A: When projecting your plan into the future, the program uses the settings in your strategy in conjunction with built-in rules, to decide each year of your life what to do next. This could be during a Monte Carlo simulation involving many trials, or during a single scenario that you've requested on the Results page. The underlying rules are:
• Target levels of pension contributions are determined by settings in the strategy. Other types of investment are only considered once these have been met .
• After essential spending, discretionary spending and pension contributions have all been taken into account, any cash left over is first used to repay any debts for which early repayment is allowed. After that, any further remaining cash is reinvested according to the level of risk indicated in the strategy. ISA allowances are utilised in preference to taxable investments.
• Where income is insufficient to cover spending, liquid assets are sold to meet the shortfall, priority being given to the least tax-efficient assets.
• Various numbers may change randomly from year to year, according to the rules of probability in your assumptions, which are set at the bottom of the Plan page. Randomisation includes the rate of inflation, investment growth rates and property growth rates. Also, if you've specified a range of bonuses for an employment, then the bonus each year is randomised within that range. Your changed financial position each year takes into account all randomly generated values.
• Investments are gradually rebalanced from the starting level of risk towards the terminal level of risk, as specified in the strategy. This is sometimes known as a 'glide path'. Lower risk means less random but smaller returns on average, whereas higher risk means more random but greater returns on average.
• A target proportion of total spending may be specified by the strategy to control the purchase of new lifetime annuities, once any member has retired. Each year, new annuities are bought only if the resultant total guaranteed lifetime income (including any state pension, existing annuities and/or Defined Benefit pension income) fully covers the target proportion of spending.
• The growth rate of any new annuities is determined by the setting in your strategy, which can be either Level, Fixed or Indexed.
• If there are two members, new annuities are allocated between the members as specified by the strategy.
• For retired members in pension drawdown, the level of drawdown is normally determined by the strategy, but may be exceeded should other sources of cash be insufficient.
• Based on gender, date of birth, region and optional manual adjustments, a member's life expectancy is determined based on probabilities found in mortality tables published by the Office for National Statistics.
• Any cash flow shortfall after using all sources of income is made up by drawing down on investments, subject to any restrictions on withdrawals (e.g. from pension funds). Taxable investments are prioritised, followed by ISAs, then pension funds (over and above the target pension drawdown setting in the strategy).
• When members retire, they take any available tax-free lump sum from their pension plan(s) according to the strategy. If phased drawdown is enabled they only take the tax-free portion pro rata to any taxable withdrawals. If drawdown is not phased then they take the full tax-free lump sum from their pension plans immediately. Unless needed to cover outgoings, the lump sums are reinvested utilising any available ISA allowances.
• If there is still a cash flow shortfall, any extensible and repayable debts are drawn upon, including an assumed overdraft facility based upon a combination of the current net worth and gross income.
• If this still leaves a shortfall and the plan has any tangible assets other than a main home, then the shortfall is reduced or eliminated by making sales from these.
• If this is still insufficient, equity is released as a reverse mortgage if possible, based on the value of any main home.
• If all of the above steps fail to raise sufficient cash then the plan is deemed to be insolvent. However, the program still continues projecting until the death of the last member but with zero discretionary spending. Any cash shortfall is filled by borrowing at a punitive interest rate (5% higher than the unsecured rate specified in the assumptions). In real life of course, any remaining assets might be sold to pay off existing loans. The punitive interest rate assumed by the program is designed to reflect the fact that being forced to sell up is highly disruptive to lifestyle, and to 'discourage' the optimisation away from insolvency. In some cases a scenario may end up with negative net worth (ruin); unsurprisingly the program treats this as the most undesirable outcome of all.
A: Yes it does. After you've signed up, you can create a plan either for a single person or for a couple.
A: We are aware of a number of programs that set out to capture every last detail about your financial life. You would need to invest a great deal of time and effort to provide all that information (far more than for EvolveMyRetirement®). They then make future projections using equally detailed rules, but these are underpinned by crude assumptions: for example, that investment growth will be identical every year, and will never fall, or that there's no need to project beyond a fixed arbitrary time horizon. This is nothing like the real world, in which investment returns fluctuate from year to year, sometimes dramatically, and in which none of us can predict with confidence how long we will live.
The philosophy of EvolveMyRetirement® is to capture your finances and your attitudes in just enough detail so that the program can fill in the remaining gaps and go on to make future projections. Our program takes into account the uncertainty of investment returns, property prices, inflation and longevity, so that your confidence in the results can be much higher. But we don't aim to take the place of an independent financial advisor, and we strongly recommend that you consult one before putting any generated strategy into practice. To make this easy, you can share your plan directly with your financial advisor.
A: The purpose of EvolveMyRetirement® is not to give you specific investment advice, but rather to arrive at a high-level strategy geared towards sustainable spending, consistent with your stated attitudes to risk and leaving a legacy. The program makes assumptions, which you can adjust if you want, about investment returns, in terms of both average returns and volatility. Specific advice on how to achieve such returns is beyond the scope of this website, and should be sought from an independent financial advisor.
