categories of Financial Advisor?

• Whole-of-market advisers, who also provide advice on products from across the whole market. • Multi-tied advisers, when the adviser will recommend products from a limited range of providers (the panel). • Single-tied advisers, when the adviser will recommend products from one provider only.

What are Provider Platforms?

Provider platforms are services used by intermediaries (and sometimes consumers directly) to view and administer investment portfolios; they include wraps and fund supermarkets.

What is Commission Bias?

In markets involving commission payments to an intermediary, there are incentives for the intermediary to recommend either an individual product that offers the highest commission rates, or products from a particular provider offering high commission rates in general. The former may be termed product bias, the latter provider bias.