R01 Financial Services Regulation & Ethics - Module 1 Flashcards

Vocabulary flashcards covering core topics, regulatory context, life assurance products, mortgage types, investments, tax planning, and state benefits from Module 1 of the R01 course.

Reinsurance

An arrangement whereby one insurer passes some of their risks on to another insurer.

Lloyd's of London

A market where specialist risks are accepted by 'syndicates' of wealthy investors who put their own wealth up against the possibility of certain events occurring.

Derivatives

Financial instruments used by companies and individuals to protect against risks associated with financial transactions by securing prices to minimise losses.

Core Banking Services

Primary services offered by banks and building societies, including current accounts with instant access, deposit accounts with limited access, loans, and mortgages.

Indirect Banking Services

Secondary services offered through branch networks, including wills and executorship, stockbroking services, portfolio management, insurance, collectives, and pensions.

Friendly Societies

Small member-owned 'mutual' organisations that offer tax-free savings and investments.

Over the Counter (OTC) Market

A financial market where buyers and sellers deal directly with each other without a formal mechanism or exchange.

Exchange-Traded Market

A financial market created and run by intermediaries where trading occurs via a formal exchange, such as the London Stock Exchange (LSE) or AIM.

Money Markets

Wholesale markets used by commercial borrowers and lenders for short-term borrowing and lending.

Capital Markets

Markets where shares, fixed-interest investments, and derivatives are traded.

Commodity Markets

Markets where physical goods such as wheat, coffee, and metals are traded.

Prudential Regulation Authority (PRA)

A division of the Bank of England responsible for the prudential regulation (capital and solvency) of significant financial institutions, including banks and insurers.

Financial Conduct Authority (FCA)

The UK regulatory body broadly responsible for regulating conduct as well as the sales and marketing of financial products.

Competition and Markets Authority (CMA)

The UK body responsible for investigating mergers to protect competition, acting against anti-competitive behaviour, and protecting consumers from unfair trading practices.

Payment Systems Regulator (PSR)

The regulator overseeing UK payment systems, with statutory objectives to promote user interests, effective competition, and payment system innovation.

Financial Action Task Force (FATF)

The international watchdog body that oversees global anti-money laundering regulations.

Fiscal Policy

Government economic policy managed through spending, borrowing, and taxation.

Monetary Policy

Economic policy controlling interest rates and money supply, set in the UK by the Monetary Policy Committee (MPC) of the Bank of England.

Gilt Repo Market

The market used by the Bank of England to influence short-term interest rates via sale and repurchase agreements of gilts.

Fact Finding

The process undertaken by a financial adviser to obtain hard facts (objective information) and soft facts (subjective preferences) from a client.

PIMPSI

A model used for prioritizing financial planning needs: Protection, Income Protection, Mortgages, Pensions, Savings and Investments.

Term Insurance

Temporary life insurance running for a set period that pays out only if a valid claim occurs during the policy term.

Whole of Life Assurance

Life assurance designed to run for the entire life of the insured person, paying out upon death whenever it occurs.

Level Term Insurance

Term insurance where the policy term, sum assured, and premium remain fixed and unchanged throughout the contract duration.

Decreasing Term Insurance

Term insurance where the term and premium are fixed, but the sum assured decreases annually over the policy length.

Increasing Term Insurance

Term insurance where both the sum assured and annual premium increase over time, either by a set percentage or in line with inflation.

Family Income Benefit

A form of decreasing term insurance that pays an agreed annual income for the remainder of the policy term upon the death of the insured.

Convertible Term Insurance

A level term policy featuring an option to convert to a whole of life assurance or endowment policy without presenting further medical evidence.

Renewable Term Insurance

A term insurance policy providing the right to extend or renew cover at the end of the term without submitting further medical evidence.

Income Protection Insurance

A long-term policy designed to pay an ongoing income (up to a percentage of pre-incapacity earnings) if an individual is unable to work due to sickness or accident.

Critical Illness Cover

Insurance paying a lump sum upon diagnosis of one of a defined set of specified serious illnesses, typically subject to a survival period.

Moratorium Underwriting

An underwriting method for medical insurance that automatically excludes pre-existing conditions for which medical advice or treatment was received within a set look-back period.

Capital and Interest Repayment Mortgage

A loan structure where payments cover both interest and capital debt, ensuring the total outstanding loan balance is fully paid off by the end of the term.

Interest-Only Mortgage

A loan structure where the borrower pays only interest charges during the term, requiring the full capital balance to be repaid from a separate source at maturity.

Offset Mortgage

A mortgage linked to a deposit account where savings are offset against the borrowing balance, reducing interest charges to the net debt amount.

Diminishing Musharaka

A Sharia-compliant home finance contract where a firm and client jointly purchase a property, with the client progressively buying the firm's share while paying rent on the remaining portion.

Ijara

A Sharia-compliant arrangement where provider-held client payments are set aside until full purchase of the property occurs at the end of the term, with ownership retained by the provider until then.

Home Reversion

An equity release contract where a homeowner sells all or part of their property at a reduced rate in exchange for cash or income and a rent-free lifetime right to reside in the property.

Lifetime Mortgage

An equity release mortgage running for life, where interest and principal are repaid upon the owner's death or entry into long-term residential care.

Active Management

An investment management strategy where fund managers select specific assets in an attempt to outperform a benchmark market index.

Passive Management

An investment management strategy aiming to track or replicate the performance of a chosen market index at a lower cost.

Greenwashing

The practice of exaggerating or misrepresenting the sustainability or environmental credentials of a firm, product, or investment.

Potentially Exempt Transfer (PET)

An outright gift made by an individual to another person or absolute trust that becomes completely exempt from Inheritance Tax if the donor lives for seven years after making the gift.

Chargeable Lifetime Transfer (CLT)

A transfer into a non-absolute trust or transfer of value that incurs an immediate 20% Inheritance Tax charge on any amount exceeding the nil rate band within a seven-year period.

Universal Credit

A single, tax-free, means-tested benefit replacing six legacy benefits: Income Support, income-based JSA, income-related ESA, Housing Benefit, Child Tax Credit, and Working Tax Credit.

Statutory Sick Pay (SSP)

A weekly payment made by employers to qualifying sick employees for up to 28 weeks, set at £118.75 per week for 2025/26.

Personal Independence Payment (PIP)

A non-means-tested, non-NIC-tested, tax-free benefit for disabled individuals aged 16 to State Pension age who require help with daily living or mobility.

Bereavement Support Payment (BSP)

A tax-free, non-means-tested benefit paid to a surviving spouse or civil partner under State Pension Age, consisting of an initial lump sum and up to 18 monthly installments.

Support for Mortgage Interest (SMI)

Government assistance provided to eligible homeowners as a interest-bearing repayable loan to help cover mortgage interest costs.