What the planner simplifies or leaves out

The planner grows each account at one steady rate, calculates once a year, and treats each person as living to exactly the age chosen. It leaves out means-tested benefits, income from abroad, divorce, gifts and trusts, and detailed pension rules such as protected pension ages, and it knows nothing about your objectives, attitude to risk or wider circumstances. The lists below cover the simplifications that matter most. They are not complete, and they are kept here so they can be updated as the model changes.

What simplifications affect the projection as a whole?

• Each account grows at one steady rate that you choose. Markets do not move in a straight line, so the model does not show the effect of good or bad years, or of their order.
• Everything is calculated once a year. Money that comes in or goes out during the year earns half a year's growth, and pension charges are worked out the same way. Upfront tax-free cash, annuity purchases and property sales are treated as happening at the start of the year. Monthly timing, tax payment dates, payments on account and tax codes are not modelled.
• Tax law is taken as it stands, with changes already legislated. Future Budgets, rule changes and decisions about thresholds are not forecast.
• Each person lives to exactly the age they are planned to. Real lifespans vary, and longer or shorter lives change results a great deal.
• Calendar end years for mortgages, property sales and life events are read as tax years, so 2035 means the tax year that starts in April 2035.
• The results are only as good as the inputs. A different set of assumptions gives a different picture, and no set of assumptions is right.

Which tax rules are simplified or left out?

• Interest and dividends are taxed on the opening balance of each account, then reinvested. Income on money added during a year is taxed the following year. The tax is paid from household cash.
• The personal allowance is set against income in a fixed order: ordinary income, property income, savings interest, then dividends.
• The Section 24 reduction is worked out against ordinary (non-savings) income. Scottish property income is taxed using the Scottish bands.
• Capital gains tax has no netting of losses against gains.
• In the tax year State Pension age is reached, National Insurance is charged only for the months before it. Employer National Insurance and voluntary Class 2 and Class 3 contributions are not modelled.
• Marriage Allowance is decided on the year's income before any withdrawals taken to cover spending.
• Means-tested and other benefits are not modelled, including Universal Credit, Pension Credit, Child Benefit and the High Income Child Benefit Charge.
• Other allowances and reliefs are not modelled, including Gift Aid, the Blind Person's Allowance, and venture capital schemes.
• Income and gains from outside the UK, and non-UK tax residence, are not modelled.
• Welsh income tax is treated as the same as England and Northern Ireland, because the rates are currently the same.
• Student loans have no interest and no write-off, and are cleared on death. Where someone holds loans on more than one plan, repayments are split between the plans in a simplified way.
• Rental property is modelled as residential lettings, and the Section 24 rules are applied on that basis.

Which pension rules are simplified or left out?

• Workplace pensions receive contributions only while there is salary or part-time pay. SIPPs and personal pensions also accept relief-at-source contributions from other earnings, or up to £3,600 gross a year with no earnings, before age 75.
• Contributions above the allowances are left out, the person's own money first. There is no carry forward of unused allowance and no annual allowance charge. The taper test uses income before pension withdrawals.
• The Money Purchase Annual Allowance applies from the tax year after the first flexible withdrawal.
• Spare income goes into a pension only for someone who already has one.
• With upfront tax-free cash, money added to pensions after the upfront payment is treated as uncrystallised, and later withdrawals from it take a quarter tax-free while the Lump Sum Allowance lasts.
• Annuity purchases take no tax-free cash and do not trigger the Money Purchase Annual Allowance. Annuity income is whatever you enter. The model does not price annuities.
• Defined benefit survivor pensions go to spouses and civil partners only. Annuity survivor income goes to any partner.
• Where a couple balance their pension withdrawals, the draws are made in about 12 steps, so the split is approximate.
• Protected pension ages, ill-health benefits and small-pot rules are not modelled. You can set an access age and a remaining Lump Sum Allowance by hand.
• Pension charges are a single yearly percentage of the pot. Platform tariffs, transaction costs and exit charges are not modelled separately.
• Defined benefit pensions are a simple income from a start age. Early or late retirement factors, transfer values and revaluation before the pension starts are not modelled.
• Only the new State Pension is modelled. The old basic State Pension, additional State Pension, deferral increases, contracting-out adjustments and entitlement to a late partner's State Pension are not.
• The detailed rules for tax on pensions passed on at death are not modelled. A pot inherited from a partner is treated as tax-free to draw if they died before 75, and as taxable income otherwise.

How are property and debt simplified?

• The main home is never sold. It counts towards net worth and the estate. Downsizing, equity release and care costs can be added as life events, but the model has no rule that triggers them.
• Properties are sold at the start of the sale year, with no selling costs and no carried-forward losses.
• Mortgages and loans have a fixed interest rate and payment. Rate changes, remortgaging and overpayments are not modelled.
• Rental property has one growth rate, one rent and one cost figure. Empty periods, rent reviews, repairs and selling costs are not modelled unless you reflect them in those figures.

What is left out for couples and inheritance?

• At most two people can be in a plan.
• Separation, divorce, a new partner and remarriage are not modelled.
• The inheritance tax estimate ignores gifts, trusts and reliefs, apart from the exemption between married couples and civil partners. The residence nil-rate band assumes the home goes to direct descendants.
• For cohabiting partners, inherited ISAs lose their tax wrapper. At a cohabiting partner's death the home is assumed to be half theirs, and inheritance tax is paid from their savings and pensions first.
• Net worth includes pensions and excludes student loans.

What is left out of spending and life?

• Household spending is one figure, with an optional yearly fall in real terms from an age you set. Real spending moves around more than that.
• Job loss, illness, windfalls and other changes are not in the model unless you add them as life events.
• The planner does not take account of your objectives, your attitude to risk or your wider circumstances.

What this looks like in the planner

Two invented examples show the simplifications at work.

• Steady growth. The Wealth view for Sam, in the section on the projection as a whole, rises and falls along smooth curves. Every account grows by the same percentage every year, so the chart cannot show a fall in markets, or the order of good and bad years. Open Sam's example on the Wealth view.
• Costs with no rule of their own. The planner has no rule for repairs or care costs. In Lee's example, shown at the top of this page, a new roof at 74 and care at home from 87 to 92 are entered by hand as life events, and outgoings rise while care is paid for. Open Lee's example on the Cash flow view.

Both are illustrations of the planner's arithmetic, not forecasts. Their growth rates are assumptions, and the value of investments can go down as well as up. Free, impartial guidance on retirement options is available from MoneyHelper, and personal advice from a regulated financial adviser; financial guidance and advice explains the difference.