Household Information: PlanLab UK Input Guidelines and Assumptions Detailed Planning Sections - Client A and B are Married: If you are entering the new client details through the Detailed Planning screens, you will be asked if Client A and B are Married. Do not tick this box if you are unsure as it is extremely difficult to un-marry a client couple. - Eligible for State Benefits: If you tick this box but do not click on the Benefits button to record further details, PlanLab will assume the client s State Benefits are to be estimated by the formula built-in to the program. This means they will receive only the basic State Pension (no SERPS or Second State Pension will be included) in retirement and no State Benefits in the event of death or disability. If you wish to include State Benefits other than these, click the Benefits button, then tick the Enter Predicted State Benefits option and record the MONTHLY amount of State Benefits in today s money in the box provided. - If you wish to analyse the Survivor Needs for a client with no spouse or for clients that are not married, please be aware of the following: o For Client A and Client B non married cases, assets will only be transferred for survivor needs if these assets have Joint ownership. Any other assets are assumed to pass to individuals unknown. The total of these are shown in the survivorship Super Ledger listed under the Net Worth of Clients section as Gifts, Bequests and Insurance to Others. o For Client A and Client B non married cases, the survivorship analysis will include Inheritance Tax payments based on the value of assets and liabilities at death. The Inheritance Tax due will be included in the Super Ledger under the Tax Payments heading and in the analysis as a Living Expenses item. o Where only Client A is recorded, assets will be transferred to the Gifts, Bequests and Insurance to Others section of the Super Ledger. The Inheritance Tax due will be included in the Super Ledger under the Tax Payments heading and in the analysis as a Living Expenses item. Children, Dependents and Others: - Fairly straight forward input here although please be aware individuals can be entered that are Not Dependent of either client by choosing the Not Dependent option in the Dependent Of drop down. Income - Inheritance: - Inheritance Income is assumed to be free of income tax. Income Other: - Entries recorded in Other Income will have income tax deducted (except if the tax exempt box is ticked) but NOT National Insurance deductions. - To apply the Dividend Income Tax calculations to the Other Income entry, select the Dividend choice from the Income Type drop down.
- Benefits in Kind amounts can be recorded in Other Income. Select the Benefits in Kind choice from the Income Type drop down. - A typical item you might record in Other Income would be Child Allowance income. Be sure to tick the Tax Exempt box as this income attracts no income tax. Also use the Child s age as the income end event in the Continue Income Until box. - Income from Property can also be recorded in Other Income although it is easier to record this income in the Assets, Property section with the other Property details. - Where the Other Income option Does income continue to someone other than the spouse? is ticked, this income amount will NOT be passed to the spouse for the survivorship analysis. Income Salary: - Entries recorded in the Salary section will attract Income Tax and National Insurance deductions. - Only the income tax due on Salary Income is calculated on a monthly basis, i.e. as it is received. Taxes from other non salary items (such as Other Income or taxable investment income) are aggregated during the year and then an adjustment is applied at the end of the year or in the 12 th month. It is this adjustment that may produce an income tax refund for the following year as the overall tax calculation is balanced. This refund will appear in the Super Ledger or as Other Income in the report presentation. - For Self Employed income, record the total profit in the Salary section and tick the Self Employed tick box to apply self employed National Insurance deductions. Expenses Gifts: - Straight forward record of Gifts paid by the clients including Charitable Gifts. These items will be added to other expense items such as Living Expenses, pension contributions and other policy premiums. Expenses Living Expenses: - Record total or individual Living Expense items stipulating what percentage of the expense is expected to continue following first death, first disability and first retirement. - Expense items can be recorded to begin and to end at any chosen date or event in the future by using the options available under the Start and Stop drop downs. - Expense items with an annual frequency where the Start option is set to Already Started are assumed to occur every year in the month the report is generated. In other words, if the user enters in an Annual frequency, lists Already Started as the Start Event, and runs the analysis in March 2006, then the expense is assumed to occur yearly every March; March 2006, March 2007, March 2008, etc. The Start 2
