Year 12 LIBF (CeFS)

Past Non-Case Study Questions

Unit 1 Financial Capability for the

Immediate and Short Term

1 | Page
January 2016
Identify five key features of a cash ISA savings account. (5 marks)

Candidates only need to identify five bullet points – one mark for each bullet point identified.
Key features could include, but are not limited to, the following:
● There is a tax-free allowance; no tax is paid on the interest received
● This allowance is just for one financial year; the allowance cannot be carried over into the next tax year
● The allowance in 2020/21 is £20,000.
● The amount that can be invested in a cash ISA savings account will depend on the amount, if any, invested in a
stocks and shares ISA in the same year
● The rate of interest can be fixed or variable depending on the particular account
● Interest rates may vary according to account balance
● The amount required to open an ISA varies
● Access can vary: some are instant access and some are for a fixed term
● An ISA savings account can only be held in the name of one person; joint accounts are not allowed
● Some accounts, but not all, accept transfers in from other ISA accounts
● The account holder must be a UK resident
● The account holder must be aged 16 or over
● The method of operation and the fact that it varies, e.g. branch (possibly with passbook or cash card), internet,
post, telephone, mobile.
● The account holder can only open one ISA in a particular tax year
● If the account holder withdraws money from an ISA and they have used their annual allowance in full, they
cannot top it up again until the next year, although this rule is now changing
● ISA deposits are protected by the Financial Services Compensation Scheme up to £85,000.

January 2016
Analyse why many financial services providers are closing branches. (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis. Only a few reasons are included and the analysis of them does not go
1 1-3
very far.

2 4-5 A good analysis. Several reasons are included and the analysis of them is developed.

Analysis could include, but is not limited to, the following:

∙ Closing branches is a means of saving money – providers say that branches are too
Cost-Driven
expensive to run

∙ Branch closures in banks are likely to result from a drive for profits from shareholders.
Drive for Profits Closures reduce running costs, but also release capital value as branches are in prime
central locations

∙ Branch closures could be seen as a response to the use of alternative methods of banking,
Alternative e.g. online, mobile phone
Method of Banking
∙ Fewer people visiting branches (RBS study)

Alternative ∙ Providers are keen to promote their alternatives, such as online sites and apps

Takeover and
∙ Two banks merge and close duplicate branches
Mergers

2 | Page
January 2016
A person, aged 18, is paid twice the national minimum wage for someone of their age.

Calculate how much they earn per hour. (1 mark)

● The national minimum wage for somebody aged 18, from 1 st October 2015, is £5.30 per hour.
● A person who is paid twice this wage will earn £5.30 x 2 = £10.60 per hour.

January 2016
State four components of a P45, apart from a person’s name and address, date of birth and gender and
the name and address of the employer. (4 marks)

Candidates could state the following:

● Tax code
● PAYE (Pay As You Earn) reference number
● National Insurance (number)
● Leaving date
● Earnings in the tax year (so far)
● Income tax paid in the year (so far)
● Student loan deduction
● Payroll number
● Department or branch where a person worked
● Instructions to employee
● Instructions to new employer

January 2016
Analyse why it is important for a person to produce a cash flow forecast as part of their
short-term financial management. (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis. Only one or two reasons are included and the analysis of them does not
1 1-3
go very far.

2 4-5 A good analysis. Several reasons are included and the analysis of them is developed.

Analysis could include, but is not limited to, the following:

∙ A cash flow forecast can be used to predict incomings and outgoings over several time
Incomings and periods
outgoings ∙ A cash flow is made up of a series of budgets which are aligned to the frequency of a
person’s income

∙ It can be used to identify when irregular income will be received, such as earnings from
Irregular income
self-employment

Large payments ∙ It can be used to identify when unusually large payments must be made

Deficits ∙ It can be used to identify options for how and when to finance short-term deficits

Surpluses ∙ It can be used to identify when a person might have surpluses that they can use to save or

3 | Page
 to make larger repayments on debts, if applicable

∙ Forces person to identify items of income and expenditure and amounts

Planning
∙ Allows later comparison of targets to actuals

January 2016
Describe how Citizens Advice can help people who are in debt. (5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited description. Only a few examples are included and the description of them does
1 1-3
not go very far.

A good description. Several examples are included and the description of them is
2 4-5
developed.

Description could include, but is not limited to, the following:

Free Advice ∙ Citizens Advice can provide free advice on debt issues and entitlement to state benefits

Independent
∙ It can provide independent advice on debt issues
Advice

Face-to-Face
∙ It can provide face-to-face advice on debt issues
Advice

Telephone Advice ∙ It has a telephone ‘Adviceline’

∙ The advice and information offered can cover how to sort out debts, how to dispute a
Type of Advice
credit debt, budgeting, options for getting out of debt and dealing with urgent debts

∙ In 2013, more than 1.4 million people asked it for advice on debt issues, suggesting that it
Statistical Evidence
is of great help to those in debt

Other Source ∙ Advisers are aware of other sources of advice related to a person’s needs

March 2016
Identify five key features of online savings accounts. (5 marks)

Candidates only need to identify five bullet points – one mark for each bullet point identified.
Key features could include, but are not limited to, the following:

● Capable of being operated 24/7, 365 days a year

● Funds can only be moved between accounts, eg cannot deposit cash / cheques in an online savings account (e.g.
a cheque would need to be posted)
● Requires access to internet
● Interest rate / payment / return / AER
● Fixed rate / variable rate
● Introductory interest rate bonus or not (how much of a bonus and for how long?)
● Initial amount to open an account
● Minimum deposits / payments
● Maximum deposits / payments
4 | Page
● Instant-access or notice account
● The number of withdrawals that can be made
● Tax status: tax-free (eg ISA) or taxable
● The amount that is protected through the Financial Services Compensation Scheme; safety / security
● Ethical features (e.g. Sharia-compliant)
● Related to age of customer
● Related to whether an applicant is an existing customer or not, possibly leading to preferential mortgage offer

March 2016
Analyse the usefulness of postal banking to a consumer. (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis. Only a few reasons are included and the analysis of them does not go
1 1-3
very far.