A: Yes and No! EvolveMyRetirement® uses Monte Carlo simulation. The variability of market returns is randomised based on probability distributions that are consistent with past market data. However, the exact past sequences of returns are not copied. There are two reasons for this. Firstly, the past doesn't repeat itself exactly. Secondly, past returns are only available for approximately the last century, which would limit the sample size to just over 100 scenarios. A reliable Monte Carlo simulation requires a much larger sample size: EvolveMyRetirement® uses 10,000 scenarios.
A: Different probability distributions are used in different contexts:
• A uniform distribution is used for the employment bonus, between the specified minimum and maximum.
• A normal distribution is used for the rate of inflation, using the mean and standard deviation specified in the plan's assumptions. Although inflation may be randomised as negative, there's a lower limit of -1%. Any randomised inflation rate below this will be treated as -1%.
• A log normal distribution is used for the growth rate of investments and properties. The mean and standard deviation are specified in the plan's assumptions. For investments, the mean and standard deviation are only specified for the lowest and highest risk investments (corresponding to investment risks of 0 and 100 respectively in the strategy). For risks in between, the mean and standard deviation are calculated based on a pro rata mix of lowest and highest risk investments, assuming zero correlation. Note that investment growth rates include any reinvested income.
• For life expectancy, no standard probability distribution is assumed. Instead, mortality tables from the Office for National Statistics are used. Based on a plan member's biological age at the start of projection, together with the gender and country of residence within the UK, the year of death is randomised via a walk through the relevant mortality table.
A: When you enter either an Employment or a Self-Employment for a Member, you specify the retirement date from that work, and also whether it's pension-related (i.e. pension contributions are made or there's a DB pension). Once the Member has retired from all pension-related work, and has also passed the earliest age at which pension funds may be accessed (currently 55, rising to 57 in 2028), the program then treats the Member as retired.
So it's possible for a Member to be treated as retired by the program while still in work, provided there are no related pension contributions. Also, if a Member stops all work very early, say at 45, then the program only treats the Member as retired once they reach the earliest age at which pension funds may be accessed.
A: Even though this could be done in theory, it would involve adjusting the utility value of early retirement compared with having extra discretionary spending. The problem lies in quantifying the benefits of an extra year of free time, compared with having, say, £1000 a year less to spend for the rest of your life. We've taken the view that these judgements are too subjective to automate reliably. We've therefore left retirement dates to be adjusted manually, at least for now.
A: EvolveMyRetirement® is designed to cater for most peoples' needs. There may be some circumstances when the right choice of inputs is not obvious. Please feel free tocontact usif you would like assistance.
A: EvolveMyRetirement® uses mortality tables published by the Office for National Statistics. Based on gender, date of birth and region, a person's life expectancy is determined based on probabilities found in the mortality tables, and randomised during each Monte Carlo Simulation. It's possible to manually adjust the average life expectancy up or down based on specific considerations such as health or demographics. It should be borne in mind that underestimating life expectancy may skew the results towards over-spending, so this feature should only be used with caution, preferably based on professional advice.
A: The main factors that impact lifetime annuity rates are life expectancy and gilt yields. Annuity rates don't fluctuate as much as some financial markets, but they do tend to vary gradually over time. Rather than second-guess the future movement of annuity rates, EvolveMyRetirement® only uses current annuity rates in its calculations, which are updated periodically. If annuity rates change significantly in the future, then your strategy may show different results, and further optimising it may well improve it.
A: On the Members page you can specify your state pension, and when it will start if in the future. The UK government provides an online service that will help you find out the amount in today's money.
A: You can, if you wish, defer the start date of your state pension, in order to increase your annual pension amount. This can sometimes be beneficial provided you're in good health, and have a long life expectancy. There's information from the UK government about this. This should give you enough information to edit your plan to see the effect of deferral. You should talk to your financial advisor about any planned deferral.
A: Yes. On the Spending page, there are three options for the payment frequency: monthly, yearly or one-off. If you select one-off, then the start-date for the spending is treated as the date on which it occurs in full.
A: If you enter your property-related expenses on the Spending page, then the program has no way of knowing which properties they relate to. That might not matter if your only property is your main home, and you never plan to downsize or upsize. But if you own a second property that might need to be sold (whether planned or forced), then it's important that expenses relating to that property cease once it's sold; so it's important to record them against the property on the Assets page. Or if you plan to resize your main home, then at the right time the program will adjust any associated expenses in proportion to the extent of the resize; this is simpler than setting up two sets of expenses on the Spending page.
A: When you create your plan, it's given a number of assumptions. You can view these in the Assumptions section on the Plan page, where you can modify them if you wish. We believe that the default values make sense, but we don't assume that we necessarily know best. If you share your plan with a financial advisor, and they consider some of these assumptions too optimistic or pessimistic, they (or you) can easily change them.
If you're a Premium User, you can create multiple plans based on default assumptions that you can customise.
