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RO1 - chapter 2
| Question | Answer |
|---|---|
| What is the maximum annual contribution to Junior ISA? (2018/19) | £4,260 per annum |
| Which financial product was replaced by Junior ISA in 2011? | Investment Child Trust Fund (CTF) |
| What is maximum investment plan (MIP)? What is the maximum annual premium into MIP? | Type of saving endowment. £3,600 pa |
| What is maximum premium into Friendly Society Saving Plans? What’s the tax treatment? | £25 per month/ £270 per annum Find grows free from income tax or CGT. |
| What does it mean when investment trust is trading at discount? | Demand for the shares is low, so the price of the share is lower than the value of its underlying assets. |
| What does it mean when investment trust is trading at premium? | Demand for the shares is high, so the price of the share is higher than the value of its underlying assets. |
| What are two main features of investment trust? | Closed- ended - set number of shares. Gearing - allowed to borrow money to invest. |
| What is a contract for differences (CFDs)? | Type of derivative. Contract between 2 parties that one of them will pay the difference between the current price of an asset and its value at a later date. |
| What are main components of a structured product? | NOTE - type of debt security, used as a capital protection DERIVATIVE - capital growth potential element |
| What’s IHT nil band (2018/19)? | £325,000 + residence nil band of £125,000 - if parent leaves their main residence (or equivalent if downsized or sold) to a direct descendant (withdrawn for estates over £2m, £1 less for every £2 over the threshold). |
| What IHT rate is payable when estate is left to UK domiciled spouse? | No IHT. |
| What insurance product is suitable to cover IHT on death? | Whole of life policy written on a last survivor basis under trust (takes the proceeds out of the estate). |
| What is potentially exempt transfer (PET)? | Gift where no IHT is due if the donor survives 7 years. |
| Can IHT nil band be transferred? | Yes, if a spouse or civil partner doesn’t use their nil band on death the proportion is transferred to the other spouse. |
| What’s the difference between tax avoidance and tax evasion? | AVOIDANCE - arranging taxpayer’s affairs so they legitimately pay less tax. EVASION - deliberate failure to provide full and accurate information, illegal. |
| Which body is mainly responsible for state benefits? | Department of Work and Pensions (DWP) |
| What’s the benefit cap for 2018/19 in London? And outside London? | LONDON - couple or parent with children - £442.31 per week, £23,000 pa - single person - £296.35 per week, £15,410 pa OUTSIDE LONDON - couple or parent with children - £384.62 per week, £20,000 pa - single person - £257.69 per week, £13,400 pa |
| Which benefits will be replaced by Universal Credit? (6) | - Chile Tax Credit - Housing benefit - Jobseeker’s Allowance (income-based) - ESA (income-related) - Income support - Working Tax Credit |
| What’s Goverment’s bonus on Lifetime ISA? What the maximum contribution? | 25% bonus Max £4,000 pa |
| What are age restrictions on Lifetime ISA? | 18-40 to open an account. Contributions can be made up to the age of 50. |
| What are the main types of pooled investments? (4) | - Open-ended investment funds - Life insurance and pension funds - Endowments - Investment trusts |
| What are the main features of Permanent Interest Bearing Shares (PIBS), type of fixed interest investment issued by building societies? | - undated - interest payments can be missed in exceptional circumstances - missed interest payments don’t need to be made up at a later date |
| What are 4 main asset classes? | - shares - bonds - property - cash |
| How many qualifying years of NICs are required to receive a full state pension? | 35 years |
| What is the main difference between Compulsory Purchase Annuity (CPA) and Purchased Life Annuity (PLA)? | CPA - bought from a proceeds of a pension, taxed as earned income at individaul’s marginal rate. PLA - purchased from other capital or tax free lump sum, separated into income and capital element for tax purposes. |
| Whats current annual allowance for pension contributions? | 100% of earnings or £40,000 pa (whichever is lower) Money Purchase Annual Allowance (for those who accessed their pension benefits flexibly) £10,000 pa. |
| When was contracting out abolished? | 6 April 2016 |
| What are two main requirements to be eligible worker for automatic enrolment? | - age: 22 - state pension age - wage: above £10,000 pa |
| What is automatic enrolment lower earnings limit for 2018/19? | £6,032 |
| What does it mean when fund is passively managed? | Fund aims to track the market it’s invested in. |
| What’s investment bond? | Lump sum investment with life insurance office. It has a life insurance element. Money are tied in for at least 5 years. Investor carries a risk of loosing some of the capital. |
| What’s an endowment? | Regular premium policy with life cover element and investment element. In the past popular type of interest-only mortgage repayment vehicle. Fixed term. Offered by life offices. |
| What are two different types of endowment policies? | Unit linked and with profits. |
| When can the saver access their Lifetime ISA without penalty? | - for a deposit for first property up to £450,000 in UK - after their 60th birthday |
| What are two main uses of life policies in estate planning? | - moving value of of individual’s estate without giving away assets immediately to beneficiaries - providing tax free lump sum to cover IHT liability |
| Are death benefits paid under trust liable for IHT? | No |
| What does it mean that benefit is means-tested? | Benefit is granted beaded on individual’s income. |
| When is tax charge applied on child benefit? | If parent/spouse/partner earns £50,000 pa |
| What is the maximum property value to qualify for support for mortgage interest? | £200,000 or £100,000 for those getting state pension credit |
| People retired on or after 6 April 2016 will receive which pension benefit? | New State Pension |
| People who retired befor 6 April 2016 will be eligible to receive which pension benefits? | Basic State Pension and Additional State Pension |
Created by:
Achmarowska
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