2 4-5 A good analysis. Several reasons are included and the analysis of them is developed.

Analysis could include, but is not limited to, the following:

∙ Avoids the need to go to a branch of a bank

∙ Useful if a local branch is closed ∙ Easily accessible for those with mobility issues
Advantages of
∙ Useful if signed forms are required
Postal Banking
∙ A physical message can be communicated and kept for future reference

∙ Can be operated while abroad

∙ Can take a number of days for something to be sent and returned, depending on the
quality of the postal service

Disadvantages of ∙ Possibility of something getting lost in the post

Postal Banking ∙ Will require a stamp, which is an additional cost (although some institutions may provide a
‘freepost’ envelope)

∙ Unable to receive an immediate response to questions

March 2016
A person, aged 25, is paid five times the national minimum wage for someone of their age.

Calculate how much they earn per hour. (1 mark)

● The national minimum wage for somebody aged 21, from 1 st October 2015, is £6.70 per hour.
● A person who is paid five times this wage will earn £6.70 x 5 = £33.50 per hour.

March 2016
State four aspects of an individual’s National Insurance contributions. (4 marks)

Candidates could state the following:

5 | Page
● They are paid by people who work
● These people are issued with a National Insurance number
● These people are aged between 16 and the state pension age
● They are paid by employees who earn more than £153 a week (accept £155 a week)
● They are paid by the self-employed and who are making a profit of over £5,885 a year (accept £5,965 a year)
● The total National Insurance contributions paid by someone over a number of years has an impact on their
entitlement to state benefits: state pension, Jobseeker’s Allowance, Employment and Support Allowance,
Maternity Allowance, bereavement benefits
● In the old pension system, a person usually needed to have made contributions for a minimum of 30 years; in
the new pension system, from April 2016, this figure is 35 years
● People can make voluntary contributions to fill in any gaps in their contribution history#
● The amount of National Insurance that an individual pays depends on their employment status and their income
● National Insurance contributions are paid by the employer direct to HMRC through the PAYE scheme
● Different class contributions

March 2016
Analyse the effect that changes in the cost of living could have on budgeting. (5 marks)
Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis. Only one or two reasons are included and the analysis of them does not
1 1-3
go very far.

2 4-5 A good analysis. Several reasons are included and the analysis of them is developed.

Analysis could include, but is not limited to, the following:

Possible Reasons ∙ Income in the budget needs to be compared with the rate of inflation to see if it is
Why A Budget increasing in ‘real’ terms, i.e. to assess its purchasing power
Needs to Take
∙ This will help when people budget and forecast their cash flow
Account of
Changes in The ∙ It will have an effect on the outgoings as well as the income
Cost of Living
∙ If inflation is relatively high, this will affect the expenditure, so a budget
will need to be flexible to take such changes into account

∙ Some price rises are linked to the inflation rate, e.g. rail prices

∙ Some wages, salaries, benefits and pensions are linked to the rate of inflation

∙ Rates of interest on savings need to be compared with inflation to make a judgement

about the ‘real’ value of the money made in savings accounts

∙ Inflation may affect the budget balance; e.g. if the rise in income does not correspond to
the rise in expenditure, this may make a budget deficit more likely

∙ There may be no impact on particular individuals if the price rises do not affect their
individual circumstances (eg rising petrol prices will have little direct effect on non-drivers)

∙ There could be a positive impact if the price of a particular product reduces (e.g. falling
petrol prices will help drivers)

∙ Reward comments on deflation and disinflation

∙ Reward comments on the impact of such changes, e.g. adverse changes will reduce

6 | Page
 discretionary spending and lead to a need to review priorities and to revisit financial plans

March 2016
Describe what is meant by ‘good debt’, using appropriate examples to support your answer.
(5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited description. Only a few examples are included and the description of them does
1 1-3
not go very far.

A good description. Several examples are included and the description of them is
2 4-5
developed.

Description could include, but is not limited to, the following:

Justification of
∙ A situation where borrowing can be justified; it makes sense to take on the debt
Borrowing

Ability to Meet ∙ A situation where the person is able to meet the commitments on the repayment of the
Commitments debt

∙ Experts state that long-term debt repayments should not exceed 36% of gross monthly
Statistical Example
income

∙ One example could be a mortgage because it is providing a home for people who, after a
period of time, will own the property; it can also be considered as financing an investment if
the property gains in value over the duration of the debt

∙ Another example could be a student loan to give a person the opportunity to go to

Examples of ‘Good
university; they should then be able to receive a higher level of remuneration in later life.
Debt’
This form of debt can be seen as an investment in human capital. Student loan repayments
are designed to make a minimal impact

∙ A third example could be repairing a car so that a person can travel to work and gain
income

January 2017
Identify five key features of the return on savings accounts. (5 marks)

Candidates only need to identify five bullet points – one mark for each bullet point identified.
Key features could include, but are not limited to, the following:

∙ interest expressed as an annual equivalent rate (AER)

∙ interest could be paid monthly or annually
∙ interest could be fixed or variable
∙ formula for AER set out in the Code of Conduct for the Advertising of Interest-Bearing Accounts
∙ interest is paid gross (ie with no tax deducted) but tax is payable if the account holder has exceeded their personal
savings allowance
∙ interest rate may include a first-year bonus
∙ interest rates move in line with changes in Bank rate
∙ a larger sum of money saved may earn a higher rate of return
∙ with some accounts, the rate of interest is tiered with higher rates for larger amounts

7 | Page
∙ the rate of interest may depend on the regularity of deposits
∙ the interest rate may be higher the longer the savings term
∙ withdrawals: a notice account may have a higher rate of interest than an instant access account
∙ the rate of interest may be contrasted with the rate of inflation to see if the ‘real’ return is positive or negative, ie is
the interest rate higher or lower than the inflation rate?

January 2017
Analyse the usefulness of online banking to a consumer. (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis. Only a few reasons are included and the analysis of them does not go
1 1-3
very far.

