1 Welcome Certificate in Mortgage Advice & Practice CeMAP 1, 2 & 3Making Sense of Money – A guide

2 Lesson 1 CeMAP 1 - Agenda Money, an understandingFinancial Intermediation Banking Income Tax Capital Gains Tax Inheritance Tax VAT Insurance Premium Tax

3 Lesson 1 CeMAP 1 - Agenda Stamp Duty Corporation TaxNational Insurance Social Security Benefits Testacy & Intestacy Basic Legal Concepts Insolvency

4 Money Many people believe that money is something magical. In fact it’s a commodity and just like other commodities it is bought and sold, hence why we have banks. Money is a common denominator in that it can be used to value all goods and services. Everyone knows that £1 can purchase 3 newspapers, 4 packets of crisps or a cheeseburger from McDonald’s. Prior to money we used a system of bartering. Although this still works between friends, it can not possibly work in a complex society. Imagine you are a market gardener growing carrots and you wish to purchase a new car. Firstly you need the car manufacturer to want your carrots and then, how many carrots will be needed to buy a new Jaguar?

5 Financial IntermediationFinancial intermediation can be viewed as “the middle man,” in that it matches a depositor’s needs with a borrower’s requirements. Geographic Location – how can a depositor in Inverness transact business with a borrower from Plymouth? Aggregation – a single depositor is unlikely to have enough funds to match the needs of a large borrower Maturity Transformation – the depositor may need his money back shortly, this is directly opposite to the needs of the borrower who requires a longer timeframe Risk Transformation – when you lend money to an individual you are at 100% risk that something may happen. By spreading your lending to many people, your money is still at risk, but how likely is that they will all default at the same time?

6 Financial IntermediationWhen we put these four factors, geographic location/aggregation/maturity transformation/risk transformation, together, we have a bank! Financial intermediation (banks) are a good way of equating the surplus sector (lenders) with the deficit sector (borrowers). The term disintermediation, refers to cutting out the middle man, a direct insurance company is a good example. Aggregation Geographic Location Bank Maturity Transformation Risk Transformation

7 Tax Tables At the back of your HomeStudy book is a tax table. It is in exactly the same format as the one you will find at your exam. It is an extremely useful aid saving you the effort of having to commit to memory much information. It provides rates, allowances and notes on Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty on land and National Insurance. Whenever, you get a question on these subjects, refer to the tax tables before answering.

8 Social Security BenefitsSocial security benefits can broadly be placed into 3 categories: Support for sick & disabled – Statutory Sick Pay, Employment & Support Allowance, Attendance Allowance, Disability Living Allowance, Carers Allowance. Support for people on low income – Working Tax Credit, Income Support, Job Seekers Allowance Support for raising children – Statutory Maternity Pay, Maternity Allowance, Child Benefit, Child Tax Credit An aide memoir for these benefits can be found at the back of your book and full details on pages of the IFS manual.

9 Intestacy If you have died without making a will, you are said to beintestate, 7 out of 10 people die intestate. As there is no will, a personal representative obtains letters of administration and the laws of intestacy apply. Many people are under the misconception that if they are married and have no will, then all will go to their spouse. As you can see from the following slide, this simply is not true. Likewise, couples often co-habit in the belief of a “common law” spouse. In English law, there is no such thing as a “common law” spouse and without a will the partner is left with nothing.

10 Next Step Now that you have finished lesson 1, please go to the End of Lesson 1, CeMAP 1 exam, which can be found on your CD GOOD LUCK