Event setting for Annual expenses should be recorded as the Date the next payment is due. - The inflation rate recorded in the Planning, Assumptions input screen will be initially applied to any Living Expenses inputs but this can be changed by editing the Inflation Rate input. Assets General: - If clients are recorded as a couple, irrespective of whether or not they are married, PlanLab assumes assets owned by a client will be transferred to the spouse in the event of premature death. Jointly held assets will also be transferred. Assets whose ownership is joint survivorship with third party are not transferred to the spouse in the event of premature death. - The figure of Growth recorded in the Assets sections is the future predicted growth rate and not the past growth performance (although these amounts might be identical in some cases). Assets Banks: - Wherever possible a bank account entry should be included in the client data. Even if the clients do not hold a bank account, it is well worth recording one with a zero balance. PlanLab uses the Bank Account as the entity through which all income and expenditure is processed. The absence of a bank account makes the analysis more complicated to follow. - If the client has more than one bank account, the account that features at the top of Cash Flow Sources in the Planning Section will be treated as the main cash account. This means this account will be used to process the client s income and outgoings. It will also be the account Discretionary Spending (see the Reposition Assets and Sweeps Transactions sections later in this document) is applied to. You can select a different bank account or other asset as the cash account by ensuring it appears at the top of the list of assets in the Cash Flow Sources. Details on how to move the asset order in Cash Flow Sources can be found in the Planning section later in this document. Assets Bonds (Investment): - PlanLab assumes the Bond s annual growth is taxed by the provider on behalf of the Inland Revenue at 20% per annum. For more information please refer to the section on Capital Gains Tax listed below. Assets Bonds (Other): - If the entry in the Bond (Other) section has a maturity date that is in the past, PlanLab will assume the Bond has matured and therefore has a zero value. For the Bond s value to feature in the analysis, please ensure the maturity date is in the future. 3
- Where a Bond is assigned as a source of cash either for any need or for one or more specific areas, when the Bond is required, the software will cash in the entire bond value, much like it would for a fixed asset such as a property, rather than just the amount needed. This is because the software assumes in order to realise the funds in a bond, the entire holding must be sold. This means the analysis will show the entire bond value as an income in the year the funds from the bond are needed. To avoid this, please use the Reposition Assets transaction to transfer the bond (i.e. to sell it) to a more liquid asset just before the time it is needed. Assets Business\Farms: - Business and Farm income (less expenses) will be treated as an income stream from which Income Tax will be deducted. National Insurance deductions are not applied to Business and Farm income. Assets ISAs, PEPs, TESSAs: - PlanLab currently has no facility to monitor the level of contributions made to an ISA investment in order to check statutory investment levels are not exceeded. Assets Personal Property\Property: - Personal Property\Property entries may include a loan element. Loans can be recorded as part of the Personal Property\Property entry or separately in the Loans section. PlanLab will automatically calculate the repayment date of a loan based on the current balance, loan interest rate and repayment amount. PlanLab will first apply the repayment amount to the interest due on the loan and then use any remaining amounts towards paying back the capital borrowed. For Interest Only loans, the payment amounts should cover the interest element only. Assets Savings (Cash Equiv.) - It is often useful to create Holding Accounts\Assets to receive future lump sum benefits and payments. PlanLab will assume all future receipts will be deposited in the client Bank Account. For large sums, such as life insurance payments and pension lump sums, it is unrealistic to assume these amounts would remain in the bank account until consumed. Instead these funds can be transferred to Holding Accounts using the Reposition Assets and Pension Distributions facilities within the Transactions section. When creating Holding Assets, it is best to use the Savings Asset as the account as it always available to be used as a source of cash in all cases. Assets Tax Exempt Funds - The Interest Income from Tax Exempt Funds is assumed to be free of income tax however the overall gain on these funds is assumed to be liable to Capital Gains Taxation (see separate section below for more details). 4
