Chartered Financial Planner with over 15 years experience in financial services.
Home is Berkshire with my wife and daughter having lived and worked in London for a number of years.
DISCLAIMER: All of my views are my own, and not representative of any company. Any personal opinions, ideas, and tips represented on this channel should not be seen as financial advice or a recommendation to take any specific course of action.
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I was about to listen to this until you said 2 1/2 cpi. Behave yourself.
Interesting, what CPI figure would you use? RPI? CPIH?
Not taxable if early retirement..take the 25 tax free and draw the rest at 4 percent each year never run out of money 😂
Hi All I'm a retired Brit living in US and my British state pension is not frozen, so I get a increase every year..
Hi Ed, really great spreadsheet, thank you for sharing, it is making my life so much easier to set up the cashflow analysis. Just one thing though, I am struggling with setting up column L, its just not calculating correctly for me, are you able to help?
Thanks so much for the kind comment. The capacity for loss column will need to be recalculated using the ‘what if analysis’. It will need to be recalculated each time any numbers are amended in the main table.
The capacity for loss column doe snot include the 10 year market drops you added to stress tests though...does it?
Correct, it does not.
16p for every pound invested in Sipp at the moment.
Thank you! You have helped me a lot 🙂
Many Thanks. I had a go at implementing your retirement cashflow model. I used Apples Numbers spreadsheet and found it fairly straight forward as your video was easy to follow. I also found the results to be very enlightening. I’m already retired but I’ve no previous SIPP or ISA etc. to bring forward. In fact, I’m selling up in the UK and moving abroad. I plan to invest some of the residual funds from the sale of my house to boost my income: 80K in an annuity and 20K in equities. I made a few changes to accommodate my circumstances: Change no 1: I included a column for an annuity adding it to my guaranteed income. Change no. 2: I had to somehow incopoorate an exchange rate variable in addition to your capital investment percentages of 1, 4, and 7%.. I added this to my assumptions. This was a very important element to judge. I used the last 10years £/€ figures from the ONS to come up with a sensible rate. Note: It’s important to remember that, if applying the exchange rate multiple to the capital columns, to only apply it to the first year formula and not all 30 years. I made this mistake initially, leading to a super inflated return on investment and a super elated few seconds until I realised my error. Change no 3: My guaranteed income exceeds my required income, so your contributions column became a hybrid column which I could use for either contributions, drawdown or savings simply by adjusting the formula in the capital columns. My plans are very budget sensitive and your video helped in a decision.
Really useful thanks, I'm now looking at how I can build in my wife's details into the same sheet but we are different ages and will retire some years apart so it's quite a bit more complicated - fun to try though!
Just use year 0,1,2 instead of age in the first column
Could you please discuss the inheritance perspective of personal pensions? For example passing on the pension pot to next of kind, either in its entirety or partially upon death. Thank you.
What’s to explain, just put there name on it for when you die and it gets transferred to them. The provider deducts the income tax at source. Who ever deals with your estate will then hand it over. Case closed
@@leonhenry4861 Edmund, does this person speak with authority? Would be good if you covered this topic and provided sources to corroborate viewpoints.
Ideally prices would fall actually and all economists agree with this... actually. What Society was ever made worse because cash money became of immense value?
Depends which school of thought you are referring to. I don’t think most economists want falling prices… most economists appear to support the governments in chasing 2% inflation.
Useful video, even if it really is about your own personal wants and needs. Given the skew mentioned, this video would be great to cover in either quartiles or decile groups (or with standard deviations!)
What a load of crap just get to the numbers. Definitely won't be watching again.
Thanks for the kind feedback. The numbers do also require explanation or you could watch it at a faster speed if it makes it easier for you. I tend to find 1.5x is watchable but 2x is probably too much.
Thanks very much for this. Is there any way of reducing the required income later in the retirement period to reflect the natural slowdown of activity and therefore spending?
Thanks yeah you can reduce it by a percentage or manually type it in.
Excellent video
Superb assistance, thankyou, earned a subscription.
My understanding of the word "average" is that it could mean "mean, median or mode". When most people say average, they mean "mean". Thought it was worth clarifying. It would be interesting to see modal values since that's what most people have. These numbers seem crazy. I don't know if anyone in my life with these sums of money! A 20 year old with £15k cash?!
