The assumptions behind every Plan
Every Plan prints its own assumptions. You can change any of them and have the projection re-run.
Every Plan prints its own assumptions. You can change any of them and have the projection re-run.
A lifetime projection is not a prediction. It shows what follows from a set of assumptions, so its answer is only as sound as those assumptions. If you disagree with one, tell us and we will run it your way.
Every figure in your Plan is in today's purchasing power. So “£3,600 a month” means what £3,600 buys today.
So inflation needs no separate guess. Assuming 5% growth and 2% inflation gives the same plan as assuming 3% real growth.
A common working assumption for a mixed portfolio over a long period. It is not a promise and it is not what any particular investment will do. Some years will be far better, some far worse, and that variation is modelled separately.
Money in cash is assumed to roughly keep pace with inflation and no more. Over thirty years that adds up, so holding everything in cash shows up in a projection as a risk.
We run every projection to age 100. Roughly half of people outlive the average life expectancy, so a plan built to the average runs short for about half of the people who rely on it.
Where there's a couple, we model both, and we test what happens when one of you lives well beyond the other. This test can decide whether a plan survives, because household spending falls by much less than half when one person dies, while pension income can fall by more.
The engine applies UK tax to every year of the projection.
Personal allowance £12,570, higher rate from £50,270, additional rate from £125,140, and the allowance taper above £100,000. Scottish bands where they apply, covered in Scottish income tax and retirement drawdown.
Charged where it is due. Employee National Insurance stops at State Pension age, and the projection reflects that.
Annual allowance of £60,000 with the taper for high earners, 25% tax-free cash capped by the lump sum allowance of £268,275, and the rest taxed as income when drawn.
Nil-rate band £325,000, residence nil-rate band £175,000 with the taper above £2m, transferable bands between spouses, and the 36% rate where 10% or more goes to charity.
Tax rules will change over a forty-year projection. We model today's rules throughout, because future rules are unknown. Re-running the plan every year or two picks up changes as they happen.
A single projection assumes the same growth every year. Real returns vary, and the order of good and bad years changes the result, as set out in why the order of returns matters.
So the same plan is run two thousand more times with those years reshuffled, keeping the same money and goals, and you are told in how many of them the money lasted. That figure is not a probability of a real-world outcome. It measures how much the plan depends on the order of returns.
The randomisation is seeded, so a quoted success rate is the same each time the plan is run on the same inputs.
We can model spending falling through retirement, and rising again if care is needed. You choose whether the plan includes it.
Businesses, second properties and anything else that needs a buyer are modelled at zero as standard, then again at your figure. The gap shows how much of the plan rests on the sale.
Included only if you ask, and the plan is also shown without it.
Projections use a growth rate and model no specific fund, provider or policy, because recommending one is regulated advice Buzz is not authorised to give.
Every one of these is printed in your document with the figure used, and you can change any of them and have it re-run. The free projection lets you change the growth rate yourself and see how the answer moves.
Three per cent is a working assumption for the long term, and a higher figure would flatter every plan it touches. It is quoted above inflation, so it already assumes your money grows in real purchasing power. If you would prefer to see four per cent, or two, say so and we will run it. Looking at all three together shows the spread, which the middle figure on its own cannot show. A plan that still works at two per cent is robust. A plan that only works at four depends on returns you have no control over, and you should know that before you commit to a retirement date.
It is deliberately cautious. Roughly half of all people outlive the average life expectancy, so a plan built to the average leaves about half of the people relying on it short. Being wrong in that direction means running out of money in your late eighties, at an age when returning to work is not available and cutting spending means cutting things that matter. Being wrong the other way means leaving more behind than you intended. The first error cannot be undone, so the projection guards against it. If you also want to see the numbers to 90, we will show you both.
They will, and over a forty-year projection they will change repeatedly. We model today's rules throughout, because any future rules we chose would be guesses. Every long projection shares that limitation. Two things make it manageable. The rules that matter most to a long projection, meaning the personal allowance, the pension allowances and the inheritance tax bands, have tended to change gradually. And a plan should be re-run every year or two, which is when a change gets picked up and its effect on your own numbers is shown.
Yes. Every assumption is printed in the document with the figure used. Growth, inflation, the age we run to, whether spending falls as retirement goes on, whether an asset sells and for how much, when you stop and what you draw: all of it is adjustable. If you think three per cent is pessimistic, or that you will spend considerably less at 85 than at 65, tell us and we will re-run it on your figures. The growth rate is quoted above inflation, so changing it changes the real return the whole plan assumes, including in the two thousand reshuffled runs.
It uses the same growth and inflation approach: today's money at a flat real rate, as in the full projection. It leaves out two things. It applies no tax, so it cannot show what drawing from a pension leaves in your hand, or how the State Pension using up most of your personal allowance changes the tax on every other pound of income. It also runs once, where the Plan runs two thousand reshuffled sequences, so it cannot show how much of the answer depends on the first few years. The Financial Plan covers both.
An hour with a planner on whether the Financial Plan suits your position.
A written plan: every year to age 100 with UK tax applied, each risk measured in years, and your next ninety days.