2 4-5 A good analysis. Several reasons are included and the analysis of them is developed.

Analysis could include, but is not limited to, the following:

∙ Easy to use/convenient

∙ Capable of being operated 24/7, 365 days a year

∙ Funds can be moved between accounts

Potentially Useful: ∙ Payments can be made to other people
Benefits of Online
Banking ∙ Some types of account can be opened online

∙ Interest rates are usually higher on savings accounts

∙ Saves the need to visit a bank branch

∙ An online chat facility is often available

∙ Cash or cheques cannot be deposited in an online account

Perhaps Not So ∙ Requires access to the internet

Useful: Drawbacks ∙ Requires basic computer skills
of Online
∙ Mistakes may be made inputting data
Banking
∙ There is not an employee of a provider to talk to, as would be the case in a branch,
although there is often an online chat facility and usually a telephone helpline available

January 2017
State the maximum number of hours per week that an employee can work, averaged over
17 weeks, unless they choose to work longer. (1 mark)

●The answer is 48 hours

January 2017
Identify four pieces of information that can be found on a P45. (4 marks)

Candidates could state the following:

∙ tax code
∙ PAYE reference number
8 | Page
∙ National Insurance number
∙ leaving date
∙ earnings in the tax year so far
∙ income tax paid in the tax year so far

January 2017
Analyse the impact that an increase in the cost of living could have on an individual’s
personal finances (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis of the impact of the increase. Only one factor is included and the analysis
1 1-3
of it does not go very far.

A good analysis of the impact of the increase. At least two factors are included and the
2 4-5
analysis of them is developed

Analysis could include, but is not limited to, the following:

∙ Increase in prices would increase expenditure

∙ This could make a person less well off if income did not rise in line with inflation

∙ This could lead to a deficit in a person’s finances

Possible Impact of ∙ This could lead to debt
An Increase in The
Cost of Living on ∙ This would be likely to lead to a review of financial priorities
An Individual’s ∙ This would also be likely to lead to revisiting/reassessing financial plans and goals
Personal Finances
∙ The increase in the cost of living could lead to an increase in rates of interest, which would
be beneficial to a person’s savings but would lead to higher costs to borrow money

∙ The rate of inflation would need to be deduced from the rate of interest paid on savings
accounts to see if there was a ‘real’ return

January 2017
Describe what is meant by ‘bad debt’, using appropriate examples to support your
answer. (5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited description. Only a few examples are included and the description of them does
1 1-3
not go very far.

A good description. Several examples are included and the description of them is
2 4-5
developed.

Description could include, but is not limited to, the following:

Description of ∙ A situation where borrowing cannot be justified; it does not make sense to take on the
9 | Page
 debt

∙ A situation where the person is unable to meet the commitments on the repayments of
What Is Meant By the debt
‘Bad Debt’ ∙ The MAS defines bad debts as ‘those that drain your wealth, are not affordable and offer
no real prospect of “paying for themselves” in the future’

∙ Description may involve a contrast with ‘good debt’

∙ Inability to pay off the full balance on a credit card leading to interest being charged
Examples of ‘Good
Debt’ ∙ The necessity of arranging a payday loan, which will incur a particularly high rate of
interest

March 2017
Identify four features of the national minimum wage. (4 mark)

NB: candidates only need to identify four features – one mark for each feature identified
Features of the national minimum wage could include, but are not limited to, the following:

∙ It is a statutory wage, i.e. it is established by law (the National Minimum Wage Act 1998).
∙ It establishes a minimum wage each year; one mark can be allocated for one such figure only. From 1 October 2016
the rates are as follows: Age 21–24: £6.95 per hour Age 18–20: £5.55 per hour Under 18: £4.00 per hour Apprentices
under 19 or in their first year: £3.40 per hour from 1 October 2015 the rates were as follows: Age 21 and over £6.70
Age 18 – 20 £5.30 Under 18 £3.87 Apprentices under 19 or in their first year £3.30
∙ The minimum wage is increased each year on either 1 st April / 1st October.
∙ The Low Pay Commission advises the government what the minimum wage should be every year.
∙ People must be of school leaving age to receive the minimum wage.
∙ The minimum wage applies to most workers, but there some exceptions, e.g. members of the armed forces (one
mark only for an exception)
∙ If a worker is entitled to the minimum wage but does not receive it, they are legally entitled to examine their
employer’s records and claim any missing payments; if there is an issue, they can take their employer to an industrial
tribunal.

March 2017
Compare a credit card and a cash card as a means of exchange. (5 marks)
Level Marks Descriptor

0 0 No relevant comparison.

A limited comparison. The answer is rather superficial with only a limited attempt to
1 1-3
explicitly compare a credit card and a cash card as a means of exchange.

2 4-5 A good comparison. There is a genuine attempt to explicitly compare a credit card and a
cash card as a means of exchange. There is a good balance to the answer in terms of

10 | Page
 reference to credit cards and cash cards.

Comparisons could include, but is not limited to, the following:

∙ A credit card can be used to pay sellers in a shop, over the internet or by telephone. A cash
card only allows account holders to withdraw cash from their account at a branch or by
using an ATM; it cannot be used to pay sellers
Comparison of ∙ A credit card is a form of borrowing up to the cardholder’s borrowing limit. A cash card
Credit Cards and cannot be used as a form of borrowing
Cash Cards as A
Means of ∙ A cash card is usually provided with a current account, but is also offered on
Exchange some savings accounts. A credit card is not linked to a current account or a
savings account

∙ A person aged under 18 or on a low income may be eligible for a cash card
but not a credit card

March 2017
State which Act establishes the details that employers must include in PAYE documents. (1 mark)
● The answer is the Employment Rights Act (1996)

March 2017
Identify five product features to consider when choosing a savings product. (5 marks)

Candidates only need to identify five features - one mark for each feature identified.
Features could include, but are not limited to, the following:

● return, i.e. AER

● inflation, i.e. whether the AER is higher or lower than the rate of inflation
● tax status, i.e. whether tax may have to be paid on interest received
● access/term, i.e. instant/easy-access account, notice account, fixed account
● frequency/regularity of deposits
● operation, e.g. passbook, online, telephone, post, mobile
● safety, i.e. covered by FSCS or provided by NS&I
● provider, e.g. bank, building society, credit union, NS&I
● eligibility, e.g. age limits, new or existing customers

March 2017
Describe the usefulness of an ATM to a financial services consumer. (5 marks)
11 | Page
 Level Marks Descriptor

0 0 No relevant description.