Agreed Average is the generic term encompassing all three types of calculation. However, in general average as a term is better understood vs mean. No, cash for that age category via median is £200.
That’s very useful, thanks.
Really helpful video. I think I am correct in saying fixed term annuity providers will not offer enhanced annuity rates for applications with existing health conditions
Thanks a fixed term annuity is not really a true annuity and health or lifestyle factors don’t impact on the available income or the maturity value.
Awesome video 😊😊
Thanks! 🙏
@@EdmundBaileyUK your welcome
I'm trying to build my own model but at age 30 the figures quoted at hopeful retirement age are astronomical for example state pension i calulated to be 28k by the time ill be elegible! Should i be planning this far ahead or is it not worthwhile?
Yeah it’s worth it. Definitely in terms of your own projected pension values. The State Pension is trickier as it will likely be adapted or amended in some way. Although those values look high they are in nominal terms so actually it’s the same purchasing power as today. Could be worth doing it using ‘real’ returns rather than nominal as per the recent video I did.
@@EdmundBaileyUK thanks will check out the other video. Really helpful content, keep up the great work 👏
I'm 35 I own what could be considered a starter home (3 bed terrist) but house prices are now so obscene its unlikely I will be progressing massively up the ladder.
thanks for this - one question - at 7:37 is skips and jumps to the £35,000 figure in G23 - is this his gross salary? Which you've taken 8% pension contributions from?
Yes sorry, it’s just assuming an ongoing pension contribution based on 8% of a £35k salary, just as an example.
@@EdmundBaileyUK Thanks - it’s weird my pension contributions don’t seem to add up on my pay slip. (I’m on the basic 5% by me and 3% employee). Under deductions my contribution (pension (inc. AVC) doesn’t seem to match my salary (in terms of being 5%). Then neither does the work contribution. I realise you might not be able to help, but thought perhaps I need to work it out differently. As I’m on a higher salary than your example of £35k yet my contributions are less…
You could be on what is called 'Qualifying Earnings' meaning that the contributions aren't based on your whole gross salary but on 8% of a band of earnings between £6,240 and £50,270 pa. It's the absolute minimum as to what is allowed under Auto Enrolment. So in the example of £35,000 the qualifying earnings would actually be £28,760. And so the % is based on 8% of £28,760 = £2,300. Definitely worth checking in case there is a mistake or asking HR/Payroll.
@@EdmundBaileyUK ah ok - yeah that makes sense - it is QE, the absolute minimum. So that seems to align up now. Thanks for your help.
What modelling software do you use
Thanks FE Cashcalc.
Thanks Edmund, what a fantastic video, thanks for sharing it. I’m due to retire next year so it’s proved very helpful. One question, I’m assuming that Income Requirement is what you need to live on once in retirement? Why did you start income requirement at 63 when the DB income (and presumably retirement) doesn’t start until 65? Thanks
Thanks so much and yes income requirement is the amount needed to live on! Best of luck with your retirement and the next phase of your life! 🥂
Very good again, thanks, non of the flashy nonsense some people pump out. You deserve way more than 15k subs
Thanks so much, that's very kind to say. I very much appreciate that.
Great video which shows that an 8% pension contribution is nowhere near enough to give you a nice pension retirement income.
Thanks and very true.
Excellent information yet again Edmund - thank you.
Thanks so much. 👍
Many thanks Edmund and this all helps to forecast just how one's money can grow but more importantly the effects of inflation which is so easy to underestimate. Much appreciated.
Thanks!🙏
how about weekly or monthly contributions chart , the intersest will compound differently wont it ?
Thanks for another great video on building Excel modelling tools. Can I make a suggestion for another one .... I would love to be able to calculate the return I'm getting from my investments taking contributions into account. This would then let me compare with benchmarks to see how well my portfolio is doing.