Assets Venture Capital Trusts, Enterprise Investment Schemes (VCT, EIS) - PlanLab will generate tax relief on the VCT, EIS initial investment if the Date Invested is the current year. This relief will also apply to any additional contributions made to the VCT, EIS through Transactions. - The tax relief will be shown as a tax refund in the year after the tax relief occurs. - PlanLab does not track the minimum holding period required to qualify for tax relief. Assets Capital Gains Tax: - PlanLab applies Capital Gains Tax to increases in value of all assets except Bank Accounts, Other Bonds (Government), ISAs PEPs TESSAs, Property Main Residence, Savings (Cash Equiv.) and Venture Capital Trusts. - Where Capital Gains Tax applies, PlanLab will first deduct the Capital Gains Annual Personal Exemption from the gains in any one year before calculating the Capital Gains Tax amount. This Personal Exemption amount will increase by the State Benefits Inflation figure recorded in the Assumptions section. - For details on the current rates of tax on capital gains, please refer to the latest PlanLab Tax Notes document from the Support drop down on the opening My Site screen. - PlanLab does not incorporate Capital Gains Tax Entrepreneurs Relief in its calculations. - When calculating the holding period for an asset, PlanLab ignores days and months. - If a Bonds (Other) investment is Tax Exempt, PlanLab assumes the capital gains in the bond are tax exempt but the Coupon Interest from the bond is assumed to be liable to Interest Income Tax. - The amount of CGT due in any given year is listed as an Income Taxes expense in the ledger and PlanLab reports. - If any element of the following assets is required to pay for cash flow, PlanLab will assume the entire asset is sold and apply the CGT calculation accordingly: Bonds (Other) Property Personal Property (subject to special rules for certain types personal property) Collectibles Speculative Assets Business Farms 5
- Although Interest Income from Tax Exempt Funds is free of tax, when the fund is liquidated, CGT is still applied. Assets Taxation of Gains on Investment Bonds (On Shore) - Onshore Investment Bonds are not subject to CGT, but additional income taxes may be due on the proceeds of a sale of the bond or a partial withdrawal. The bond provider pays income tax on the growth in the bond at 20% per annum. This taxation is deducted from the overall growth amount in the bond (i.e. it is reflected in the bond s increase in value as opposed to being listed under the Income Taxes expense item in the ledger and reports). - If the owner of the bond is not a higher rate taxpayer, no added taxes will be generated by liquidation or withdrawals from an Investment Bond. - For higher rate taxpayers, taxation on Investment Bonds depends on whether the bond is sold or if a partial withdrawal is made. If the whole bond is liquidated, a special averaging method, called tax slicing is used which can result in a lower tax liability. Full liquidation of Investment Bonds: - If the bond is totally liquidated, top slicing can be applied which has the effect of averaging the gain over the years the bond is held. The income for the purposes of taxation is equal to the gain or - Gain = Sales price + Total Tax Deferred withdrawals to date (original cost) - Average Gain = Gain / Years Bond Held - Income tax is calculated on Average Gain to the extent Average Gain falls into the upper band; only this portion will be taxed at the additional 20%. One further step is required to get the full tax: Tax due = income tax on Average Gain X Years Bond Held - Top Slicing will reduce total taxes due when sale of an Investment Bond pushes a taxpayer across the boundary of the higher tax band. By averaging this over a number of years, the amount of gain actually subject to the higher band could be reduced, resulting in income tax savings. Partial Withdrawals from Investment Bonds - A feature of Investment Bonds is the ability to withdraw up to 5% per year of the initial cost of the bond. This feature is cumulative; if the 5% hasn t been taken in a given year, the owner can catch up later. - Withdrawals beyond the tax free amount available in a given year are taxed as income to the extent total income falls into the higher band once the top slicing technique listed above has been applied. The top slicing on partial withdrawals is averaged over the number of years since the last partial withdrawal that included an amount other than the tax deferred portion. 6
