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RO1 - chapter 2

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band of £125,000 - if parent leaves their main residence (or equivalent if downsized or sold) to a direct descendant (withdrawn for estates over £2m, £1 less for every £2 over the threshold).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