A limited description. Only a few examples are included and the description of them does
1 1-3
not go very far.

A good description. Several examples are included and the description of them is
2 4-5
developed.

Description could include, but is not limited to, the following:

∙ An ATM allows customers to withdraw cash from their account when a bank branch is
closed

∙ ATMs operate 24/7, so they are extremely convenient

∙ ATMs are not only located outside financial institutions, but also in areas such as shopping
The Usefulness of centres, airports and railway stations
An ATM To A
Financial Services ∙ ATMs often do not involve an additional charge
Consumer ∙ A receipt is provided if requested, showing the account holder the current balance of the
Examples Of ‘Good account
Debt’ ∙ ATMs can be used abroad to withdraw cash in the local currency

∙ Security is provided with the use of a PIN

∙ An ATM can be used to credit/top-up a mobile phone

∙ An ATM may provide mini-statements

March 2017
Compare the benefits and drawbacks of branch banking and online banking for a
financial services consumer. (5 marks)
Level Marks Descriptor

0 0 No relevant comparison.

A limited comparison. The answer is rather superficial with only a limited attempt to
1 1-3 explicitly compare the benefits and drawbacks of branch banking and online banking for a
financial services consumer.

A good comparison. There is a genuine attempt to explicitly compare the benefits and
2 4-5 drawbacks of branch banking and online banking for a financial services consumer. There is
a good balance to the answer in terms of reference to branch banking and online banking.

Comparisons could include, but is not limited to, the following:

∙ Personal service can be provided

∙ Some customers prefer banking face to face

The Benefits of ∙ This may be helpful if a particular financial issue is complex

Branch Banking
∙ Questions can be asked and answers acted upon

∙ Various leaflets and brochures are available to pick up that inform the consumer of
services and products provided by the financial services provider

12 | Page
 ∙ Opening hours can be restrictive and are usually only 9am–5pm Monday to Friday and
9am–1pm on a Saturday (although some of the challenger banks offer more extensive
opening hours, such as Metro Bank and M&S Bank)
The Drawbacks of
∙ There may be a queue to be served, especially at busier times during the day, such as
Branch Banking
lunchtime

∙ It is usually difficult to arrange an immediate appointment to speak with somebody if the

issue is complex

∙ Banking services can be operated 24/7, so there are not the same time restrictions as apply
to bank branches
The Benefits of
∙ Banking online is very convenient and can be done ‘on the move’
Online Banking
∙ Customers can immediately see the balance of accounts and money can be moved from
one account to another very easily

∙ There may be issues of internet security and customers may be worried about fraud

∙ Sometimes the internet systems of financial services providers crash and can be out of
The Drawbacks of
operation for hours or even days
Online Banking
∙ Online banking requires having the necessary hardware and software and the skills to
operate accounts online

January 2018
Identify five considerations that people should make when choosing a loan product. (5 marks)

Considerations could include, but are not limited to, the following:

∙ what they can afford to repay;

∙ the costs of different borrowing methods;
∙ the risks of different borrowing methods;
∙ how long they need to borrow for; and
∙ how they apply for and manage the debt.
∙ cancellation rights and the ‘cooling off’ period;
∙ alternative forms of borrowing.

January 2018
Analyse how useful borrowing by overdraft might be to an unemployed person. (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis of the impact. Only one factor included or two factors included and the
1 1-3
analysis does not go very far

A good analysis of the impact of the increase. At least two factors are included and the
2 4-5
analysis of them is developed.

Analysis could include, but is not limited to, the following:

General ∙ Designed for short term only
Considerations
∙ Needs a current account

13 | Page
 ∙ Should not be a regular occurrence

∙ Risks of not repaying the overdraft

∙ All overdrafts are offered subject to status – so an unemployed person’s status may not
meet the required standard

∙ Not repaying the overdraft may result in a higher EAR, smaller credit limit or being rejected
for a new overdraft
Unemployed
∙ Any debit card transactions needing to be paid will be paid out even though it may mean
Considerations
the account goes further overdrawn

∙ Unemployed people may find it harder to pay off overdrafts

∙ Budgeting is still very important to ensure that borrowing by overdraft does not become a
habit or lead to more expensive forms of borrowing

January 2018
Give an example of how providers of charge cards make a profit. (1 marks)

Examples could include, but are not limited to, the following:

∙ Issuers charge service fees.

∙ Issuers charge cash advance fees and charges.
∙ Issuers charge annual fees.

January 2018
Identify four (and only four) benefits of telephone banking when compared to branch
banking. (4 marks)

Benefits could include, but are not limited to, the following:

∙ Customers can contact their bank from wherever they are.

∙ The call centre often has longer opening hours than branches.
∙ Call centres are less expensive than branches for providers to operate.
∙ Customers can access specialist advice that is not available in the branch.
∙ Customers can ask questions to clarify information or raise concerns and get tailored responses.

January 2018
Analyse the impact of an increase in the Bank of England base rate on a person’s finances. (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis of the impact. Only one factor included or two factors included and the
1 1-3
analysis does not go very far

A good analysis of the impact of the increase. At least two factors are included and the
2 4-5
analysis of them is developed.

Analysis could include, but is not limited to, the following:

For Savers ∙ savers receive more income

∙ providers improve their savers’ interest rates

14 | Page
 ∙ more people save

∙ more people invest

∙ Borrowers are charged more in repayments

∙ Providers increase their loan rates

For Borrowers
∙ Fewer people borrow

∙ Fewer people purchase goods and services

January 2018
Describe the features of Clearing House Automated Payment System (CHAPS), using
appropriate examples to support your answer. (5 marks)

Level Marks Descriptor

0 0 No relevant description.