A: Economists use the word 'utility' to describe the usefulness of something. A utility is expressed as a number, so the bigger the utility value something has, the more useful it is considered to be. A utility can be calculated for every strategy. The higher the value of the utility, the better the strategy is deemed to be in meeting the objectives of the plan's members.
To calculate a strategy's utility, EvolveMyRetirement® runs a Monte Carlo Simulation. This simulates possible scenarios over and over again, randomising where there are uncertainties according to built-in probability distributions. In some scenarios the plan members may run out of money. In others, investment returns may be exceptionally high and the members may leave a huge legacy. The results of all the scenarios are analysed, taking the following factors into account in this analysis:
• The level of spending achieved in each scenario.
• The likelihood of running out of money.
• The likelihood of ending up with negative net worth.
• The size of any legacy.
• The importance to the plan members of leaving a legacy.
• The plan members' risk aversion.
A: No, certainly not in the same way as AI systems based on Large Language Models (LLMs). Unlike LLMs, our optimiser doesn't rely on external training data that might be biased. Instead, the optimisation process is evolutionary. In effect, the training data is constructed on the fly, and is based on the specific contents of your plan. The optimal strategy is determined based solely upon simulated outcomes. The only possible scope for bias is in the built-in projection rules of the program, which are outlined in the answer to the first question on this page. Our philosophy is to hard-wire as few decisions as is practical, and to base as many decisions as possible on the strategy settings, which are optimised.
A: We'd ask in return: too long compared to what?
For any given strategy, running a Monte Carlo simulation completes in no more than a few seconds. But optimisation doesn't involve running just a single Monte Carlo simulation. As it progresses, it has to evaluate thousands of different strategies, each one requiring a new Monte Carlo simulation.
On the face of it, this might sound inefficient. If we'd have implemented our optimisation (it uses a Genetic Algorithm) naively, it might have taken hours to complete. If that had been the case, optimisation would have been impractical. However, while developing EvolveMyRetirement®, we incorporated a proprietary technique that dramatically reduced the time to completion from hours to minutes.
If waiting several minutes still seems like a long time, keep in mind that our optimisation does something unique among retirement planning calculators.
A: Some possible reasons for this could be:
• If the setting is for discretionary spending, then lowering the risk means lowering spending, which you'd like to keep as high as possible. The optimisation will have found a balance between risk and reward, based on your stated attitude to risk.
• If you've indicated a desire to leave a legacy, then the optimised setting may offer better chances of doing so than a lower-risk setting. Once again, the optimisation will have balanced risk against reward.
• A small apparent difference in risk may be within the margin of error of the Monte Carlo Simulation.
A: When you run a sensitivity analysis, a Monte Carlo simulation is run for each setting with which the current setting is being compared. This results in a utility value that's not exact due to the margin of error of the Monte Carlo Simulation. It's possible that two settings could result in utility values that are very close, and it would then be a matter of chance which one ended up higher. In practice this means that there's little to choose between those settings, based on the program's algorithms.
A: The risk of insolvency and the median legacy are just two of the factors that the program uses to arrive at the utility. Other factors that could push the utility in a different direction are:
• The likelihood of ending up with negative net worth (even worse than 'mere' insolvency).
• The size of any legacy (the median is just an indication of the spread across scenarios).
• The importance to the plan members of leaving a legacy.
• The plan members' risk aversion.
In some cases the nuances of uncertainty can produce a counter-intuitive result.
A: The assumptions (which you can view at the bottom of the Plan page) represent things that you cannot control, but that you can estimate. We've provided a set of default assumptions, which we believe are reasonable and sensibly cautious. No doubt some economists and financial advisors may disagree with our settings, and would have chosen different ones. That's why we've made our assumptions configurable.
Whatever set of assumptions you start with, EvolveMyRetirement® will optimise your strategy taking them into account. It's almost inevitable that the resulting strategy will be highly sensitive to some (but not all) of the assumptions. That's why it's so important that they're reasonable and not overly optimistic. If you are unsure about the assumption settings, we recommend that you share your plan with an independent financial advisor, who can review them.
A: It's not impossible, but it may be counter-intuitive. It can happen with certain settings in your Strategy relating to buying new lifetime annuities (known as annuitisation). Suppose your strategy says that you'll buy annuities provided they'll cover a certain percentage of your spending. Then if at some point in the future that condition is met, you'll convert some of your net worth into annuities thus reducing your potential legacy. But if you increase your discretionary spending from the start then there's less chance that you'll meet the annuitisation condition, in which case you won't convert any of your net worth into annuities so there'll be more potential legacy. You don't get something for nothing though: if you increase your discretionary spending and in so doing avoid buying annuities, then your risk of running out of money will increase.
A: This can happen based on your strategy settings for buying new lifetime annuities. In any given year, if the conditions of your strategy are met, then the program will convert pension and/or other funds into new annuities. This has the effect of lowering net worth whilst increasing income, thus reducing any decrease in net worth in subsequent years.
A: Once is unlikely to be enough. Your circumstances can change in many possible ways. For example:
• You might gain an unexpected promotion with higher pay.