Thanks so much. Are you referencing the difference between time weighted and money weighted returns?
column E from 8 mins has contributions. its already in there
Thank you - these videos are excellent! I’m in my late 40s and am deep in retirement planning. Have paid in to company and personal pensions and investments throughout my working career, and am now trying to work out when I can realistically retire. The dream is to retire at 57 - ie. when I can access my SIPP under current rules - and your videos are making me realise this could be a realistic goal. How so? I appreciate how you take the “mystery” out of financial forecasting. Valued in particular the cashflow modelling video. So, thank you very much - it is much appreciated. Could I also ask a dumb question - how do you work what your annual return on an investment is when you are also making regular contributions to that investment? The formulas you see on the Internet don’t take into account contributions when calculating RoI.
Thanks so much for the kind comments, great to read that you are fully engaged with your retirement planning. In the models the contributions are increasing in the subsequent year by the investment return. Or I might not be understanding the question sorry,
@@EdmundBaileyUK Hi Thanks for your reply - my fault entirely in not explaining myself properly! I’m probably jumping-the-gun (hence, the confusion) by trying to understand how you work out an annual return-on-investment (RoI) on any investment. Let me try to explain using an example. If I invest £5000 in a share on 1st January and I do nothing more to that share (ie. make no more contributions) and the value of that share is £5250 by the end of the year on 31st December, then my understanding is that would be a return on investment of 5% - ie. (£5250-£5000)/£5000. However, if I invest £5000 in a share on 1st January, contribute £100 per month into that share and, to keep the maths simple, the share also appreciates by 5% over that 12 month period, I’d end up with £6510 on 31 December - ie. ((£5000+(£100*12))*(1+5%). However, (£6510-£5000)/£5000 = 30.2% In my mind, it would be misleading to claim that my RoI in this instance is 30.2% - because much of the final amount (£6510) is made up of additional capital contributions rather than investment growth. Or is my logic muddled? Any help or insight you can give would be greatly appreciated.
@@chrisashley6611this is exactly what I have been trying to work out. Sure Edmund will have the answer 👍🏻
Thanks, understood and you are looking to calculate the Money Weighted Rate of Return (MWRR), based on the numbers you gave above the MWRR would be 6%. The easiest way to do this is via Excel using the XIRR formula. You have your starting value all contributions and any withdrawals and your ending value as a negative. Possibly one for another video but there should be some guides online showing how this is done. The manual calculation is far more tricky.
@@EdmundBaileyUK Thanks, Edmund. Very much appreciate your reply. Will look into using the XIRR formula. As you suggest though, this could be a great topic for one of your videos. I'm sure it would be warmly received by those who watch your videos which explain very clearly the process involved when making these calculations.
Another great video Ed, very informative an useful . The link to the file opens up the previous CashFlow Modelling file, is there a link to this Compound file
Thanks. I can add that one as well if it helps. Will add it later when back home. 👍
@@EdmundBaileyUK no worries I can build this compounding one, I incorrectly thought the link was to this new Compounding Calc one. Thanks again and enjoy the weekend.
@@neilhopkins-dl7vm www.dropbox.com/t/8DJnxBR14VEsp7LF
Thanks for watching. Nice simple compounding calculator that I hope you find useful. Template shown in video: www.dropbox.com/t/8DJnxBR14VEsp7LF It’s good to have your own one saved that you can come back to and adjust and adapt accordingly. Let me know in the comments whether your preference is for Real or Nominal rates of return? All the best. Ed
@@EdmundBaileyUK Much prefer to use real rates of return, as it is a truer reflection on the real power of your money once investment growth is taken into account. Had no idea however how you calculated real rates of return until I saw your video. Very informative and empowering.
What software do you use? Is it publicly available?
This is FE Cashcalc and unfortunately it isn’t, there is a version by Voyant that is available publicly.
Really useful I’ll have a go!
Wished Id found you,before talking to another FA🤔...Dont have any private pension,work one worth pennies 11k and im 60yrs,but have saved long and hard,no mortgage,that was always my goal,,get rid of that ball and chain. Thank you for sharing your knowledge
Great video. It would be good to extend to drawing lump sums from a SIPP
Reality depressing ey
Odd that occupational pension not included in your headline: this can be a major source of wealth in retirement. Failure to maximise investment in occupational pension is a big mistake
Great video - thank you. I will be contributing for another 10+ years and I have my own spreadsheet but it doesn't quite match your numbers (using the same assumptions). Your formula doesn't add any growth for the contributions as it is added as a single lump sum value (but many people will be adding contributions on a monthly basis over the year). I've found this small difference starts to snowball! Just a suggestion that you can add in any v2... Thank you again!