- Part of the gain may fall into the lower band and therefore not generate any additional tax, and the amount that exceeds the lower band would be subject to tax at the 20% rate (the bond provider is deemed to have accounted for taxes at 20% within the bond s account). - If the client is taking a percentage of the bond as a tax deferred withdrawal and makes an additional withdrawal, the tax deferred withdrawal will stop until the following year. Assets Taxation of Gains on Investment Bonds (Off Shore) Full or Partial liquidation of Investment Bonds: - The gain on Off Shore bonds at full or partial liquidation does not receive the top slicing approach but it instead is treated as regular savings income for the purposes of income tax. Liabilities Credit Cards, Overdraft: - PlanLab will use any available credit (either overdraft or credit card) to meet possible cash flow shortfalls in the future. Where available credit lines are used, PlanLabs will automatically include the repayment of the credit line in the analysis. To avoid PlanLabs using credit line, enter zero in the Maximum Credit Amount input. Liabilities Loans: - Loans taken out to purchase Personal Property and Property can also be recorded as part of the Property or Personal Property entry. When recorded as part of a Property record, the details of the loan will also appear under the Loans section. - PlanLab will automatically calculate the repayment date of a loan based on the current balance, loan interest rate and repayment amount. PlanLab will first apply the repayment amount to the interest due on the loan and then use any remaining amounts towards paying back the capital borrowed. For Interest Only loans, the payment amounts should cover the interest element only. - PlanLab can accommodate future loans that have not yet been arranged. To record future loans enter the future date the loan will be drawn in the Date of Balance entry. - There is not a way to exclude particular loans or debts from showing up on the Immediate Cash Needs part of the Financial Needs Analysis module s survivorship section. In the Survivorship analysis, there are two different ways of dealing with the survivor s needs: 1. How much insurance would be necessary today to fund the survivorship period assuming you cover all expenses immediately following death (the Immediate Cash Needs section of the survivor needs analysis). 2. How much insurance would be necessary to fund the continuing income needs throughout the survivorship phase, assuming debts, liabilities, etc. are 7
continued to be paid over the normal course of time that they are outstanding (the Income Needs report see pages 6 to 9 of the attached). - The best way to model a property with more than one type of mortgage is to split the asset into separate asset values, and associate the loan balance and repayment types (i.e., straight repayment, interest only) with the appropriate split asset. Retirement Plans General: - Apart from Final Salary Schemes and Final Salary AVC s, PlanLab splits recording Retirement Plan details into two sections. The first element is recorded in the Retirement Plan section where the current details of the plan are entered such as current balance, contributions, anticipated growth rate, etc. The second element of the Retirement Plan is the future benefits which are recorded as entries in the Pension Distribution screen in the Transactions section. PlanLab will automatically create a default entry in Pension Distributions for each entry recorded in the Retirement Plan section. This default entry in Pension Distributions can then be edited if necessary. Retirement Plans Tax Relief on Contributions - For contributions to approved fund based pensions (i.e. FSAVCs, Money Purchase, Money Purchase AVCs, Other Pensions, Personal Pensions and Stakeholder Pensions), PlanLab will apply the following tax relief calculations: o Where the Retirement Plan is sponsored by an employer (i.e. Money Purchase, Money Purchase AVC and Stakeholder) Basic rate tax relief is applied in the form of additional contributions to the pension fund. The figure recorded under Employee Contributions should be the Net figure. PlanLab will increase the contribution to represent the Gross amount by multiplying by 80% (or 0.8). Higher rate tax relief is automatically calculated and is listed as an Income Tax Refund in the following year. o Contribution Source Salary: Basic rate tax relief is applied in the form of additional contributions to the pension fund. The figure recorded in the pension input should be the Net figure. PlanLab will increase the contribution to represent the Gross amount by multiplying by 80% (or 0.8). Higher rate tax relief is automatically calculated and is listed as an Income Tax Refund in the following year (or deducted from other Income Tax due). o Contribution Source Cash Flow: Basic rate and higher rate tax relief is calculated and listed as an Income Tax Refund in the analysis (assuming no other income tax is payable). Basic rate relief is not added to the contribute to the fund. o Final Salary Schemes and Final Salary AVCs: There is no tax relief calculated for employee contributions to these schemes in the current version. Basic and higher rate tax relief can be manually recorded as a tax exempt Other Income in the Income section. o Reposition Assets: Where the Reposition Assets transaction is used to move funds into one of the approved fund based pensions, basic rate and higher rate tax relief is calculated and listed as an Income Tax Refund in the analysis (assuming no other income tax is payable). 8