• Markets might rise or fall significantly resulting in a revaluation of your assets.
• Annuity rates might change significantly.
• You might be made redundant.
• You might develop an overwhelming urge to retire early.
• You might decide you want to continue work past your originally planned retirement date.
• You might receive an unexpected windfall.
• There might be a significant increase in your expenses.
• You or your partner might develop health problems.
• You might alter your attitude to leaving a legacy if you subsequently have children.
• You might outlive your partner.
The optimal level of discretionary spending is based on the known facts at the time that a strategy is optimised. In the words of the economist John Maynard Keynes: "When the facts change I change my mind. What do you do, sir?" So the answer to the question as to how often to re-optimise your strategy is: Whenever the facts change!
A: Part of the answer could be that in many of the trials in which you ran out of money, this happened very soon before the last member of the plan died, which would have mitigated the negative aspects to some extent. It could also be that running out of money often occurred when you were still asset-rich, implying that lifestyle changes, whilst undesirable, would be possible to avoid total disaster.
The calculated chance of your running out of money may have assumed that your discretionary spending will stay the same in real terms, year in, year out. Your circumstances are likely to change in the future as discussed in the answer to the previous question. Unless you've already done so, you might consider allowing the program to vary your discretionary spending over time: your chance of running out of money should then be reduced. This setting is on the Plan page.
A: The4% Ruleis a rule of thumb, and nothing more. It's based on the concept of a Safe Withdrawal Rate, which is intended to be the level of withdrawals from a retirement fund that's unlikely to deplete the fund during the lifetime of the retiree.
In practice this is an oversimplification. For one thing, different parts of the retirement fund are taxed differently (pension plan withdrawals are treated as income, ISA withdrawals are tax-free, and sales of other investments may be subject to capital gains tax). It also ignores non-financial assets, such as properties, which might generate rental income, be sold for cash, or be used for equity release via a reverse mortgage. In addition, it assumes one spends exactly what one withdraws.
EvolveMyRetirement® uses a better approach, based on sustainable discretionary spending. With this approach, starting from known essential spending, it optimises a level of discretionary spending that can be safely funded through our lifetime. The program allows for either a fixed inflation-adjusted level of discretionary spending, or else discretionary spending that varies up or down in line with unfolding financial events.
The actual drawdown decisions are affected by tax implications to a large extent. Withdrawals from pension plans, ISAs and taxable investments need to be balanced; this is to minimise the liability to income tax, national insurance, capital gains tax and inheritance tax. When the program generates an optimised strategy, it takes all this into account.
A: This is a very important question, and is fundamental to the philosophy of EvolveMyRetirement®. There are a number of points to make:
1) As is stated in the description near the top of the Spending page: "Whether or not you enter discretionary spending here, the system will later optimise it as part of your strategy". In other words, if you choose to enter discretionary spending on the Spending page, the total should represent your current level, which is not necessarily the same as your sustainable level. You may be currently spending too much or too little.
2) In fact, the optimiser ignores any discretionary spending that you may have entered on the Spending page. This doesn't mean it's useless to enter it. After you've optimised your strategy (or manually edited it), the Results page will tell you if your strategy indicates that you're over- or under-spending.
3) Any (current) discretionary spending you enter on the Spending page is included in the chart at the bottom of the page, which can be useful. Once you're happy with the level of discretionary spending in your strategy, you can go back to the Spending page and make it consistent with your strategy.
4) Unchecking the box on the Plan page allowing the program to vary your discretionary spending has nothing to do with what we've just discussed. It simply means that whatever the starting level of discretionary spending (as specified in the strategy, not the Spending page), it will be increased each future year in line with inflation, come rain or shine.
5) As for specifying discretionary spending and getting the program to stick to it, with a Premium subscription you can manually edit the discretionary spending in the strategy to the desired value, and then lock it before optimising. The optimiser will then look for the best way of achieving this level of spending in the most sustainable way.
A: At the start of each year of projection, the program compares your plan's net worth (adjusted for the estimated net present value of any guaranteed income) with what it would have expected in the average case without uncertainty. The ratio of these two values is then used to vary your discretionary spending up or down for the following year. Any increased (but not decreased) spending is tempered according to the importance of leaving a legacy as specified in the plan; if the plan has specified the maximum legacy importance, real spending will never be higher than at the start.
Other things being equal this approach reduces the risk of running out of money. It also helps you unnecessarily avoid underspending when things go better than expected. Rather than copying this heuristic approach each year though, you'll get better results by keeping your plan up to date and re-optimising your strategy from time to time. When you re-optimise, the program treats today as the first day of the rest of your life: it doesn't fret over past mishaps, and it takes account of the most up-to-date information.
A: That depends on what you want the program to tell you. When you don't check the box, it gives you results based on a constant level of discretionary spending, in real terms (other than any fixed taper you may have specified). Traditionally, this is what most people have assumed that retirement would be like. Leaving the box unchecked gives you a picture of such a 'traditional' retirement. However, this is unlikely to reflect your future reality, unless perhaps you're able to fund it entirely from Defined Benefit pensions or other guaranteed income.
