week 5 : Savings

Question 1

AER

Answer 1

annual equivalent rate - is the interest that will be earned on the money in 1 year and takes into account how often the providers pays the interest, the effect of compounding the interest ad any fees and charges

Question 2

bank rate

Answer 2

the interest rate that the BofE uses when it lends money to other banks. financial service providers take into account the bank rate when they decide how to set interest rate on their own products

Question 3

child trust fund(CTF)

Answer 3

a long term savigs account only available to children born between 1 september 2002 and 2 january2011. CTFs were set up by the govt to encourage people to build u savings for their children

Question 4

Consumer price index(CPI)

Answer 4

One of the means the government uses to measure inflation. It is
calculated by checking the price of a representative sample of
goods on a monthly basis – this enables statisticians to measure
how much prices are rising or falling

Question 5

financial conduct authority(FCA)

Answer 5

one of the 2 main regulators if financial services in the UK

Question 6

financial services compensation(FSCS)

Answer 6

A compensation scheme that pays compensation to account holders of up to £85,000 per provider if the provider goes into default (in other words cannot pay account holders the money they have in their accounts)

Question 7

HMRC

Answer 7

her majestys reveue and customs - the organisation that collects taxes in behalf of the govt

Question 8

income tax

Answer 8

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

Question 9

individual saving accounts (ISA)

Answer 9

An account that pays interest tax-free on savings up to a certain
level. There are two types of ISA: cash ISAs and stocks and shares
ISAs. Junior ISAs are available for people under 18. New, simpler rules for ISAs were introduced in 2014. The products offered under these rules were rebranded as New ISAs or NISAs, but providers still call them ISAs.

Question 10

inflation

Answer 10

a rise in prices, which means that the purchasing power of money falls

Question 11

instant access account

Answer 11

any account from which the hilder can withdraw their money at any time without losing any interest

Question 12

interest

Answer 12

Money either paid to an account holder by the provider, or charged to the account holder by the provider. Interest is paid on savings accounts and some current accounts and charged on borrowing eg an overdraft. Each provider decides the rate of
interest it will pay or charge, depending on the type of account
and, in some cases, the credit history of the individual account
holder

Question 13

interest rate

Answer 13

The amount, expressed as percentage, that a financial services
provider charges a borrower when it lends money, or pays to a
saver

Question 14

national savings and investment(NS&I)

Answer 14

a provider that is backed by the treasury(the govt department that manages the uks finances)

Question 15

notice account

Answer 15

An account for which the holder has to tell the provider in advance if they want to withdraw their money. If they do not give the provider the required amount of notice, they lose interest on their savings.

Question 16

personal allowance

Answer 16

the amount that an individual can earn before they have to pay income tax

Question 17

rate of return

Answer 17

The amount a saver gains in interest on their savings. For instance
an account paying 0.2% AER offers a lower rate of return than one paying 0.4% AER.

Question 18

retail prices index(RPI)

Answer 18

One of the ways the government measures inflation. It is calculated by checking the price of a representative sample of goods on a monthly basis but unlike CPI (see above), it also takes
into account mortgage interest payments and other costs associated with home ownership

Question 19

savings bonds

Answer 19

A savings product held for a fixed period eg two years. The holder can only make a limited number of withdrawals, or none at all, during that period without incurring a penalty.

Question 20

stocks and shares

Answer 20

Stocks, shares and equities are all words used to describe an
investment that gives the holder part ownership of a company. If the company’s value increases, so does the value of your share; if
its value falls, so does the value of your investment. Shares are
bought and sold on stock exchanges.

Question 21

tax year

Answer 21

Also known as the financial year, the tax year runs from 6 April to
5 April in the following year. The tax people owe is calculated according to how much they have earned April–April rather than January to December