o Distribute Income to an Asset: Where the Distribute Income to an Asset transaction is used to make contributions to one of the approved fund based pensions, basic rate and higher rate tax relief is calculated and listed as an Income Tax Refund in the analysis (assuming no other income tax is payable). - No checks are automatically carried out by PlanLab to ensure a client s pension contribution does not exceed allowable limits. - To record additional fund-based pension contributions in the future, use either the Reposition Assets or Distribute Income to Specific Asset transactions depending on whether the contributions source is an asset or income. Alternatively, users could create a new fund based Retirement Plan entry, enter the details as normal except do not apply the general inflation rate to contributions (as these would be applied from today) and use the Start Contributions input to record the date in the future when contributions will begin. Use the Transactions, Pension Distributions section to record the funds future benefits as normal. Retirement Plans Final Salary Schemes: - Unlike fund-based Retirement Plans, the current contributions and future benefits for Final Salary schemes are recorded in the same input screen. Retirement Plans Pensions in Progress: - If the client has already retired or is already claiming benefits from a pension plan, the details can be recorded in the Pensions in Progress section. To improve the clarity of the analysis, it is recommended each pension plan s benefits are recorded as separate Pensions in Progress entries. Be sure not to duplicate pension benefits income by recording details in Pensions in Progress and the Other Income section. - For non married clients, the input option Percent Paid to Surviving Spouse is not available. If you wish to record existing Pensions in Progress continuing to a non married partner, you can record an entry under Other Income where the Start event is death of the client. Retirement Plans Unapproved Pensions: - Taxation on Contributions: It is assumed the client will be liable to pay Income Tax on any employer contributions to FURB Retirement Plans. - Taxation on Distributions: It is assumed all future distributions (future withdrawals) from FURB Retirement Plans will be free of Income Tax. - As the benefits from Retirement Plans Unapproved Pensions are not subject to the same rules as other fund based pensions, they are not handled by the Pension Distributions section. Instead these withdrawals are recorded using the Reposition Assets transaction section. Benefits from these funds can be recorded as either a single withdrawal or as a series of income streams. - If the client holds an Unapproved Pension in the form of a future income to be provided by the employer, this should be recorded under the Other Income section. 9
Insurance: Disability Insurance: To record employer benefits based on salary, use Disability Insurance: Group and create an entry for each payment. For instance, employee receives full pay for six months would be one entry, after six months employee receives 50% of salary for a further six months would be another entry. After one year, the employee receives 25% of salary for a further year would be another entry. Insurance: Endowment Insurance The Policy End input is to record when the policy finishes. The Endowment Event input is to record when the Endowment Capital Value is to be paid out. The Policy End and Endowment Event may occur at the same time or at different times but the Endowment Event must always occur before the Policy End. Insurance: Family Income Benefit - Any income from Family Income Benefit plans will be included in the Other Income figures in the Survivor analysis output pages and as an income source in the Super Ledger Death of Client documents. Insurance: Life Insurance Cash Values for Whole of Life insurance policies are only included in the future cash flow projections if the version of PlanLab being used includes an illustration system that provides more detailed information about the life insurance policies. Without these further details it is impossible to calculate the effect policy cash withdrawals will have on the future death benefit amount. For Joint Life Insurance policies, select Joint Life from the Insured options. Irrespective of the entry in the Beneficiary input, the software will include the death benefit amounts in the analysis for client A and client B. Where a Life Insurance policy is recorded with Beneficiary is Other, the death benefits from this policy will