Nowadays most people fund some or most of their retirement by drawdown of their pension funds, savings and other assets. If you check the box, the program will adapt to any over- or under-performance of your investments by varying your discretionary spending. The advantage of this is that you'll probably be able to afford to start off with higher spending and still have a smaller chance of running out of money. The disadvantage is that budgeting your discretionary spending for the long term requires more flexibility.
One approach is to leave the box unchecked during optimisation, but then to check it afterwards to see how that improves the results. But leaving it checked during optimisation works too, since the optimiser takes into account whether it's checked; if so, it will tend to go for a lower risk of running out of money, since there will be less scope for future corrective action than if fixed discretionary spending is assumed.
Whether or not you check the box, remember that the program treats today as the starting point for its projections. At some future date you'll need to update your plan based on any changes to your financial circumstances. Between now and then, some of what were just possibilities will have crystallised into certainties. When you re-optimise you strategy, your results should become more reliable.
A: The pension figures you entered for employments and self-employments represent what you're currently paying in. The strategy, on the other hand, is telling you a target percentage, which could represent more or less than you're currently paying in. If it's more, then when the program projects your plan into the future it will use the higher amount, subject to sufficient funds being available.
In fact, even this percentage may be exceeded if there are surplus funds to invest, since the program attempts to mitigate income tax via tax-efficient investments. However, this is capped via the strategy setting for the maximum percentage of earnings. For some members the cap might be important to avoid cash flow problems before retirement.
A: Currently pension tax relief is available only before age 75. After that, the program treats any employer contributions as added taxable salary, and ignores any employee or self-employed contributions. It also ignores any target percentage of earnings paid into pension plan that's specified on the Strategy page.
A: If you've been using EvolveMyRetirement® for a while, you may remember there used to be a strategy setting for the percentage of pension funds to draw down each year. One of the major considerations when choosing a drawdown level is income tax. By drawing down a fixed percentage of a variable pension pot, it wasn't possible to accurately optimise income tax band(s). So we looked for a better way to achieve this.
We considered changing the strategy setting to a fixed drawdown amount for each member, rising each year with inflation. This didn't quite address the taxation issue, since income from other sources might well vary over time, which could push total income into an unnecessarily high tax bracket. For example your state pension may start after retirement; or your investments may generate higher taxable income.
So we finally decided on a setting for the target taxable income in retirement for each member, rising each year with inflation. For a member who's not yet retired the effect doesn't kick in till retirement. The program calculates the pension drawdown amount for each year of retirement taking into account all other sources of taxable income, so that the total taxable income reaches the target. This means that drawdown is dynamic rather than following a fixed formula. This is both more flexible and more tax-efficient.
If the setting for the target taxable income isn't enough to cover outgoings, then the program will try to cover the shortfall using non-pension assets. If there's still a shortfall, then the program will make further pension drawdowns if possible: the target is not a hard and fast maximum.
Conversely, if the setting for the target taxable income is more than enough to cover outgoings, then the program will reinvest any excess, into ISAs where possible, otherwise into taxable investments.
When the program optimises your strategy, it arrives at a setting for the target taxable income that balances several competing influences:
• The cash needed to cover outgoings.
• The efficient utilisation of income tax allowances and bands during the lifetime of each member.
• The desirability to leave pension funds in order to minimise inheritance tax.
• The stated importance of leaving a legacy.
A: Actually, you can view bar charts from the Results page, once you've entered your information and generated a strategy. Many other tools prominently display bar charts, and use them to determine if you're 'on track'. This can be highly misleading. EvolveMyRetirement® uses Monte Carlo Simulation by running thousands of scenarios, and working out the chances of a satisfactory financial outcome. On the Results page, you can see the results of this Monte Carlo Simulation, presented as pie charts. But you can also view randomly generated scenarios as bar charts, as well as a scenario that uses average values. None of these scenarios are meant to be relied upon as accurate in isolation, but to serve as illustrations of how the future might unfold.
A: You can delete a plan even if it's your only one. Scroll to the bottom of your plan on the Plan page: at the same level as the button to update the plan, you’ll find a less prominent “Delete Plan” link. If you use this it will delete everything in your plan, you can then create a new plan if you wish. If you have more than one plan, then deleting a plan won't affect any of your others.
A: Absolutely not! EvolveMyRetirement® is not intended to replace professional financial advice. Even though it's able to suggest a strategy, putting it into practice requires significant expertise and discipline. In any case, the output of any computer program is only ever as good as its input. We strongly recommend that you share your plan with an independent financial advisor. They can validate your plan before you make irreversible changes to your current approach to financial planning.
A: Yes it is. When you sign up, you automatically get the ability to create one financial plan, which can be for either a single person or a couple. You can also subscribe to become a Premium User, which lets you create an unlimited number of plans. What's more, you can collaborate with your clients by means of shared access to their plans, so you can both see exactly the same information.
A: Yes, there's a REST API available to Premium users, together with a guide on how to use it.
