B1

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  • B1- Types of Financial Institution
    • Bank of england
      • The  UK’S central bank with responsibility for maintaining a healthy level of financial stability for the UK as a whole
        • Responsible for protecting the financial stability of the economy as a whole. Sets interest rates at a level designed to help achieve a stable economy. Lends to banks
        • Not a bank for members of the general public. Can raise interest rates making borrowing more expensive (more expensive to take out a loan).
    • Banks
      • An organisation that handles financial transactions and stores money on behalf of its customers
        • Offer a range of services and account types.Provide a secure place to store money. Pay interest on credit balances on most types of accounts.
        • Savings are only protected up to the value of £85,000, so if a bank goes bankrupt savings above this would be lost. Profit-making organisations owned by shareholders, therefore costs to individuals may be higher than necessary in order to fulfil shareholder objectives.
    • Building societies
      • Organizations that handle financial transactions  and store money on behalf of its members. Members (account holders) are part owners of the building society and have a right to vote and receive information on the running of the society.
        • Offer a range of services and account types.Provide a secure place to store money. Pay interest on credit balances on most types of accounts. Owned by members and therefore costs can be kept down allowing for higher interest payments.
        • Savings are only protected up to the value of £85,000, so if a building society goes bankrupt savings above this would be lost. May lack the business drive of a commercial bank.
    • Credit unions
      • Not-for-profit organisations that handle financial transactions and store money on behalf of their team members
        • Offer a range of services and account types.Provide a secure place to store money. Owned by members and therefore costs can be kept down allowing for higher interest payments.Often offer additional benefits to the community or a good cause.
        • Savings are only protected up to the value of £85,000, so if a credit union goes bankrupt savings above this would be lost. May lack the business drive of a commercial bank.
    • National Savings & Investment (NSI)
      • A government  backed organisation that offers a secure savings option
        • Rates are variable. Not as easy to access due to lack of a high street presence. Often required to give notice on withdrawals.
        • Government-backed, therefore offering security on 100% of savings with no upper limit. Offers additional services/methods of savings, e.g. premium bonds.
    • Insurance companies
      • Businesses that protect against the risk of loss in return for a premium. They are profit making organisations
        • Protect against unexpected losses or financial expenses. Easy and regular monthly payments make planning easy. Wide range of services and levels of cover to suit the needs of individuals.
        • Premiums are assessed on the estimated degree of risk which may be seen to penalise some members or groups of society too harshly.Profit-making organisations, therefore premiums will be charged to ensure shareholder needs are met.
    • Pension Companies
      • Businesses that sell policies to individuals, whether  privately or through employers, to allow them to save now to fund retirement in the future
        • Provides a structure to help plan for financial security after retirement.Deductions can be taken directly from pay and be fully or partially matched by an employer’s contribution.Experts are employed to make investment decisions.
        • Poor investment decisions by the pension company may result in a disappointing return.Money already invested in a pension cannot be released prior to the dates agreed in the policy.
    • Pawnbrokers
      • Organisations that offer a short-term source of finance to bridge the gap between  now and next receiving a wae
        • A quick way of acquiring cash needed for a short period of time. They are easy to access and they do not check your credit. Fewer requirements than other loans.
        • Interest charges are likely to be very high.Often results in paying back a final sum substantially higher than the initial amount borrowed.

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