Thanks for the kind comment. Yes the contributions can be increased as well, technically they should go up by inflation but in reality not everyone's pay does go up by inflation or often it is less than inflation. I can look also to do a follow up using both real and nominal growth rates as I know some people prefer the values in 'real' terms rather than nominal.
@@EdmundBaileyUK increasing contributions is one part - but what I'm referring to is the actual growth on a monthly basis for contributions. An example is - instead of putting £12k in as a lump sum, if you put £1k in a month for a year, then the first monthly £1k will be growing at the low/mid/high rate for the whole year, then repeat for each remaining monthly contribution which is growing for a shorter time in that years calculation. This is a bit like regular savers from banks where they offer 7% interest but you get approximately half of this rate because of contribution timing. My calculation adds roughly half of the growth assumption (1/4/7%) and adds it as additional growth for the contribution . Hope that makes sense!
Thanks, sorry I had the wrong end of the stick. You are right the calculation in my model assumes the growth is before the contribution and the contribution comes in one lump sum at the end of the year and does not benefit from the growth. I've always tended towards a simpler more cautious position as a preference.
Why refer to HL this applies to all fund holders AJ Bell and the like. What is the likelihood of this happening? Did you pick HL for a reason?
Correct thanks for the comment. At the time it was the largest direct to client platform.
@@EdmundBaileyUK thanks for replying. I know there’s a merger and it made me worried then I saw it was a couple of years back you did this. 👍
Nothing is really safe. Looks like it’s getting as safe as crypto platforms!
Nonsense, average ‘household wealth by age’ - what does that mean? Makes no sense, the economically active members of the household are easily in different buckets. I guess individual wealth by age would make sense but no you didnt get there…
Thanks for the comment. You do understand that this is ONS data don’t you and yes it is broken down into individual wealth at the end of the video. But you are entitled to believe the data is nonsense if you like, I’d be interested to know if your numbers deviate significantly from those of the research either to the upside or down.
Just turned 60 - No Mortgage - Debt Free - Home valued @ £2.5m Land between £2-4m Rented Property GDV of £3.5m - Everything bought and paid for. Left school @ 15 - No Money No Qualifications - No University. Secret - Borrow as much as you possibly can, spend it on something worth it and have a good plan to pay it back !
Good video, I like to see how the models work. Also I like to read comments from people who are actually retired, stating how much income you really need. Personally it gives me comfort that at 53 I am completely sorted financially for retirement (between my wife and I we have £1.6m in DC pensions and investments) and can retire at 55 if I choose. I will wait until I am 56 as our son will still be in sixth form until then and I really can’t see the point in retiring until he finishes school and is old enough to be independent. Being retired while still needing to do school runs during term time seems a bit pointless when for us retirement is about freedom to travel.
great spreadsheet, great ideas for forecasting. i added a column, for occassional "lump sum" withdrawals. (new car, kitchen etc). Still works out, clear results. i started pensions in my 20's, but stoped contributing for 20 years! Horrah for compound interest! Lucky enough to be able to save significantly in the last 6 years i have till 67.
Thanks glad it helped. X
Hi, can you just clarify the "contribution" column please.. Also, presume this is based on draw down?
The contributions are simply payments into the account, investments into it for a few years before withdrawals are taken.
It's irrefutable, though, that luck plays a huge part in life. Im doing ok at 58 but seen friends made practically destitute at 40 by divorce that wasnt their doing. So I always keep that in mind before patting myself on the back.
Absolutely agree with this! 👍
Hi. Can Mr. Pickles and yourself please do some number crunching based on early retirement? I'm currently watching cars being automated - a relatively complex task involving hardware & software tackling an infinite number of 'life or death' edge case scenarios. So I realise from this that most jobs at this point are not safe and many of us will be pushed into early retirement.
Sounds like a good idea! 👍
@@EdmundBaileyUK Thanks Edmund. Keep up the great videos.