Good Cashflow modelling tool for DB Transfers?
laurahutch
Member
Hi guys, we are looking at trying a new cash flow modelling tool specifically to help with DB transfer cases, where can 'stress test' the transfer value.
We currently use the LV Retirement Planner but are finding it very restrictive and not producing what we want. Can anyone recommend and good tool to achieve what we are looking for?
We currently use the LV Retirement Planner but are finding it very restrictive and not producing what we want. Can anyone recommend and good tool to achieve what we are looking for?
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Chartered Financial Planner
Certified Financial Planner
Head of Technical at Paradigm Norton
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I also do a 'bespoke' cashflow where I try to model as closely as possible the client's actual retirement plans taking into account all of their available assets and their objectives, income needs etc. Again, this is based on relevant growth rates and includes all charges.
The like for like cashflow helps to show whether the CETV represents good value. The bespoke cashflow is used more for analysing whether what the client is trying to achieve is feasible based on their needs/aspirations.
The idea is that these would then be used as the starting point for a cashflow planning meeting with the client to try and illustrate the pros/cons of the different options and illustrate the risks of moving from a secure DB environment to drawdown (or other DC based retirement options). This meeting is also where the adviser could challenge the client and establish whether their needs were in fact aspirations and they might either need to adjust their expectations and/or reconsider whether DB is in fact the most suitable option etc.
Paraplanner. F1, Apple, Nutella, ice cream. No trite motivational quotes. Turning a bit northern.
Similarly to @parawhat, we start with replicating income from the DB scheme in a personal pension environment. We prepare three cash flows for this:
1. What growth rate would be required for the fund to run out completely by age 100 - this allows us and the client to see how much risk they might potentially have to take with the fund.
2. Then we run it using a growth rate appropriate to that client's ATR (based on house assumptions).
3. Then we provide a graph showing the situation if instead of investing, funds were kept in cash and grew at X%pa (whatever your assumption is for long-term cash).
Then we turn to look at the actual income and capital needs of the client in retirement. We take into account any other income and assets that would be available at the time to fund their retirement and prepare another three cash flows very much following the pattern of the three above, so:
4. What growth rate would be needed now for the aggregated fund (including the transfer value) to generate the pattern of income the client needs and not run out by age 100.
5. What would it look like if the fund grew at the rate applicable to client's ATR?
6. And what if the fund only grew at our assumed cash rate - in some cases this will show that the client does not actually need to take any investment risk and still have enough.
All of these are then inserted into a stand-alone discussion document which forms stage one of our DB transfer process and helps the client make a decision. We don't make any product recommendations at this stage and charge a fixed fee, which is not contingent on the transfer going ahead. In some cases, we will do further cash flows if we need to also discuss LTA implications/long-term care etc.
We don't do stress testing - I don't think it's possible with Moneyscope (@richallum?) but we do it when we use Voyant with clients. We use Voyant as a holistic planning tool in front of clients more than in reports.
Paraplanner. F1, Apple, Nutella, ice cream. No trite motivational quotes. Turning a bit northern.