NOT pass to the spouse in the survivorship analysis. Group Life Insurance and Estate Planning module: The benefits of any group life insurance policy where the beneficiary is the spouse are assumed to pass directly to the spouse at the client s death. As such they are not included in the initial Gross Estate figure but are added to the Inherited from ClientName figure in the Comparison of Transfer Costs calculated in the Estate Planning module. Where the beneficiary of group life insurance is the client s children, the benefits are excluded from the Comparison of Transfer Costs calculation and are added to the post Inheritance Tax calculation figure of Total to Heirs and Others. Transactions: Dist. Income to an Asset - Used to record one-off or regular transfers of income to qualifying assets to increase the value of the asset. Assets that cannot receive additional contributions from this transaction are: Retirement Plans (these contributions are recorded in the Retirement Plan input screens), Businesses and Farms. 10
- Distribute Income to an Asset is typically used to record regular contributions to a savings asset. To record one-off movements of funds from one asset to another, please use the Reposition Asset transaction. Transactions: Income Drawdowns - Record Income Drawdown benefits for fund-based Retirement Plans recorded in the Retirement Plans input section. - The pension plans available for income drawdown appear in the drop down list in the Select Plan box. - Be sure to check the selected pension plan does not already have a Pension Distribution record associated with it. - If the client wishes to take tax-free cash from the fund in a single, one-time lump sum, check the box Use Tax-Free Option and record the details in the additional boxes. - If the Use Tax-Free Option box is unchecked, the system will assume 25% of any Income Drawdown amounts recorded are tax-free. - The level of income drawdown can be selected using the Drawdown Method drop down. The options available are Fund Percentage, Amount and Schedule. - Fund Percentage: This allows you to model withdrawing an annual percentage of the fund value. Although you have options available for the frequency of payment, the Fund Percentage input will always represent a per annum withdrawal. - Amount: Select this option to record an amount and desired frequency. The amount recorded can be automatically escalated by entering an annual Escalation Rate. - Schedule: Select this option to reveal the Schedule tab at the top of the input screen. Click the tab to record varying levels of an annual income drawdown throughout the analysis period. - If you select the Convert to Annuity at Drawdown End option, the system will apply the Annuity Rates recorded to the projected fund value at the specified Drawdown End. - Income Drawdown benefits can be recorded beginning and ending at different ages with different rates of benefit for the same fund based pension by recording more than one entry. For instance, record the benefits taken from retirement age to age 75 as one entry (ensuring the plan is not converted to an annuity at the drawdown end), then create a new entry to record the benefits taken from 75 onwards. PlanLab will automatically acknowledge the same fund is being used and will calculate the drawdown income for the subsequent entries based on the final fund balance for the previous ones. 11
- If death occurs during Income Drawdown, the drawdown is assumed to continue as long as no other transaction changes the distribution OR the convert to Annuity option is not set to happen before death. - Withdrawals from fund based pensions can also be modelled using the Reposition Assets function (see below). No maximum is applied to withdrawals using this method and all withdrawals will be liable to income tax. Transactions: Pay Expense with an Asset - Used to record an expense recorded in the Expenses input section is being paid for from a specific asset as opposed to being paid out of normal cash flow. - This transaction can also be used to record a business expense, rental property expense or loan expense is being paid by a specific asset as opposed to normal cash flow. Transactions: Pension Distributions - Used to record the desired benefits to be taken from fund-based pensions recorded in the Retirement Plans input section. - PlanLab will automatically create a Pension Distribution record for each fund-based pension recorded (provided a cash account, such as a bank account, has been recorded). The default record created assumes 25% of the fund will be taken as Tax-Free Cash and uses a default annuity rate. Each automatically created Pension Distribution record should be reviewed and edited before proceeding with the analysis. - If Discretionary Spending has been included (i.e. the client states anything left over in the bank account is spent), it is advisable to ensure the Deposit Payments In box is set to a deposit or holding asset