1 1-3 A limited description. Up to three factors included. Examples may be weak.

2 4-5 A good description. At least three factors are included and the examples used are good.

Description could include, but is not limited to, the following:

∙ Same day automated system.

∙ Used for high value payments.
∙ Performed in branch.
∙ Providers charge for the service.
∙ Transaction is secure and guaranteed.

March 2018
Describe the role of the Financial Conduct Authority (FCA). (5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited description. The answer is rather superficial with only a limited attempt to
1 1-3
explicitly describe the role of the FCA.

A good description. There is a genuine attempt to describe the role of the FCA that goes
2 4-5
beyond simple lists or identification.

15 | Page
Description could include, but is not limited to, the following:

∙ It reports to the Treasury and can receive direction from the Financial Policy Committee.
∙ It has three operational objectives:
o to secure an appropriate degree of protection for consumers;
o to protect and enhance the integrity of the UK financial system; and
o to promote effective competition in the interests of consumers.
∙ The FCA meets its objectives by supervising providers to ensure they are conducting their businesses appropriately.
It sets out rules relating to the way they carry out their business activities.
∙ It has investigative powers to gather information from providers and consumers. It also has enforcement powers so
that it can take action when it discovers providers have broken rules.
∙ These actions include: o imposing fines on providers and/or individuals; o withdrawing or suspending a provider’s
authorisation to operate; and o ordering providers to compensate customers.
∙ The FCA gathers information by making supervisory visits to providers, monitoring transactions, contacting
consumers directly, and monitoring markets and the economy.
∙ It manages risk in two ways:
o by investigating individual providers or linked providers; and
o by investigating themes or issues in the market.
March 2018
Describe the effect of key external influences on the retirement stage of the personal life cycle. (5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited attempt to describe. The answer is rather superficial with only a limited attempt
to explicitly describe the effects of the key external pressures in the retirement stage of the
1 1-3
life cycle. There may only be identification of the external pressures without description of
the effects.

A good attempt to describe. There is a genuine attempt to explicitly describe both the
2 4-5 pressure and the effects in the retirement stage of the life cycle. The answer goes beyond
simple identification of the key pressures OR the key effects.

Students may offer sensible suggestions and attract marks. Students can give the pressure as long as
they explain the effect. However, examples from the study materials include the following:

∙ A longer life expectancy means that people retiring now are likely to be retired for more years than in
previous generations. This means they need a source of income for longer.
∙ Most people qualify for a state pension paid by the government once they reach a certain age. The
government funds state pensions from the taxes and National Insurance contributions made by people
who are currently working.
∙ By 2050 one in four people in the UK will be aged 65 or over. As a result, there will not be sufficient contributions
from working people to pay state pensions to all the people who qualify, using the current age limits.
∙ The government is therefore increasing the state pension age to 66 for both men and women by 2020 and 67 by
2028.
∙ People who rely on the state pension for all or part of their retirement income will need to delay their retirement
life stage until they reach the new pension age.
∙ Some people may have additional pension income from other sources. Most employees, for example, are entitled
to an occupational pension provided by their employer, subject to certain rules.
∙ The income paid by the state pension and most occupational pensions is relatively modest compared to earnings as
an employee, so many people need to work beyond the state pension age.
∙ Most employers cannot force staff to retire at a specific age, although some can justify imposing a retirement age
on grounds such as safety.
∙ Another retirement stage trend is pensioners moving to another country to live because of a warmer climate
and/or reduced living costs.
16 | Page
March 2018
Identify five (and only five) ways to reduce the cost of motor insurance. (5 marks)

One mark for each relevant point made related to reducing the cost of motor insurance. Examples include:

∙ Shop around.
∙ Compare the details of what is covered by different policies, as well as the cost.
∙ Fit an approved alarm or immobiliser.
∙ Premiums may also be lower for cars kept in a garage.
∙ Pay a higher voluntary excess.
∙ Only use the vehicle for social, domestic and pleasure purposes.
∙ Build up a no-claims discount.
∙ Pay the premium as one payment if possible.
∙ Drive a lower-powered car.
∙ Look at all three levels of cover as third party is not always the cheapest.
∙ Protect your no claims discount: pay a fee to ensure you do not lose.
March 2018
Describe the advantages of using an individual voluntary arrangement (IVA) for
clearing debt. (5 marks)
Level Marks Descriptor

0 0 No relevant description.

A limited attempt to describe. The answer is rather superficial with only a limited attempt
1 1-3 to describe the advantages of using an IVA. There is very limited or no content beyond
identification.

A good attempt to describe. There is a genuine attempt to explicitly describe the benefits of
2 4-5
an IVA. The answer goes beyond simple identification.

Students may offer sensible suggestions and attract marks.

∙ People make reduced, affordable repayments for five or six years, meaning the plan is manageable.
∙ After that period their debt is written off, meaning that there is a point at which the debt is gone.
∙ IVAs are legally binding arrangements on debtors and creditors, so they must be entered into formally.
∙ IVAs apply to people who have unsecured debts that are larger than the value of their assets, including houses, so
debts are usually large.
∙ An insolvency practitioner (IP) negotiates the arrangement with the person’s creditors, as an expert is handling your
finances.
∙ Creditors cannot add any more interest or charges to the debt, so it does not get any larger.
∙ Creditors cannot take court action against the debtor, because as long as the IVA is complied with, the debt is
written off at the end of the period.

March 2018
Identify four (and only four) of the recommendations by the Banking Commission in 2011 following the
credit-crunch of 2008/2009 (4 marks)

One mark for each recommendation.

∙ Improve regulation of providers.