A: No, any user can become a Premium User in order to gain access to the additional features.
A: There are numerous advantages:
• You can create as many plans as you want, instead of being limited to just one plan. This is especially important for financial advisors having many clients.
• If someone else has created a plan and requested to share it with you, you'll have full access to it, including editing and optimisation.
• If you've created a plan on behalf of someone else, you can collaborate with them by transferring ownership of the plan to them. You'll still retain shared access to it (unless the new plan owner decides otherwise).
• You can make duplicate copies of your plans. Originals and copies can be modified independently of each other. This makes it convenient to try out different settings and what-if scenarios.
• Before optimising a strategy you can optionally lock, or fix, the values of one or more of the strategy settings.
• You can run unlimited sensitivity analyses on the results of any plan to which you have access.
• You can run unlimited survival analyses, showing the likelihood of plan members' survival into the future and the corresponding statistical spread of a plan's net worth.
• You can customise the assumptions you use for new plans you create, and propagate the customised assumptions to existing plans that were based on your previous assumption settings.
• Extra optimisation credits.
• Prioritised access to our fastest servers. Because of this, accessing your results after modifying your plan (which requires Monte Carlo simulation) is consistently fast.
• Access to the REST API, enabling integration with other systems, programs or spreadsheets
A: After you've signed up you'll see a button on the Plan page to become a Premium User.
A: No, but you'll receive an email reminder approximately one month before it's due to expire. You can then renew it at any time before or after expiry for a further full year.
A: To manually edit your strategy, you need to take out a Standard subscription (or a Premium subscription if you prefer). You'll find the buttons for this on the Plan page.
A: Each optimisation done by EvolveMyRetirement® uses a Genetic Algorithm, which is based on similar principles to the way in which biological organisms evolve through breeding and mutation. Although the evolutionary trend is towards better and better strategies, he path taken depends on numerous random factors. Indeed, the very nature of the problem of retirement planning involves uncertainty. For an optimisation to generate the theoretically ideal strategy could require unlimited time.
It may also be the case that the program considers two or more strategies equally optimal, even though there may be certain differences. Reasons for this might be:
• Increasing the value of a particular setting beyond a certain amount has no effect on the results. For example, it might make no practical difference whether a 60-year-old starts rebalancing investments in 35 years time or in 40 years time.
• There's a trade-off between risk and reward. Changing one setting may increase reward just enough to compensate for the increased risk in changing another setting. For example, increasing discretionary spending beyond a certain amount will naturally increase risk. In some cases, the program may consider that the benefit of the increased spending exactly balances the increased risk, based on the user's stated risk tolerance.
A: If all the strategy settings were independent of each other, this approach might work though it would be very time-consuming. However, the strategy settings are actually related to each other via a web of interdependencies. Changing one setting can require a compensating change in another, which in turn can require a compensating change in yet another, and so on. Because of this, manual optimisation is impractical, except for fine-tuning.
Whenever you believe your strategy to be out of date, the best way to improve it is first to let the program optimise it, before making any minor manual adjustments.
A: During projection, the program only releases equity from the main home if other sources of funds are unavailable, and only to the extent required to cover outgoings. The amount of equity available to release is limited according to age, based on a maximum of 25% of the primary home value for a 55-year-old, with a sliding scale up to 50% for an 85-year-old or older. Equity release is assumed to be unavailable to anyone under the age of 55. The program assumes a reverse mortgage is used for equity release, except if there are no members who are not in full-time care, in which case the main home is sold. The reverse mortgage interest rate can be changed in the Assumptions (secured borrowing).
Note that Premium users have the option of ruling equity release under any circumstances.
A: When you enter a value of zero (or any other value) for your ISAs, this should represent the total value today. Entering zero doesn’t prevent the program from investing into ISA’s in the future, assuming there’s sufficient liquidity to do so, in which case it will utilise as much of the annual allowance as it can. It prioritises ISAs over taxable investments.
A: The system calculates the required spending for the current year, and uses any income streams to pay for it. If there isn't enough income to pay for all spending, this is shown as withdrawals carried forward, which is made up at the start of the following year by withdrawing from disposable assets, supplemented by borrowing if both required and possible.
It's quite normal for there to be withdrawals carried forward, particularly in retirement, and it would only lead to insolvency if it couldn't be achieved.
A: The assets & liabilities chart and tables start at the current year. The first year represents the starting position today, the next year the position one year from today, and so on. The income & outgoings chart and tables start the year after the current year. The first year represents the year finishing one year from today, the next year the year finishing two years from today, and so on.
A: Investment income is assumed to be a percentage of the mean growth rate. In the assumptions, the specified growth rates assume income is reinvested. For lowest risk, income is assumed to be 100% of growth: in other words, it's all income and no growth. For highest risk, income is assumed to be 0%: all growth and no income. For risks in between, the percentage is interpolated linearly. So in a random scenario, the percentage income will only change during rebalancing of the investment risk, which is determined by the strategy. This means that the investment income percentage is deterministic rather than randomised. If no rebalancing takes place, the investment income percentage will remain constant.
