Unit 2.2 Savings and Investment Products

Question 1

annual exempt amount

Answer 1

The annual tax-free allowance for capital gains tax

Question 2

annuity

Answer 2

A financial product that pays a regular guaranteed income, in return for a lump sum paid to the product provider. It is used by people when they retire

Question 3

assets

Answer 3

Things that a person or a business owns. For a person their assets might include property, jewellery or financial products such as company shares

Question 4

captial gains tax

Answer 4

A tax payable on the gain (profit) made when you sell or give away an asset, for example property or shares. Each person is allowed to make a certain level of profit before being taxed on it (see annual exempt amount).

Question 5

capital growth

Answer 5

increase in the market value of an investment , over the amount the investor paid for it

Question 6

capital sum

Answer 6

total amount borrows or saved/invested , before interest.

Question 7

Cash ISA

Answer 7

account that pays interest tax-free on cash savings up to a certain level

Question 8

children’s bond

Answer 8

Investment bond taken out by a legal guardian of a child under the age of 16. Investing between £25-£3000, investor is guaranteed interest at fixed rate for 5 years, after the bond matures. Guardian controls bond until child turns 16.

Question 9

Commodity

Answer 9

goods that share the same characteristics wherever they are produced and whoever produces them. E.G. gold

Question 10

collective investments

Answer 10

investment produces such as unit trusts that let many retail investors pool their money together

Question 11

corporate bond

Answer 11

product that companies can use to borrow money over periods of time of 5 yrs +. Buyers can then sell bonds onto other investors. Bondholders do not own a share in company

Question 12

corporation tax

Answer 12

tax levied on taxable profits of limited companies and some other organisations

Question 13

deposit

Answer 13

sum of money placed by customer with financial services provider

Question 14

diversification

Answer 14

spreading investments across a range of different products, funds or types of assets so as to reduce the potential impact of any doing particularly badly

Question 15

endowment policy

Answer 15

insurance product that pays out a Lum sum after a specified term or if insured person. died before end of term. used for long term saving

Question 16

final salary scheme

Answer 16

type of occupational pension that pays an income related to amount of last salary a individual earned before retirement. have been largely replaced by money purchase schemes

Question 17

friendly society

Answer 17

mutual organisation that offers its members a wide range of financial products

Question 18

gilt

Answer 18

bond issued by uk gov as way for gov to borrow money. Most are issues with a redemption date - date that gov agreed to buy back. b esteem issue and redemption date gilts can be traded

Question 19

gov bond

Answer 19

bond issued by national gov - is a way for goc to borrow money.

Question 20

hedge fund

Answer 20

organisation that takes in funds from investors such as pension schemes act. and invests funds to try get high return. High risk

Question 21

HMRC

Answer 21

Her majestys revenue and customs - organisation that collect taxes on behalf of gov

Question 22

income tax

Answer 22

tax paid on earnings from employment, self employment and interest on savings

Question 23

index-linked

Answer 23

rising in line with inflation

Question 24

isa

Answer 24

account that pays interest tax-free on savings up to certain level. Cash isa and stocks and shares isa, junior isa for under 18s

Question 25

investment trust

Answer 25

collective investment, which operates as public limited company. investors buy shares in investment tryst, and trust then uses money from share issue to trade in stocks and shares

Question 26

junior isa

Answer 26

long term savings account set up by parent/guardian for parents future, child can only access money when 18