∙ Make sure banks are able to absorb any losses.
∙ Make it easier and less costly to deal with banks in financial trouble.
∙ Reduce the amount of risks the banks take.
∙ Separate retail banking from investment banking
17 | Page
March 2018
State what document, issued at the end of each tax year, do employees use
to prove how much they have earned and how much income tax and NI
contributions have been deducted from their salary. (1 mark)

●The answer is P60

January 2019
Compare direct debits and standing orders as a means of transferring money. (5 marks)
Level Marks Descriptor

0 0 No relevant comparison.

A limited attempt to compare direct debits and standing orders as a means of transferring
1 1-3
money.

A good attempt to compare direct debits and standing orders as a means of transferring
2 4-5 money that goes beyond considering each of them separately and makes a genuine attempt
to actually compare them.

• A standing order is an instruction from you to the bank to pay money to a third party, whereas a direct debit is
your authorisation for a third party, e.g. a utility company or mortgage provider, to take money from your account.
• A standing order is an instruction to pay the same amount of money to another account on a regular basis,
whereas a direct debit gives permission for the amounts paid to vary each month.
• Standing orders can be easily set up, whereas direct debits involve the signing of a mandate.
• Standing orders are not protected by a guarantee, whereas direct debits are protected by a
guarantee against errors or unscrupulous transactions.
• With a direct debit, there must be a trusted relationship with the third party

January 2019
Analyse the possible effect of external influences on somebody at the young adult stage of the personal
life cycle. (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis of the possible effect of external influences. Only a few effects are
1 1-3
included and the analysis of them does not go very far

A good analysis of the possible effect of external influences. Quite a number of effects are
2 4-5
included and the analysis of them is extensive

18 | Page
Possible External Influences
∙ General state of the economy, e.g. recession or boom.
∙ Interest rate changes.
∙ Government legislation.
∙ Rate of inflation.
∙ Taxation.
∙ Role model
∙ Marketing

Possible Effects
∙ When they leave home, they will be responsible for paying for their needs (e.g. rent, household bills, food and
travel) as well as their wants.
∙ They may need to take out a personal loan to pay for further education, training or travel abroad.
∙ They are likely to save for aspirations, such as a holiday, but may find it difficult to save.
∙ Earnings may increase if they are employed, but there may be concern about the possibility of unemployment.
∙ They are more likely to look for trusted sources, e.g. family and friends, recognised financial institutions to borrow
money or get financial advice.
∙ At this stage they are still likely to be thinking mainly short term, but with increasing awareness of medium-term
issues.
∙ They will be influenced by short-/medium-term forecasts on the economy, interest rates, legislation, etc. They are
unlikely to be too concerned by longer-term matters, e.g. pensions.

January 2019
Describe why customers might choose to stay with current providers even though they
might not get the best service or products. (5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited attempt to describe. The answer does not address why customers might choose to
1 1-3
stay with current providers. Examples might be given but are not relevant

A good attempt to describe. There is some attempt to explain why customers might choose
2 4-5 to stay with current providers, but there is a clear and explicit conclusion. There may be
examples and the link between them and the question is developed consistently.

Some people stay with their existing provider because:

∙ reluctance to change is called inertia

∙ they are more comfortable buying new products from an organisation they know;
∙ because they trust the provider and are pleased enough with the customer service;
∙ they know where the local branches are; are comfortable using a familiar online banking site; and they know the
helpline telephone numbers;
∙ they think it is difficult to buy a new product from a different one;
∙ they assume they will be rewarded for their loyalty;

January 2019
Identify, using five examples, the features that could be given to help consumers choose
between different savings accounts. (5 marks)

Award 1 mark for each identified point with an example. Brief examples are expected for this
question.

19 | Page
∙ Rates of interest.
∙ Payment of interest.
∙ Minimum to start the account.
∙ Withdrawal periods and notice.
∙ Bonus interest payments.
∙ Operational characteristics.
∙ Access.
∙ Difference between the appeal of a feature to different customers.
∙ Religion
∙ Ethics

January 2019
State clearly five, and only five, reasons why somebody should be concerned about their credit history. (5 marks)

Award one mark per relevant item, specified in clear terms. This could include but is not limited to:

∙ When people apply to borrow money, providers check their credit history, i.e. what individuals have borrowed over
the previous six years and how often they were late making payments; they also record defaults and county court
judgments (CCJs) made against an individual for non-payment of debts, and bankruptcies.
∙ Providers use this information to decide whether to lend money to someone who has applied for a borrowing
product and on what terms.
∙ People with poor credit histories will either be refused credit
∙ People may not be refused but will be charged a higher rate of interest.
∙ Credit history ultimately affects the credit rating and stays with you throughout the life cycle.
∙ It is easy to get a poor credit history and much more difficult to improve it.
∙ Customers with a poor credit history may suffer from the stress associated with it
∙ Customers are likely to have a more restricted choice of provider

March 2019
Compare, using examples, the terms ‘good’ debt’ and ‘bad debt’ (5 marks)
Level Marks Descriptor

0 0 No relevant comparison.

A limited attempt to compare. The answer is rather superficial with only a limited attempt
1 1-3
to describe both terms.

A good attempt to compare. There is a genuine attempt to describe both terms. There is a
2 4-5
good balance to the answer in relation to both terms.

The Money Advice Service (MAS) website defines a good debt as:

∙ one that is a sensible investment in your financial future that should leave you better off in the long-
term and should not have a negative impact on your overall financial position.

20 | Page
∙ Some examples of ‘good debt’ is repairing a car so you can travel to work; student loan to help finance your studies,
which should lead to better employment; and a mortgage, borrowed over about 25 years to pay for a property.

The Money Advice Service (MAS) website defines bad debts as:

∙ those that drain your wealth, are not affordable and offer no real prospect of ‘paying for
themselves’ in the future.
∙ An example of ‘bad debt’ is not paying off a credit card balance in full, meaning that the balance
takes longer to pay off and ends up costing you more.

March 2019
Identify, five, and only five, main features of the 14-day cooling off period when someone takes out a
credit card or personal loan. (5 marks)

∙ They can change their mind.

