The Lifelong Lolly Prognosticator is a financial planning model designed specifically for projecting pensioners' finances through retirement.
The Lifelong Lolly Prognosticator helps individuals evaluate whether their future spending can (or cannot) be met by pension income, rental income and withdrawals from asset portfolios.
The Lifelong Lolly Prognosticator includes detailed modelling of income, spending, tax, inflation, and investment returns.
The Lifelong Lolly Prognosticator allows you to vary future assumptions (including assumptions for life expectancy, care costs, inflation, investment returns, tax, and one-off spending)
in order to project a range of potential outcomes, from a "central case" scenario to a "worst case" scenario, combined with unlimited "what if?" scenarios.
Blue inputs are known facts
Green inputs are informed guesses
Red inputs are assumptions about the future
Enter your current annual pension income (before tax) split by:
- Recipient (ie husband or wife)
- Increase type (ie whether it increases with inflation)
For each of those, you need to specify:
- the current amount
- the percentage which would be payable to a surviving spouse when the recipient is no longer alive
Enter your current annual rental income (after expenses, before tax)
Enter your current annual regular spending
This should be the actual amount you currently spend on items purchased every year
Do not allow for future one-off costs
Do not allow for future care costs
Do not allow for future inflation
Do not allow for possible future emergencies
Do not allow for tax payments
Just focus on what you actually spend on a regular basis at the current time
The Lifelong Lolly Prognosticator considers four asset categories:
- Taxable accounts: This includes all investments where tax is payable on the investment return
- ISAs: Individual Savings Accounts - no tax payable on investment return or withdrawal
- SIPPs: Self-Invested Personal Pensions - no tax payable on investment return, but withdrawals are taxed at the pension income tax rate
- IHT-Free assets: This includes bonds written in trust, and schemes attracting business relief
For each asset category, you need to specify:
- the current value of the assets
- the percentage invested in equities (it is assumed that the rest is held in cash and receives zero interest)
Enter the current annual cost of care for one person. This could be the cost of residential care, or care in your own home.
It is assumed that the cost of care for two people would be twice the cost for one person.
Do not allow here for future inflation - just enter the cost at today's prices.
Enter the amount by which your current annual regular spending (as specified in the Income and Outgo section) would reduce if one person was in care, or if one person was no longer alive.
Enter assumptions for future one-off spending, specifying the amount of spending (at today's prices) and the year of spending. Inflation will be applied automatically.
Enter assumptions for the life expectancy (in whole years) for each person, split between:
- years in good health
- years needing care
Enter assumptions for future inflation. The tool allows for different inflation rates to be applied to pension income, rental income, and spending.
(The spending inflation is applied to all types of spending, ie regular spending, care costs, and one-off spending.)
Bear in mind that the Bank of England has a target for Consumer Price Inflation (CPI) of 2% pa in the long run.
Over the last ten years, CPI has averaged 2.2% pa and CPIH has averaged 3.4% pa.
(Your pension is most likely linked to CPI, whereas CPIH includes owner occupiers' housing costs and is widely agreed to be more representative of the cost of living).
Enter assumptions for future investment returns on equities, specifying separate rates for dividend yield and capital growth. These rates are before tax.
For example, a dividend yield of 2% pa and capital growth of 3% pa would be equivalent to a total return (before tax) of 5%.
Bear in mind that over the last ten years, the total return on the FTSE All World index (representative of global equities) has averaged 12.2% pa in GBP terms. This is a fact.
For both inflation and equity returns, different assumptions can be specified for the initial period (eg the first 1 or 2 or 3 years) followed by a long-run assumption thereafter.
This is helpful if you want to reflect the impact of an immediate stock market crash - simply set the 'Initial' capital growth rate to a negative number, eg -5% or -10%,
and set this initial rate to apply for 1 or 2 years after which point the 'long-run' rate will be used.
Enter assumptions for future tax rates. The relevant UK tax rates from April 2027 for additional rate taxpayers are expected to be:
- Pensions income: 45%
- Rental income: 47%
- Dividend income: 40%
- Capital gains: 24%
See the 'Methodology' section for full details of how these rates are applied.