The net investment growth percentage is randomised. The growth percentage shown is the net growth percentage minus the income percentage.
A: When the program makes projections internally, it handles all amounts as absolute values rather than inflation-adjusted values. Inflation is applied at the end of each projection year according to the rules and settings in the program. Adjustment for inflation only happens for reporting purposes, and has the effect of reversing any growth that was caused by inflation, and by eroding the real values of items that don't increase with inflation.
Let's take a simple example. Assume that inflation is fixed at 5% each year. Suppose that discretionary spending is £1,000 per year, and increases with inflation each year with no adjustments and no tapering. Then discretionary spending will be £1,000 in year 1, £1,050 in year 2, £1,102.50 in year 3, and so on. These numbers are the actual numbers that the program would use internally. Despite the fact that the amounts have been increased each year by inflation, they are not "inflation-adjusted" in the true meaning of the term. The inflation-adjusted numbers are £1,000 in year 1, £1,000 in year 2, £1,000 in year 3, and so on. In other words, the plan would spend a fixed £1,000 per year in today's money.
If you run a scenario (in our simple example) without adjusting for inflation, you'll see the discretionary spending grow each year. But if you run it adjusting for inflation, discretionary spending will remain constant.
The same principle applies to other financial amounts in the program. For example, suppose property growth is assumed to be always zero, while inflation is again a fixed 5%. Then a property worth £100,000 will never change value internally, and this is illustrated by running a scenario without any inflation adjustment. But if you run a scenario adjusting for inflation, the value of the property will seem to get smaller each year. That's because without property growth, it will lose 5% of its value in real terms each year.
A: When the program adjusts for inflation, the numbers shown in subsequent years are reduced by an amount to compensate for the inflation that has accumulated since today's date. If you attempt to reconcile the changes in the fund values from one year to the next with the listed increases and deceases, then you'll find that you need the inflationary erosion figure to make the numbers balance.
For a simple example to illustrate the point, suppose taxable investment funds have no additions, withdrawals, growth or reinvested income from one year to the next. Let's assume inflation is 5%. Then if the value in one particular year is shown as £100,000, then the value in the following year, after adjusting for inflation, would be shown as £100,000 / 1.05 = £95,238. There's £4,762 that we need to account for. That’s what we've called “inflationary erosion”?
A: You're asking about what's often referred to as the glide path to retirement. It's true that according to received wisdom, the glide path should complete before retirement. When EvolveMyRetirement® optimises your strategy, t doesn't start with any opinion on whether investment risk should be decreased, increased or left constant. Nor does it assume any particular timescale for such a rebalancing, including whether it should start or finish before, at or after retirement. It arrives at an optimised strategy based solely on the best outcomes after thousands of Monte Carlo simulations.
Received wisdom is sometimes right, but not always and not for everyone. We've often been surprised by the optimised strategies produced by EvolveMyRetirement®, as they're sometimes quite different from what we'd have guessed. But our guesses are nearly always inferior.
A: The concepts of cautious, balanced and aggressive map onto the three possible answers to the question on the Plan page: "How do you feel about the risk of your investments falling in value?". The answer to this question limits the maximum risk that’s allowed in the Strategy. If your answer is "I worry whenever my investments fall in value", then this requires cautious investment, and the program limits the measure of risk in the Strategy to 30. If your answer is "I only worry if my investments fall in value a lot", then this allows more risk with a balanced investment, and the measure of risk in the Strategy is limited to 70. If your answer is "I keep a cool head however my investments perform", then this allows aggressive investment, and the measure of risk in the Strategy is allowed to be anything up to 100.
When we were designing EvolveMyRetirement®, we spent quite a long time looking at the best way of representing the risk vs. reward equation. A common approach is to split an investment portfolio into asset classes, typically equity, bonds and cash, but possibly others. For instance, the well-known4% Ruleassumes a portfolio made up of 50% equity and 50% bonds, with no cash. And target-date funds tend to shift funds from a portfolio heavily weighted in equity to one heavily weighted in bonds. Of course there are other asset classes, such as commodities, derivatives, etc. which are also in the investment universe.
We realised that using the asset class approach would make the tool unnecessarily complicated. Bonds in particular are an anomaly in that their main value for long-term investors in drawdown is in generating a steady income stream rather than in generating capital gains (or losses). Bond ladders are often used to generate income, which are really a kind of cash substitute. Another use of long-term bonds is as a hedge during the lead-up towards buying a lifetime annuity; annuity rates correlate with the yields on long-term bonds, so that if annuity rates fall, bond values should rise.
Juggling three or more asset classes would require configuring risk/reward assumptions for each asset class. It would also require many more Strategy settings to cater for each allowed asset class. To keep the complexity manageable we arrived at the sliding scale approach. This is analogous to having just two asset classes, one for lowest risk and one for highest risk. The lowest risk (0) would most likely be assumed to be cash. The highest risk (100) is assumed to be equities by default; but it could also be a mix of various high-risk assets. The assumptions settings (mean growth, standard deviation, bid/offer spread) for highest risk can be manually adjusted; this requires expert knowledge or research, so we recommend professional advice for this. Our sliding scale approach also assumes that the highest risk assets are growth-oriented, with negligible income, whereas the lowest risk assets are wholly income.