∙ They can cancel the agreement.
∙ They can return the card or the loan.
∙ There are no penalties.
∙ It starts from the date that the agreement was signed or the date that the customer received a copy of the
agreement, whichever is later.

March 2019
Describe the characteristics that a local currency must have to be acceptable as money. (5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited attempt to describe. The answer is rather superficial with only a limited attempt to
1 1-3
describe in detail. There is no reference made to the local nature of the currency.

A good attempt to describe. There is a genuine attempt to explicitly describe in detail. There
2 4-5
is explicit reference to the local nature of the currency.

A local currency note must meet the following criteria:

∙ accepted as payment by local merchants;

∙ recognisable because it has a picture of a local landmark on it;
∙ stable because its value is the same as the Great British pound;
∙ divisible because it is issued in a small denomination and change can be given in coins;
∙ durable because it is made of strong paper;
∙ portable because it is a similar size to other banknotes;
∙ scarce because it is only issued locally;
∙ homogeneous because all local currency notes look and feel the same.

21 | Page
March 2019
State five, and only five, examples of what the premium of an insurance policy is based on. (5 marks)

One mark should be awarded for each relevant example. Points may include but are not limited to:

∙ how likely an event is to occur;

∙ the amount of money needed to put things right if the event happens, known as the sum insured;
∙ the length of time that the policy will be in force, known as the term;
∙ the amount of money the policyholder will pay towards repairs or replacement, known as the voluntary excess;
∙ how the premium is paid – that is, as one payment or in monthly instalments.
∙ age
∙ health
∙ geographical location
∙ range of policy cover
∙ previous claims
∙ type of policy
∙ credit history of policyholder

March 2019
Describe how tax codes are used by employers and employees. (5 marks)
Level Marks Descriptor

0 0 No relevant description.

A limited attempt to describe. The answer is rather brief. Examples given are weak or
1 1-3
limited in description.

2 4-5 A good attempt to describe. There is a range of good points made and they are detailed.

∙ Employers use the employee’s tax code to work out how much tax to deduct from their earnings.
∙ Tax codes show the individual’s personal allowance and are provided by HMRC.
∙ Earnings below the tax code allowance are free from tax – employees can understand how much
they can earn before paying tax.
∙ The format for a tax code is four numbers and one letter, for instance 1185L is a common tax code
for the tax year 2018/19.
∙ People who have more than one employer are given two tax codes so that HMRC can ensure they get the correct
personal allowance.

January 2020
Describe the role of the four parties involved when making a payment by credit card. (5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited attempt to describe. The answer is rather superficial with only a limited attempt
1 1-3
to describe the four parties. Only one, two or three parties are described.

A good attempt to describe. There is a genuine attempt to explicitly describe the four
2 4-5
parties. All four parties need to be described.

The description could include but is not limited to:

22 | Page
∙ The cardholder makes a transaction on a credit card with the merchant.
∙ The merchant passes the transaction details to its bank (the acquirer). The acquirer pays the merchant the value of
the transaction.
∙ The acquirer then sends the transaction details to the cardholder’s bank (the issuer) and the issuer pays the
acquirer for the transaction.
∙ The issuer records the transaction on the cardholder’s statement. When the cardholder pays the issuer for the
transaction, the cycle is complete. Accept alternative terms where the meaning is clear, e.g. customer or purchaser
rather than cardholder, shopkeeper rather than merchant.

January 2020
Compare the advantages and disadvantages of making payments with a debit card and a prepaid travel
card while abroad. (5 marks)

Level Marks Descriptor

0 0 No relevant comparison.

A limited attempt to compare. The answer is rather superficial with only a limited attempt
1 1-3
to compare the advantages and disadvantages of using debit cards and prepaid travel cards.

A good attempt to compare. There is a genuine attempt to explicitly compare the

2 4-5 advantages and disadvantages of using a debit card and prepaid travel card. There is a good
balance to the answer in terms of both debit cards and prepaid travel cards.

Debit Cards
∙ Can be used in many stores, hotels and restaurants.
∙ Only limit is your account balance.
∙ Provider may charge a fee to change the local currency into pounds.
∙ Cardholders may be charged a fee for each usage abroad.
∙ Debit cards can be used in ATMs to withdraw cash in the local currency.
∙ If lost, the cardholder must claim for a new card.

Prepaid Travel Cards

∙ Must be loaded with money to be used abroad and topped up when spent.
∙ Can also be used to withdraw cash at ATMs.
∙ Currency converted to the local currency at point of sale.
∙ If the card is lost, it can be blocked, and the remaining balance refunded.

January 2020
Analyse why the use of cards is rising and the use of cash is falling in the UK today. (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

23 | Page
 A limited analysis of why the use of cards is rising and the use of cash is falling in the UK
1 1-3 today. The answer is largely descriptive and doesn’t convincingly analyse the different
trends in each kind of transaction.

A good attempt to analyse. There is a genuine attempt to explicitly analyse why Carl should
2 4-5 be concerned about his credit history. There is a good reference to Carl and his
circumstances and use of information from the case study.

The analysis could include but is not limited to:

∙ People cannot use cash to pay for items over the internet or by telephone; cards are necessary in such situations
and many purchases are conducted through the internet.
∙ Card payments are much more flexible and convenient than cash and they may include
insurance on purchases.
∙ The cash has to be obtained first, whereas a card can be used immediately (assuming sufficient
funds are available in the account if using a debit card).
∙ Carrying large amounts of cash can be riskier than having a card.
∙ Trust in new technology is increasing.
∙ Most outlets are accepting contactless cards for transactions up to £30, so this payment method is gaining critical
momentum.
∙ Card transactions have an audit trail.
∙ Some retailers will only accept cards as methods of payment, although some retailers will only accept cash.
January 2020
State five, and only five, features of the Retail Prices Index (5 marks)

NB: one mark should be awarded for each feature of the definition shown.

∙ It is a way of measuring changes in prices (inflation) over a period of time.