rather than the bank account. If the bank account is selected, any large tax-free cash amount will be spent immediately as part of the Discretionary Spending setting. Transactions: Reposition Assets - Reposition assets can be used to record the movement of funds between assets. The value of the funds and the frequency of the movement can be recorded at any level. - Reposition assets is particularly important when Discretionary Spending has been set, i.e. when the client has stipulated that any funds left in the bank account are regularly spent. Reposition assets should be used to ensure any large amounts (such as life insurance death benefits) are moved away from the bank account before they are also spent under Discretionary Spending. The simplest way to achieve this is to reposition each life insurance to a deposit or holding asset. When setting up the reposition transaction, it is not necessary to state the Transfer On event as the policy holder s death. PlanLab will automatically recognise the life insurance policy will only pay out at death and will instigate the transfer at that event. 12
- Where Discretionary Spending has been included, the Reposition Assets transaction can be used to move benefits from any endowment policies away from the main cash account (usually the bank account). A Reposition Assets transaction can be created for each endowment policy but only one transaction per policy is required to ensure life cover benefits (in the event of death) and future cash values (where death does not occur) are moved away from the cash account. When creating a Reposition Assets transaction for an endowment policy, Already Started should be selected for the Transfer On input. - When using Reposition Assets with any Bonds recorded, the Transaction Types available are All Distributions or Sell. The All Distributions refers to the Annual Withdrawals being drawn from the Bond. The Sell option means transferring the entire bond value. Transactions: Sweeps - The Sweep transaction differs from the Reposition Assets transaction as it allows you to set a threshold or minimum balance figure before funds are moved from one asset to another. - Sweep transactions can be recorded as a one-off event, to run from one period to another or to run permanently. - The Sweep transaction can be used to move large funds away from the client bank account to avoid them being spent on Discretionary Spending. As a rule, if a Sweep is set up with a threshold equal to the total monthly income plus the bank account balance any large fund amounts, such as life insurance benefits or pension lump sums, will be transferred before they can be spent on discretionary spending. Planning: Assumptions - To record inflation rates for State Benefits, general living expenses and education costs as well as chosen retirement ages. - The assumptions section is also where Discretionary Spending can be set. This is particularly useful where a client does not know on what items income is spent only that it is spent before the next income is received. You can turn on Discretionary Spending by clicking the tick box next to Spend everything left in Current Account over and record the bank balance in the box provided. Planning: Cash Flow Sources - Allows the user to select the order in which assets are to be consumed to fund any cash flow shortfalls in the analysis areas. To adjust the order, simply click on the list of assets. Planning: Downsizing - Allows the user to incorporate a property downsizing strategy as part of the client s future cash flow arrangements. Downsizing can include future borrowing as part of the arrangement. 13
Planning: Risk Profile - Features the Risk Profile questionnaire which consists of ten questions designed to ascertain the clients attitude to risk profile. Goals: Education Goals In the Education Funding sections of the reports PlanLab will only use education assets (i.e. those assets where Use as source of cash has Education selected as one of the Restrict Use to: options) to fund the need with the remaining being an education shortfall. Goals: Future Purchases - This section is designed to record the intended future purchase of fixed assets. Once the purchase is completed, the item will be added to the client s other assets for the purposes of future net worth. - If a single owner of a future purchase dies (as in the survivorship analysis), the future purchase will not be honoured. If the future purchase has joint ownership selected, then the transaction will still occur in the event of survivorship analysis. The future purchase will also still occur in the event of either client becoming disabled. Goals: Other Specific Needs - This section is designed to record other future needs, except for the purchase of any fixed assets (which should be recorded under Goals: Future Purchase). Items recorded in Other Specific Needs represent the future purchase of non tangible items i.e. holidays, services, etc. 14