TOPIC 5 KEYTERMS

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AER
Annual equivalent rate is the interest that will be earned on the money in one year and takes into account how often the provider pays the interest (for example, monthly or annually), the effect of compounding the interest and any fees and charges.
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BANK RATE
The interest rate that the Bank of England uses when it lends money to other banks. Financial services providers take account of the Bank rate when they decide how to set interest rates on their own products.
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CHILD TRUST FUND
A long-term savings account only available to children born between 1 September 2002 and 2 January 2011. CTFs were set up by the government to encourage people to build up savings for their children.
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CONSUMER PRICE INDEX
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.
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FINANCIAL CONDUCT AUTHORITY
One of the two main regulators of financial services in the UK (the other is the Prudential Regulation Authority).
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FINANCIAL SERVICE COMPENSATION SCHEME
A compensation scheme that pays compensation to account holders of up to a certain amount per provider if the provider goes into default (in other words cannot pay account holders the money they have in their accounts).
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HMRC
Her Majesty’s Revenue and Customs – the organisation that collects taxes on behalf of the government.
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INCOME TAX
Tax paid on earnings from employment, self-employment and interest on savings
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ISA
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.
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INFLATION
A rise in prices, which means that the purchasing power of money falls.
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INSTANT ACCESS ACCOUNT
An account from which the holder can withdraw their money at any time without losing any interest.
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INTEREST
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.
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INTEREST RATE
The amount, expressed as percentage, that a financial services provider charges a borrower when it lends money, or pays to a saver.
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NATIONAL SAVINGS AND INTEREST
A provider that is backed by the Treasury (the government department that manages the UK’s finances).
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NOTICE ACCOUNT
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.
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PERSONAL ALOWANCE
The amount that an individual can earn before they have to pay income tax.
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RATE OF RETURN
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.
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RETAIL PRICE INDEX
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, it also takes into account mortgage interest payments and other costs associa
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SAVINGS BOND
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.
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STOCKS AND SHARES
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. S
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TAX YEAR
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.
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Other cards in this set

Card 2

Front

The interest rate that the Bank of England uses when it lends money to other banks. Financial services providers take account of the Bank rate when they decide how to set interest rates on their own products.

Back

BANK RATE

Card 3

Front

A long-term savings account only available to children born between 1 September 2002 and 2 January 2011. CTFs were set up by the government to encourage people to build up savings for their children.

Back

Preview of the back of card 3

Card 4

Front

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.

Back

Preview of the back of card 4

Card 5

Front

One of the two main regulators of financial services in the UK (the other is the Prudential Regulation Authority).

Back

Preview of the back of card 5
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