∙ It usually covers a 12-month period.
∙ A basket of goods is used to measure price movements.
∙ Products in the basket can be changed over a period of time.
∙ For an ‘average’ household.
∙ Prices are weighted according to the pattern of household spending.
∙ Includes mortgage interest costs.
∙ The index is measured against a base year of 100.

January 2020
Describe the most important effects of external influences on a person at the mature adult stage of the
life cycle. (5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited attempt to give the main ideas or features. Only a small number of points are
1 1-3
included or the explanation of them is superficial.

A good attempt to give the main ideas or features. Several points are included, the
2 4-5
description of them is developed, and there is a good balance to the answer.

Description could include but is not limited to:

Possible External Influences

∙ General state of the economy.
∙ Interest rate changes.
24 | Page
∙ Government legislation.
∙ Rate of inflation.
∙ Taxation.
∙ Technology development.

Possible Effects
∙ If there is a recession, this impacts employment and personal finances.
∙ If interest rates rise, this is good for a saver but bad for borrowers.
∙ Legislation could change, such as that in relation to pensions.
∙ If inflation is high, the real value of savings declines.
∙ Increases in taxation will reduce take home pay. NB: the mature adult stage of the life cycle is 26-40 years.

March 2020
Describe five reasons for the likely continued growth in the membership of credit unions. (5 marks)

The description could consider, but is not limited to, the following:

The distinctive philosophy of credit unions:

• They are co-operatives, owned and controlled by their members.
• They are non-profit organisations.
• Members are linked by a common bond.
• They provide services for all kinds of people but do aim to help those less well off.
• Financial capability/education element.

The opportunities for financial inclusion that they can provide:

• Provide services/facilities for those who otherwise might have difficulty because of poor credit ratings.
• Avoids these people having to go to payday loan providers.
• Idea of self-help rather than state handout.
• Credit union provision enables financial inclusion.
• Community based/owned solution.
• People learn the value of sensible financial decision making.
• People can access facilities/services even if they do not have a bank account

March 2020
Analyse the possible effects of external influences on somebody in the retirement life stage of the
personal life cycle. (5 marks)

Level Marks Descriptor

0 0 No relevant analysis.

A limited analysis of the possible effects of external influences. Only a few effects are
1 1-3
included and the analysis of them does not go very far.

A good analysis of the possible effects of external influences. Quite a number of effects are
2 4-5
included and the analysis of them is extensive.

25 | Page
Possible effects of external influences on a person in the retirement stage:
• The typical life cycle is getting longer due to factors such as better living conditions, better nutrition
and medical advances.
• On average, women live longer than men – but both men and women born today can expect longer
life spans than those of their great-grandparents.
• A longer life expectancy means that people retiring now are likely to be retired for more years than in
previous generations.
• They need a source of income for longer.
• Most people qualify for a state pension paid by the government once they reach a certain age.
• The government funds state pensions from the taxes and National Insurance contributions made by people who
are currently working.
• As time progresses, more people in the UK will be aged 65 or over. As a result, there will not be sufficient
contributions from working people to pay state pensions to all the people who qualify.
• People who rely on the state pension for all or part of their retirement income will need to delay their retirement
life stage until they reach the new pension age.
• Some people may have additional pension income from other sources. Most employees, for example, are entitled
to an occupational pension provided by their employer.
• Many people need to work beyond the state pension age. Some will carry on doing the same job for their existing
employer. Others may become self-employed.
• Most employers cannot force staff to retire at a specific age, although some can justify imposing a retirement age
on grounds such as safety.
• Some employers prefer older staff because of their experience.
• Another retirement stage trend is pensioners moving to another country to live because of a warmer climate
and/or reduced living expenses.

March 2020
Describe why there has been a decline in the use of cheques to make payments. (5 marks)

Level Marks Descriptor

0 0 No relevant description.

A limited attempt to describe. The answer does not address why there has been a decline.
1 1-3
Examples might be given but are not relevant.

A good attempt to give the main ideas or features. Several points are included, the
2 4-5
description of them is developed, and there is a good balance to the answer.

The description could consider, but is not limited to, the following:

• It can take a number of days after the cheque has been deposited for the money to be accessible.
• Providers cannot honour cheques if the person who wrote the cheque does not have enough money in their
account.
• Since 2011, there is no guarantee of payment, so people are only willing to accept payment by cheque from people
they trust.
• Some businesses refuse to accept cheques.
• The cost of processing cheques is greater than processing payment card transactions.

March 2020
Describe, using examples, the sources and frequency of unearned income that might be used when
constructing a personal budget. (5 marks)

Level Marks Descriptor

26 | Page
 0 0 No relevant description.

A limited attempt to give the main ideas or features. Only a small number of points are
1 1-3
included or the explanation of them is superficial.

A good attempt to describe. There is some attempt to explain both the source and the
2 4-5 frequency of unearned income across each of the headings detailed below. There are
examples and the links between them and the question are developed.

Unearned income is from a source that is not work and includes the following four main headings:
• Benefits, which may be paid weekly, once every two weeks or monthly, and pensions, which are usually paid
monthly.
• Interest on savings, which may be paid monthly or, more usually, once a year, and returns on investments such as
dividends, which are paid once or twice a year.
• Allowances paid by family members, which may be paid weekly or monthly, and gifts that may be received on
birthdays and at Christmas and other celebration days.
• One-off payments (windfalls), such as an inheritance or a win on the Premium Bonds. People usually prepare a
budget that has the same time period as the frequency with which they receive income. This presents a problem
with the varying time periods in which unearned income is received.

March 2020
State clearly five, and only five, principles in the Standards of Lending Practice that relate to information given to
customers. (5 marks)

Award one mark per relevant item, specified in clear terms. This could include but is not limited to the following:

• Advertising information must be clear and not misleading.

• Giving customers information before, during and after the point of sale about how products work, interest rates
and charges.
• Giving customers information about any changes to their product or service.
• Only giving information about suitable products, especially borrowing products.
• Dealing with customers quickly and sympathetically when things go wrong

27 | Page
28 | Page