As an example, a risk of 60 would mean 60% of whatever highest risk assets are deemed to mean, and 40% of whatever lowest risk assets are deemed to mean (probably cash, possibly including short-dated bonds).
A: Yes. EvolveMyRetirement® incorporates current rates and bands for income tax, national insurance, capital gains tax and inheritance tax, and makes corresponding deductions in its projections. Tax rules for ISAs and pension plans are also taken into account.
Please bear in mind that the program only takes into account what you have entered into it, so the calculated tax may only be an approximation, though close enough for most planning purposes.
A: Yes. Regional tax differences (currently only in Scotland) are taken into account, based on the UK postcode entered for the plan.
A: Projections made by tools on a straight-line basis are highly questionable. As a simple example, let's assume that certain investments are expected to grow on average by 7% each year. Then an investment of £10,000 would be projected to double to £20,000 in 10 years, on average. However, to make a financial plan that depended on this doubling would be highly risky: there's a 50-50 chance that returns after 10 years will turn out to be less than double, perhaps much less, in which case our plan would fail. How badly it might fail depends on the type of assets we've invested in.
This is not to say that higher risk investments such as shares are to be avoided, but merely that planning based on straight-line projections is far too simplistic. The effects of volatility and uncertainty are felt even more acutely when drawing down investments during retirement. It is far harder to recover from a stockmarket dip that occurs early on in retirement than from one that occurs during one's working life. Sound planning must take into account such risks.
A: If you're not a Premium User, you'll need to make sure that the lifetime contingency on the Plan page includes an amount that will reasonably cover the estimated care costs for all members.
However, if you're a Premium User, you can explicitly plan for long-term care by checking the relevant box on the Plan page, and entering the annual cost of care per member. The start of long-term care is randomised, not fixed. For each member, the number of years before death is randomised using a normal distribution, the mean and standard deviation being governed by the Assumptions section of the Plan page. If the randomised number of years is negative, this means that the member never requires long-term care.
This randomisation model is a simplification. But together with the default settings in the Assumptions, it fits reasonably well with published data. This cited study has three categories for long-term care: Low, Medium and High. In deriving our model and the default settings, we focused exclusively on the Medium and High categories.
Any member-specific spending that has been marked on the Spending page as ceasing in long-term care will completely cease once care has started. Joint spending will be reduced when care starts, by the same amount as if the member had died. Discretionary spending also ceases for any member in care.
Under normal circumstances, the main home (if any) is not sold until the death of the last member. But if all members are in care and all other sources of cash have been exhausted, then the program will sell a main home to pay expenses.
A: Your lifetime contingency represents expenditure that's impossible to foresee now with accuracy, or that's not catered for in your plan. Because it's unforeseen, it's a matter of judgement as to how much you should estimate. We recommend consulting an independent financial advisor to assist in making this kind of judgement. If you share your plan with a financial advisor, you can ask them to enter this information for you. Also, it may be possible and beneficial to take out insurance policies against certain contingencies, to help reduce the necessary size of your lifetime contingency.
A: Once your plan is complete and you've generated the results, there's a button on the Results page to download a full PDF plan report, detailing your plan, assumptions, strategy and results, together with charts. This file is perfect for printing, or you can save it or attach it to emails. This feature is available to Standard and Premium users.
A: Not at all! All calculations and optimisations take place on our powerful computers, not on your own computer.
A: No! The only thing that may be slower is getting the optimised strategy back to your browser, once the optimisation has completed running. However, since the amount of information to be uploaded is quite small, this should not be a problem. This is no different from accessing other pages or other websites.
A: If your plan has changed when you go to the Results page, the program runs a fresh Monte Carlo Simulation with 10,000 trials. If you have a Premium subscription, the program will have an extra-fast server on standby for you, and so the Monte Carlo processing will complete more quickly. These extra-fast servers are the same ones used for optimisation (for all users). They'll also speed up sensitivity analyses, ach of which requires up to four additional Monte Carlo Simulations.
For non-Premium users, Monte Carlo processing takes place on the fastest server currently running, which won't necessarily be one of the extra-fast ones.
A: Yes. If you don't want to use EvolveMyRetirement® anymore and would like everything that you've entered to be deleted, you can do this from the Settings page once you're logged in. Please bear in mind that if you later decide to sign up again you'll have to re-enter everything from scratch.
A: EvolveMyRetirement® is created and owned by Okinawa Zest Limited, a company that is wholly independent of financial institutions, and which provides financial planning software that is not biased towards any specific types of investment. Please feel free tocontact usfor further company information.
A: Please take a look at our ourPrivacy Policyfor details.
A: No. After a thorough investigation we confirmed that EvolveMyRetirement® is not vulnerable to the reported issue. We continue to monitor our software for this and other potential vulnerabilities.
